Who Will Win in Mobile VoIP?

The number of mobile VoIP users worldwide could reach as high as 100 million by 2011, up from 7 million in 2007, according to a recent study by consulting firm ON World. Mobile VoIP could generate $33.7 billion in revenues over the next two years, a huge jump from $516 million in 2006, the first year such figures were available.

That’s great news, of course, but who will be bringing in those billions? Likely, just a few providers. In the eight or so years that VoIP has taken off, the technology has neared commoditization levels. Providers have pitched it as the cheap or low-cost alternative to the PSTN. So, when startups such as Skype were bought by public companies – i.e., eBay (EBAY) – they had to find ways to monetize their services. Mobility was the most obvious answer. And as happens with any new and hyped technology, dozens of companies jumped on the mobile VoIP bandwagon, hoping to make their millions.

Now, brand name recognition, investor backing, user demand and the economy are weeding the weaklings from the warriors. This year alone, two of the bigger mobile VoIP companies have gone under and another two appear likely to go kaput. The question is not whether mobile VoIP will evolve into a must-have, but whether the market can support more than two or three solid competitors. The answer? Probably not.

A pair of survivors

To date, Jangl and TalkPlus have closed up shop. EQO Communications Inc. – pronounced “echo,” an odd name for a telephony firm – recently laid off 65 percent of its staff and in early December, had removed executives’ names from its “About Us” page. The CEO blamed the economy but insisted business was strong. Fring said the same even though it just fired 20 percent of its work force.

Jajah founders Roman Scharf and Daniel Mattes

On the flip side, Jajah and Skype are two of the companies that appear to be going strong. There are other providers as well – such as iSkoot, which puts Skype software on mobile phones, and Gorilla Mobile – but Jajah and Skype appear best-positioned for long-term survival.

One of the best ways to predict how a company or sector will fare is to analyze the investors who believe in it. High-profile and multiple names often indicate a solid business model, or at least one that’s worth a big risk. The fewer the investors, and the less well-known the names, well, that all speaks for itself.

Four firms supported Fring: North Bridge Venture Partners, VenFin Ltd., Pitango Venture Capital and Veritas Venture Partners. In addition to Fring, North Bridge has funded dozens of companies such as Bigfoot Networks VenFin claims software developer Britehouse among its investments. Pitango, based in Israel, backed Comsys. Veritas, another Israeli firm, has nine communications investments, the most recognizable name of which is Fring.

Jangl's investors included Cardinal Venture Capital, Labrador Ventures and Storm Ventures. Cardinal has backed ipInfusion. Labrador funds music site Pandora, and Storm’s investments include Kineto Wireless.

TalkPlus, meanwhile, was supported by Menlo Ventures, which has funded AcmePacket and Hotmail. (TalkPlus, though, is not listed among the portfolio companies on the Menlo Ventures Web site.)