ooVoo is hot among teens looking to video chat, but can it take the next step? - Image credit:... [+]
Imagine that you created an application that managed to keep its users hooked from the moment they got home until they fell asleep, with 47 million users spending an average 200 minutes a month on it. Now imagine that your application is a video chat app that is riding the Facebook wave, leveraging their social APIs, and has been fully backed financially by just one man. That company exists, and it’s called ooVoo, and has essentially flown under the radar until now.
ooVoo offers a free social-chat video service via twitter and Facebook. Face-to-face conversations of up to 12 people in HD quality are enabled by the fact that ooVoo was built on the cloud from scratch, making it the first free application to do so. On Tuesday, the company released its product across several platforms, including versions for iPhone, Android, iPad, Facebook, and the web.
Speaking with Forbes at TechCrunch’s Disrupt NY, executive chairman Robert Jackman and Rajesh Midha of corporate development built the case for ooVoo. Asked his opinion on being called “the new Google hangout killer,” by Business Insider Midha bragged: “I liked ‘the next billion dollar business.'”
The company has become a hub for teens looking for constant communication, as Forbes’ Elizabeth Woyke has reported. 60% of its subscribers are under the age of 25, while the total subscriber base uses approximately 2.5 billion minutes of video a month (the average user is on for 200 minutes a month, compared with 34 for Twitter, according to Jackman). In their latest earnings, Microsoft revealed that Skype users made more than 100 billion minutes of calls in Q3, or about 33 billion per month.
The teen community has picked up on ooVoo and uses it as an “extension of their social lives,” logging on to the network in order to have someone else’s virtual presence with them at all times, explained Jackman. Half of ooVoo’s users have watched TV together, while others do homework, work on projects, or simply keep the video-chat on while they do other things.
The company isn’t profitable, even though revenues are “substantial” according to Jackman. Its proprietary cloud is what differentiates it from the competition. Billionaire Clayton Mathile founded ooVoo in 2007 after taking private a publicly traded company focused on “distance training over satellite video,” giving it a team of engineers that built a video-based product on a cloud-like architecture from the start. “Skype is a voice-over-IP [product] trying to do peer-to-peer video,” explained Midha, “we were built from the ground up for video.
While all of that sounds great, ooVoo, like other fast-growing internet companies, faces a monetization problem. The company makes money off the web version of their program, serving ads to the millions of users that log on through Facebook or twitter. They offer a premium service for $2.99 a month, but most of their cool features are given out for free. In part, having a generous backer like Mathile is a blessing, but taking management’s mind off profitability can also be a curse.
Jackman is confident, though, that ooVoo will be profitable soon. He says the company generates big revenues, and that the costs of paying management “aren’t a cash drain” (they have about 100 employees). Asked about developing a social network to develop Instagram-like video-sharing capacity, Jackman said “we’re going in that direction, but I don’t want to say too much about it.” He noted that companies like Coke, Macy’s, and Procter & Gamble have already done direct campaigns with them, and had little doubts that ads would help allow them to continue providing their service for free.
ooVoo faces other challenges, like the high-cost of broadband capacity and the fact that its user-base is predominantly teenage girls, making it a bit harder to drive ad campaigns. ooVoo could also be an acquisition target: while they build their software on Facebook’s platform, they also compete with Apple (Face Time), Microsoft (Skype), and Google (Hangouts on Google+).
Jackman shrugged that one off. He said Facebook is very aware of their product, and the possibility of using their APIs allows them to integrate “without as deep of a partnership” as was common in the past. On going public, Jackman said “that’s not a today decision,” highlighting how lucky they were to have a single founder (thus avoiding the dreaded 500 shareholder rule by which the SEC requires companies that hit that limit to disclose their finances, forcing many of them to go public).
If video is indeed the next frontier, ooVoo is in the right place. Monetization is still a problem, as it is with Facebook, Instagram, and many other companies. Unlocking that secret, while keeping the product free, could be the key to success.
