Yahoo! continues on its acquisition spree with its latest purchase of Dialpad a PC-to-phone VoIP service provider. Dialpad of Milpitas, California, was launched in 1999, and received tech-bubble notoriety by offering free PC-to-Phone calling for a time. The “free” part has gone the way of the bubble, but infrastructure needed to place phone calls from a PC remains. This is what Yahoo! purchased — the technology to place and bill calls from your PC. They also got 14 million Dialpad users — whatever a “user” is — as a bonus.

In acquiring Dialpad, Yahoo! followings its usual acquisition strategy of purchasing technology vs. brand — the brand in this case is Skype. Previous examples of acquiring technology vs. brand include: 411 for free email (the leader was Hotmail), Inktomi for search (the leader was Google) and Musicmatch for a music player (the leader a few years earlier was Winamp which AOL purchased… although Musicmatch had a pretty large user base when Yahoo! picked them up).

So, I predict that the Dialpad brand is dead as dead, soon to be replaced with the Yahoo! brand. Had Yahoo! purchased Skype which has a very powerful brand — so powerful that it’s a verb similar to Google.. Skype someone, I Skyped someone, I’ll be Skyping someone — the Skype brand would have remained along the lines of Flickr. That is, Flickr’s brand remains the primary brand (at least for now), and is sub-branded as a “Yahoo! Company.”

Below I’ve put together some notes on the VoIP market and some thoughts on the acquisition.

Dialpad vs. Skype Pricing

Here’s a summary of the two providers pre-paid calling plans. Dialpad also offers several “bucket of minutes” plans, something that Skype has yet to introduce. In addition, Yahoo! will probably modify pricing, perhaps offering some “loss leader” pricing similar to their subscription music service Yahoo! Unlimited (Yahoo! Unlimited is offered at $60/year, but the price will be more in the future).

*Skype’s Euro-based pricing was converted to dollars using a 0.8249 exchange rate

Just as a note, what is up with calling India? I guess India has some large tariffs on telecommunications? You can view Skype’s pricing plans here and Dialpad’s here.

The Current VoIP Market

• Skype claims to have 41 million users — again, whatever a “user” is.
• U.S. residential subscriber totals have jumped from 150,000 at the end of 2003 to well over 2 million as of March 2005.
• Vonage has about 700,000 subs
• By the end of 2005, TeleGeography predicts that Cablevision, Comcast, and Time Warner together will have 2 million subscribers and nearly one-half of the total residential VoIP market.
  The last three stats are from Om’s post on the VoIP market

Thoughts On the Acquisition

Om Malik on Broadband

Yahoo confirmed the deal, declined to talk numbers and assured me that Yahoo’s broadband partners (read Bells) are well aware of its voice plans.

Charles Golvin, an analyst with Forrester Research:

“This is more about the future,” Golvin said. “This is another requisite building block in the range of services they need to deliver to their customers.”

VoIP Watch Blog:

…the key reason for making the acquisition for Yahoo was for the complimentary Dialpad technology that quickly provides Yahoo with the ability to introduce PC to phone and Phone to PC services (i.e. compete with Skype) as well as the ability to scale and roll out other services that will initially be introduced on Yahoo Messenger the same way as it was done with British Telecom with the BT Communicator. Long term this is being positioned as an acquisition to enhance all of Yahoo’s platform functionality across the Yahoo network, with the likely target areas to include gaming, groups, mail, shopping etc.

…This still looks like a win for Yahoo and makes me wonder where it leaves MSN Messenger and how it one ups AOL, who plans to build a softphone into AIM at some point, but has yet to really pull that trigger.

Summary

It’s great to see Yahoo! committed to VoIP and to improving its instant messaging product. Will the Yahoo! brand translate to VoIP? It’s way to soon to tell, and Yahoo! will face serious competition from Skype, the cable companies, the phone companies and probably Microsoft and Google in the near future. What I can say is that this will be good for consumers through lower pricing (if not free someday) and, more importantly, an increased offering of IP-based communications applications (think video conferencing, Webex-type information sharing, podcasting support, etc.).