Is WebEx “Dead Man Walking?”
This week I was preparing for my weekly This Week in Venture Capital web show and was researching some of the deals that were announced for the week. One of the companies that just announced $10 million in funding was a company I had never heard of called Huddle. I wanted to look at what they actually did so in looking at their website I saw this positioning
“Huddle helps businesses connect, share and work better together. With Huddle, you can manage people, projects and information inside and outside your company, securely.”
OK, so that could mean a lot of things. Dig deeper and you see that they do: project management (like 37 Signals), share and store files online (like DropBox and Box.net), create and edit documents online (like Google Docs & Zoho), Wikis (like SocialText) and Discussions (like Yammer). Oy vey. In my show with Dana Settle (near the very end of the video if you’re interested) I said two things: 1) I’m routing for Huddle because I always route for UK-based companies and 2) I was worried that they were spread too broadly and perhaps they should focus around a few key areas in which they can build market-leading products.
I always worry about companies that spread themselves too broadly. I believe that you need to have product excellence in order to scale to being a really big business and that’s pretty tough when you have such a wide remit. An amalgamation of other people’s services might win business with some companies (there is an age old debate between “best of breed” versus “integrated solutions”) but in the end I doubt a business that goes “a mile wide and an inch deep” can be a huge company. So my advice was to focus a bit more.
But then I saw something really nutty. When I was looking through their company’s history I saw the following statement made in September 2009:
“Takes on WebEx, launches web conferencing and announces its US expansion with 900 US resellers”
Really? Aside from attacking yet another market segment all I could think about is, “Why enter the web conferencing market. Isn’t WebEx already dead man walking? And for that matter GoToMeeting also?’
When you use technology for a really long time you begin to spot patterns. Like when in the space of a week everybody I knew had signed up for Quora. Or when I lived in Europe and everybody I knew was using Skype. This happened in Europe way before the US because to make any call out of the country was a paid call whereas in the US you had a lot of “all you can eat” national plans.
So Skype was ubiquitous. And then eBay bought them for $2.6 billion (plus an earn out that could have totalled $4 billion but didn’t in the end) in 2005 before selling 65% of the company in 2009 for $1.9 billion (they retailed a 35% stake valuing Skype at $2.75 billion). So at least they preserved some value and they didn’t “pull an AOL”. But it wasn’t exactly the boon that they had expected. If Skype continues its growth eBay should at least see a return on its investment.
I’ve been thinking about Skype a lot again. I’m spotting another trend. And as I foreshadowed, it doesn’t bode well for WebEx let along a wanna be WebEx killer. I first noticed it while filming an episode of This Week in Cloud Computing. Kevin Epstein, VP Marketing of CloudShare had Skyp’d in to our broadcast. And when we asked him to demonstrate his product he reverted his Skype session to a screencast (e.g. he was showing us what was on his computer).
I hadn’t used Skype video too much in the past year and hadn’t noticed this feature. I registered it in my mind at the time, “hmm, a screen cast while you’re on Skype, that’s pretty clever.” CloudShare as a product also sounded like a great idea to me. You can create virtual instances of computers in the cloud. I could see that being really useful.
The very next week I organized a call with Babak Nivi of VentureHacks to present to the Launchpad LA class. We were doing an educational session on term sheets. The two bibles on this topic on VentureHacks Archives and on Feld.com so I asked Nivi to do a Skype call. I had expect a Q&A style session and as I asked the first question — BOOM — he went straight to screen sharing using his term sheet write-ups on VentureHacks. Then David Lapter, the CFO & EVP Operations of KickAps in the same week did a Skype / Webcast presentation of his business to the SoCal Venture Alliance monthly meeting.
There it was staring me in the eyes. WTF would I ever use WebEx or GoToMeeting? And how were they going to exist as paid products in the future? As Om Malik points out here: Skype is HUGE! It’s the largest telco in the world. They have 560 million users! Nearly two times the entire size of the US population. And growing. Skype accounts for 12% of the world’s international calling minutes. 36% percent of Skype calls include video. And they’re averaging more then 12 billion Skype-to-Skype calls / month. Yes, with a “B.” And soon that will include screen sharing.
Just as Skype took a major chunk out of the international carriers businesses, so to do I believe it will take a major bite out of the web & video conferencing business. I’m writing this post from Shanghai. I just got off a Skype call with my wife and kids. The voice was more clear than my mobile phone. And we had full screen video. I had forgotten just how awesome it is. And as soon as more people find out about screen sharing I imagine a lot of cancelations to people paying big fees for web conferencing. If Cisco were smart they would have more aggressively used WebEx to push a free Skype competitor. After all, the success of the VOIP market helps push its core router products that get sold to telcos. Too late. Skype is king.
So the only room I see left in the paid market in the near future is for super premium services that offer features that I don’t believe Skype will any time in the near future. This could include value-added features like audience polling, caller Q&A that is moderated, multi-location support for highly distributed meetings, etc. I doubt there will be much middle ground. Low end to mid end = free. Super high end = paid.
And that leads me back to Huddle. I think they should take some advice from their brand name and then regroup around what their core strategy will be. I don’t doubt that there’s room in the markets for which they’re playing. Just not each of them simultaneously. And certainly not “tak[ing] on WebEx.” That’s not a battle I’d be thrilled to win.
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Update: Just thought I’d add for record that I’ve been a happy user of GoToMeeting for years (and Placeware before that. Before Microsoft bought them and did nothing exciting with them). I see nothing wrong with GoToMeeting. But you still face problems that: 1) you have to wait for a lot of people to download the client (it’s not as ubiquitous as Skype) 2) it costs money and 3) it’s not designed for voice/video. So I think it’s simply a case of Skype’s creative destruction of that market than of anything WebEx or GoToMeeting did.
