The Jeff Pulver Blog: Y! Yawn. Phone-Out/Phone In...Just another case of Replication without much Innovation:

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December 12, 2005

Y! Yawn. Phone-Out/Phone In...Just another case of Replication without much Innovation:

Perhaps I've just grown a little jaded from watching so many "me-too" IP Communications plays over the years, but following Skype's remarkable rise in the space in late 2003, I fully expected AOL, Google, Microsoft, Yahoo!, and others to develop and deploy their own innovative approach to competing with Skype. And perhaps this is why when the news recently broke that Yahoo! would soon be offering "Skype-like" services, my reaction to the announcement was a big yawn and not a “wow!”

What does surprise me is how long it took for one of these giants to make such a move. In 2005 Yahoo! acquired Dialpad, Microsoft picked up Teleo, Google launched Google Talk (beta), and AOL launched Total Talk. It has been pretty much a foregone conclusion (at least in my mind) that each of these companies would, at the very least, begin offering their own versions of “Skype-In/Skype-Out” services.

Though I am not surprised that a primary Internet entity is now moving directly into the Skype space, I do have to say that I am a little surprised to see Yahoo! doing so at this point, considering the possible impact it could have on the company's strategic relationships with both SBC (now AT&T) and BT coupled with the additional incremental costs associated with complying with the FCC’s rules for offering connected VoIP Services in the US. Of course, this was not the first time Yahoo! has offered PSTN termination (let's not forget that a few years ago the company partnered with Net2Phone to provide Instant Messaging to PSTN termination, as did MSN), so perhaps this move was long-anticipated by everyone, including Yahoo!'s partners.

OK. So Yahoo!, an already well-established IM and VoIP provider - wanted to redefine themselves, generate a news cycle's worth of free publicity, take a stab at reclaiming some lost customers (and hook some new ones), and announce VoIP service into/out of the PSTN. Certainly cool, but where is the novelty in this move? What is the point? Rather than introducing a significant innovation, Yahoo! has instead chosen not to evolve but to simply copy the work of Skype. This latest move signals Yahoo!'s intent to invest in and build market share in an IP Communications sector where margins are extremely-low (actually razor thin) and the only thing that matters is price. Put another way, Yahoo!’s tactical decision to compete on price is a strategy that on its own can only marginalizes the space and does nothing to highlight the value that IP based communication services could offer.

The fact is that Yahoo! had a wonderful opportunity to announce and launch their own unique "purple minute" applications associated with their service offerings, but instead of trying to lead, they chose instead to follow. Yahoo! should be looking to add some strategic value to their IP based platform and to contribute in a positive way to the space they are operating in, if they want to differentiate themselves from their competition.

I am also curious to see how Yahoo! intends to satisfy the social obligations (emergency response and lawful intercept) that the FCC has imposed on PSTN-connected VoIP services.

As we head into 2006, my hope is that as the other major portals roll out their Instant Messaging VoIP-to/from-the-PSTN services and strategy that we end up with some really cool and innovative technologies that actually help extend and redefine IP Communications.

Tags: voip, Skype, Yahoo!, Jeff Pulver

Posted by jeff on December 12, 2005 07:32 AM | Permalink

Additional resources: #140conf events | Watch the Jeff Pulver Show | Jeff's Qik Videos

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