Interview with EJ Lugt, CEO, Nimbuzz
My impression is that your revenue model is currently based on advertising and whitelabeling? How soon do you expect those sources to generate meaningful revenues for you?
We don’t do whitelabelling exactly. Although apart from consumer solutions we also have industry solutions, those industry solutions are social networks for mobile operators and device manufacturers. These are outsourced IM and VoIP platforms that we operate for a mobile operator. We also bring mobility to web based social networks.
Is that not whitelabelling?
No. In whitelabelling you would typically charge a certain license fee per subscriber. We do not charge the operator anything. Our solution is used for free. What we do is share the ad revenues.
How many social networks and operators have you partnered with? What is the usage among the operators right now?
We have signed up 10 social networks and 3 mobile operators. One of the operators is using the full Nimbuzz solution. The other two, for now, are promoting our web client to their mobile users. With regard to social networks we will go live with our joint offering with a social network in Germany in August.
You will also have PSTN termination business in place. Which part of your business do you expect to be bigger: ad revenue sharing or the PSTN termination?
My belief is that mobile advertising will be a bigger part in the pie. Mobile advertising is not cpm based. The ad rates you get for cost-per-click can be very attractive. But what you need for that is a large community in a particular region. Companies like us have a large but distributed community worldwide. From mobile advertising perspective it is better to have a large community in one country than having 10 million users scattered over 200 countries.
With mobile advertising, probably the most effective advertising medium is messaging like SMS. You are primarily VoIP oriented.
We have our own messaging system in place. You can also be creative about advertising while the users are having a text chat. We should not discount voice based ads either. Jajah has been doing some testing in the US. They found out that users actually like the idea of listening to some voice message while the phone is ringing quietly in the background.
I am on LinkedIn and I find it useful. The thing I find amazing is that they charge you $19 dollars a month for sending a maximum of 6 emails to people that are not in your network. If you can charge 19 dollars for 6 emails, why is that sort of monetization not possible in Nimbuzz and other Voice 2.0 type apps?
Companies like Nimbuzz are right now focussed on making their technologies scalable and stable. And secondly trying to get distribution models in place. Monetization is hardly on our priority list right now.
What kind of Voice 2.0 services do you see emerging that are mobile related? Mobile handset is not like a PC that gives a lot of flexibility to the user in terms of the apps that can be used.
I see players like us pushing video calling which we do not support right now but that will come in few months’ time. At the moment we are busy getting traditional voice apps out.
Some of the softswitch makers are also developing mobile VoIP features. They will obviously not serve the consumers. They will license such platform out to operators with other features bundled in. Do you think operators are better placed to sell a bundle of new Voice 2.0 services, or will these services continue to be offered by independent ASPs like yourself?
There is likely to be a mix of these distribution channels. From an independent ASP perspective, the companies that are likely to win are the ones that are able to cut deals with handset manufactures and other OEM partners. Nokia has openly said that they will change from a device manufacturer to an Internet services company. They already have VoIP integrated in several handsets.
You also work with some cellular operators. What kind of mobile VoIP architecture are they typically implementing? Are they leveraging data channels mostly or is it a mix of both data and GSM channels?
Operators differ on the issue of VoIP over data connection. Even within a single operator there are different opinions on mobile VoIP. I recently spoke to three different teams inside a large multi-national mobile operator. Two of them do not seem to care about mobile VoIP. One of them is very much against implementing mobile VoIP. It is fair to say that mobile operators do not know themselves which way to go.
Can they afford to be complacent about it? What about possible competition from someone like Google in the future? How are they planning to handle such competition?
One thing that has changed is that operators are no longer going to their traditional vendors like Ericsson and Alcatel-Lucent and asking them to build a services portfolio for them. I think the operators are looking to build their own Internet services that have Nimbuzz like components. So for us that is a big opportunity. We are helping operators connect to the web services, and we are working on interoperability of such services from multiple operators. One of the reasons why IMS has not worked so far is because IMS is not able to interwork services from multiple operators.
What about the underlying VoIP platform you use? Do you also use open source components?
Yes, we use a lot of open source components such as Asterisk and OpenSER. We also use open source components for IM like Jabber and Open Fire. And of course we have built a lot of proprietary technology around it.
There are a lot of tier 1 operators using open source components for their VoIP offerings. Is this an established trend now?
Absolutely. One of the large mobile operators in Europe is building their Internet services portfolio around the open source components mainly. There was a time when mobile operators were willing to pay huge amounts of money to platform companies. Those days are over. Now it is all about flexibility, lower costs, and speed. And open source can provide you those capabilities.
Do you have a developer program of your own?
Not yet. It is in the pipeline.
How many signups have you had so far and how many of those are paid customers?
We just passed 1 million signups. We don’t have paid customers yet because we have not launched the paid service yet (PSTN termination). By the end of 2008, we expect to have more than 20 million users on our platform because of the deals we have signed with social networks and mobile operators.
What in your opinion are the relative prospects of mobile callback and mobile VoIP?
In Europe, over the last 6 months, there has been a major shift in data services offering by mobile operators. In Netherlands you can get unlimited data package for a monthly fee of 10 Euros. You can therefore expect a bigger take up of Internet services. Along the way users will discover mobile VoIP. So I think mobile VoIP will replace mobile callback type of services within the next few years.
