"With stiff competition in the already saturated Free VOIP market, those who do not have a revenue model will suffer in the long run"- VOIP Guide. We always said this.
People always complain about increasing cost and higher rates to certain destinations. Customers wants free calls or cheap international calls. With such high customer expectations, how telecom/VOIP companies can actually work and most imprortantly still be profitable in this competitive environment where a new VOIP provider is born every week and gives away free calls to a destinations which was once your profit territory.
Lets consider this from a VOIP provider's perspective. Let me tell you hard fact, your favorite analyst never tell you. Today 90% VOIP providers especially those in pure FREE VOIP space are operating in deep pockets means actually under losses. They are either using their own money or the VC's to penetrate the market. Let me tell you 5 years down the line, only handful of these 100 VOIP providers will actually survive. Those who believe getting money from VC's is the only alternative to raise funds to make their business successful are WRONG. You MUST have a revenue model unless you are Fring. Companies such as Fring are now already in the elite league and can easily get hundreds of millions if sold.
We know everyone can't be a Fring. You really need that extra bit of luck and passion to build a brand that leads the niche. Becoming a leader in cheap international calls and free voip could be a distant dream for many VOIP providers. There is really a lot of competition in this space which will result in no leader. However we could see 5-10 major VOIP providers taking up the 70% market share. However the question remains the same. How are you gonna make money?
1) Charge a Flat Price for Free Calls per month: Let the customers make unlimited calls for a price. Anyways you are giving away for free might as well make a few $$.
2) Adopt Ad-based free calling: Seriously the best option out there. People do not mind ads as long as they get free calls. This could be used on the website or actually inserted in a call. RingBranch has started doing this now. They are placing ads at the start of the call and when someone calls you up they listen to the short ad. We personally feel this space will get really big in 2008. Mark our words.
3) Blow VC's money and pray for a takeover: LOL. Seriously you just wait till someone buys you over however how long will your VC keep filing your pockets?
Whatever maybe the route VOIP providers take, FREE VOIP is here to stay. People are now used to it and will now never pay for it. If the VOIP providers wants to sustain they have to adopt to the changing markets.
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