VOIP & VIDEO TRENDS FOR INTERNET STARTUPS Yossi Cohen CTO DSP-IP

VOIP & VIDEO TRENDS FOR INTERNET STARTUPS Overview

Overview

VOIP SOLUTIONS AND TRENDS VoIP status VoIP Trends

VOIP STATUS PC VoIP History PC VoIP by two parallel paths for personal and business use: Enterprise Phone switches offered PC VoIP extensions Large IM Portals offered VoIP

PC VoIP History

PC VoIP by two parallel paths for personal and business use:

Enterprise Phone switches offered PC VoIP extensions

Large IM Portals offered VoIP

VOIP STATUS Enterprise PC VoIP started as PC phone extension for enterprise Avaya Cisco Nortel Connegy Tadiran Personal VoIM Large portals with IM clients started offering VoIM Single Client IM IRC, ICQ AOL AIM MSN Messenger Yahoo! Messenger Jabber Converged IM Meebo Trillian Gaim Yack!

Enterprise

PC VoIP started as PC phone extension for enterprise

Avaya

Cisco

Nortel

Connegy

Tadiran

Personal VoIM

Large portals with IM clients started offering VoIM

Single Client IM

IRC, ICQ

AOL AIM

MSN Messenger

Yahoo! Messenger

Jabber

Converged IM

Meebo

Trillian

Gaim

VOIP STATUS VoIP Challenges VoIP subscription fees are: None Very low per minute rates Low Monthly/Yearly Flat rate Client acquisition costs are very high Vonage–$150-200 according to CEO interview Offerings of “VoIP subscriber for sale” $ 200 per head Churn is very high No Differential factors: if I’m on a 19.99 flat package I could turn to a different vendor for 18.99 (Ask Vonage)

VoIP Challenges

VoIP subscription fees are:

None

Very low per minute rates

Low Monthly/Yearly Flat rate

Client acquisition costs are very high

Vonage–$150-200 according to CEO interview

Offerings of “VoIP subscriber for sale” $ 200 per head

Churn is very high

No Differential factors: if I’m on a 19.99 flat package I could turn to a different vendor for 18.99

(Ask Vonage)

VOIP TRENDS VoIP Trends

VoIP Trends

VOIP TRENDS Personalization Skype Offers Klonies with Comverse More Avatars by Combots WeeMe IDT

Personalization

Skype Offers Klonies with Comverse

More Avatars by

Combots

WeeMe

IDT

VOIP TRENDS Mobile VoIP Usually free calls between subscribers PC over current Portal VoIP networks Lower than standard rates for mobile calls EQO - Widget for MySpace for Mobile Fring – Leading Israeli Mobile VoIP Company iSkoot – Deal with Skype Mobile

Mobile VoIP

Usually free calls between subscribers PC over current Portal VoIP networks

Lower than standard rates for mobile calls

EQO - Widget for MySpace for Mobile

Fring – Leading Israeli Mobile VoIP Company

iSkoot – Deal with Skype Mobile

VOIP TRENDS Messaging Convergence Cerulean Studios’ Trillian Connects to leading IM services: MSN ICQ Yahoo VoIM convergence Farsight

Messaging Convergence

Cerulean Studios’ Trillian Connects to

leading IM services:

MSN

ICQ

Yahoo

VoIM convergence

Farsight

VOIP TRENDS Connect to Expert/Service Palore Call and rate services like restaurants or plumbers BitWine Connection to experts Kasamba connect to expert, bought by LivePerson for $ 40M June 2007

Connect to Expert/Service

Palore

Call and rate services like restaurants or plumbers

BitWine

Connection to experts

Kasamba

connect to expert, bought by LivePerson for $ 40M June 2007

VIDEO SOLUTIONS AND TRENDS Specialized niche videos Video overly advertisement Video understanding and tagging Media discovery

Specialized niche videos

Video overly advertisement

Video understanding and tagging

Media discovery

UGC VIDEO TODAY UGC Video Today Is this the best video delivery system we can create? A $1.4B system? Where are the Videos I like??

UGC Video Today

Is this the best video delivery system we can create?

A $1.4B system?

Where are the Videos I like??

VIDEO CHALLENGES Portal Video Challenges Revenues are mostly based on Advertisement: No Focus or Ad personalization per Content User Low CTR Clients wants to see video and not buy Cola or a new phone High expenses “ CDN costs are killing us” Personalization – Nada ! Aggregated search mechanism - No Personal recommendations – No “ Save” option Low stickiness

Portal Video Challenges

Revenues are mostly based on Advertisement:

No Focus or Ad personalization per

Content

User

Low CTR

Clients wants to see video and not buy Cola or a new phone

High expenses

“ CDN costs are killing us”

Personalization – Nada !

Aggregated search mechanism - No

Personal recommendations – No

“ Save” option

Low stickiness

VIDEO SOLUTIONS Solutions Specialized niche videos Example: 5Min, Café-Confidential in Metacafe Video overly advertisement Example: YouTube - August 2007 Video understanding and tagging Examples: VeoTag, Blinkx Better Search results Better Advertisement targeting Social discovery web sites Discover people with the same taste

Solutions

Specialized niche videos

Example: 5Min, Café-Confidential in Metacafe

Video overly advertisement

Example: YouTube - August 2007

Video understanding and tagging

Examples: VeoTag, Blinkx

Better Search results

Better Advertisement targeting

Social discovery web sites

Discover people with the same taste

TRENDS Recommendation Systems close the loop between content creator/distributors and the users

Recommendation Systems close the loop between content creator/distributors and the users

VIDEO SOLUTIONS Internet Video Trends Future Present Past Process My Customized channel UGC / Pre defined channels Broadcast Pre defined channels Distribution Lean back Lean Forward Text search of clips Lean Back – open loop Consumption UGC + Legal Premium content + Meshups UGC content + Stolen Premium content Premium Content Content type

Internet Video Trends

FINANCIAL ISSUES IN SCALING Revenues models Expenses (Do we really need to speak about it?) IPR Issues Development issues

Revenues models

Expenses (Do we really need to speak about it?)

IPR Issues

Development issues

FINANCIAL ISSUES IN SCALING Revenue Models Advertisement Google, MetaCafe, YouTube and most of Web 2.0 services Subscription fees Business service – LinkedIn Content download - Rhapsody music service by real Per interaction model iTunes – per song payment ~ $1 Guba – per video payment ¢45-99 Requires attention to client retention Requires very low cost of billing handling (~¢1 ) No revenue model – Exit

Revenue Models

Advertisement

Google, MetaCafe, YouTube and most of Web 2.0 services

Subscription fees

Business service – LinkedIn

Content download - Rhapsody music service by real

Per interaction model

iTunes – per song payment ~ $1

Guba – per video payment ¢45-99

Requires attention to client retention

Requires very low cost of billing handling (~¢1 )

No revenue model – Exit

FINANCIAL ISSUES IN SCALING VoIP and Video startup scaling Full scale commercial deployment Scaling 1M users Commercial Dev. + Beta 100K users Garage +Alpha 10K users Idea Web 2.0 development

VoIP and Video startup scaling

FINANCIAL ISSUES IN SCALING Community oriented Startup Create a Community Socialization Information sharing Community Bonding/Gluing Socialization and search tools Stronger relations and interactions between community members Bridging Communities Creating mutual interest spaces Bridging technological Gap Create Communities Social Service

Community oriented Startup

Create a Community

Socialization

Information sharing

Community Bonding/Gluing

Socialization and search tools

Stronger relations and interactions between community members

Bridging Communities

Creating mutual interest spaces

Bridging technological Gap

FINANCIAL ISSUES IN SCALING Community Creation Bridging Bonding Community Free Services Goals Group creation Group Scaling Identity Connection Basic communication Presence Premium Services Goal Revenues border crossing Presence – Mood Personalization Cross technology services VoIP<->PSTN VoIP over Mobile Free WLAN Technology oriented premium bridging services Community free services

Community Creation

Free Services

Goals

Group creation

Group Scaling

Identity

Connection

Basic communication

Presence

Premium Services

Goal

Revenues

border crossing

Presence – Mood

Personalization

Cross technology services

VoIP<->PSTN

VoIP over Mobile

Free WLAN

FINANCIAL ISSUES IN SCALING Expenses What Should be the cost of the model? What is the delta-expense between 1M and 10M users? Linear Semi-linear Flat Linear Cost IP and Patents for media coding and processing Semi linear Support, Infrastructure Flat Development costs

Expenses

What Should be the cost of the model?

What is the delta-expense between 1M and 10M users?

Linear

Semi-linear

Flat

Linear Cost

IP and Patents for media coding and processing

Semi linear

Support, Infrastructure

Flat

Development costs

FINANCIAL ISSUES IN SCALING IPR Costs As engineers we tend to see only development For large scale deployment, IPR (Royalties) are the largest expense (ask Adobe and Skype) Payment for IPR: Codec Patent rights (G729, G723.1, MPEG4) Developer royalties for companies developing our: Signaling Multimedia codecs

IPR Costs

As engineers we tend to see only development

For large scale deployment, IPR (Royalties) are the largest expense (ask Adobe and Skype)

Payment for IPR:

Codec Patent rights (G729, G723.1, MPEG4)

Developer royalties for companies developing our:

Signaling

Multimedia codecs

FINANCIAL ISSUES IN SCALING Ownership problems – 3 rd Party IP Standard media codec and many algorithms used for media coding are protected IP and requires payment to patent owners. Although after the community is large enough there are revenues from premium services, they do not cover IPR costs Revenues IPR Costs How to finance this gap? Subscribers Revenues IPR Costs Subscribers

Ownership problems – 3 rd Party IP

Standard media codec and many algorithms used for media coding are protected IP and requires payment to patent owners.

Although after the community is large enough there are revenues from premium services, they do not cover IPR costs

FINANCIAL ISSUES IN SCALING Development Models review Deciding which option to choose affects the development cost, scaling costs and TTM Cons Pros Development Time-to-market Development risks Large initial cost Create IP for the company No Royalties / 3 rd costs Internal Development IPR if exists Relay on other companies Time-to-market Low initial cost (royalties) No development risks Buy Hmmm… Low development risks Time-to-Market No Royalties / 3 rd costs Outsource

Development Models review

FINANCIAL ISSUES IN SCALING Project Mapping into development option space Outsourcing Make/Internal development Buy Development risk Long-term/IP cost Time-to-Market Develop + Consulting

Project Mapping into development option space

FINANCIAL ISSUES IN SCALING Summary Pay attention to scalability and IP ownership issues Rapid Development Use open source for rapid prototyping and demos Buy or outsource whatever you can’t develop fast. Don’t get stuck because on technology issues Mix technological breakthrough, product features, client behavior understanding and innovative GUI to get ahead of the pack Biz Model Technology Scaling Idea

Summary

Pay attention to scalability and IP ownership issues

Rapid Development

Use open source for rapid prototyping and demos

Buy or outsource whatever you can’t develop fast.

Don’t get stuck because on technology issues

Mix technological breakthrough, product features, client behavior understanding and innovative GUI to get ahead of the pack