Search Engines and VoIP: Why?

You may have heard some rumors about major search engines becoming interested in VoIP. But VoIP is a telephony technology; it has nothing to do with search, right? Well…yes and no. Keep reading to find out the connection, and why those who advertise with search engines should sit up and take notice of the potential behind this technological pairing.

Rumors run rampant in any field where a lot of money is at stake, and that’s as true in technology as it is elsewhere. Some of the latest rumors in the SEO field say that Google and several of the other top search engines (Yahoo and MSN in particular) are looking to get into voice-over-Internet Protocol (VoIP), a growing field that already boasts a respectable number of competitors. The first question that comes to mind is, do these rumors have any basis in fact? This is rapidly followed by the second question: why?

Let’s address the first question first. While these rumors may have started earlier, they gained fuel recently at the Spring 2005 Voice on the Net conference. CNET reported speaking with a VoIP executive who insisted on remaining anonymous because of the sensitive nature of the news. According to this anonymous source, a Google management team met with several VoIP service providers. What did Google discuss with them? “They were fairly aggressive about getting our opinions,” CNET quoted the source as saying.

It’s particularly telling in this case that Google sent some strong representation to the 6000-member conference. Nine Google employees attended, including Google product manager Eric Sachs. It’s also worth mentioning that Sachs has ties to a founder of an Internet phone service.

As for Yahoo and MSN, they already offer a kind of phone service that uses their instant messaging software and a PC. Microsoft even plans to add voice calling to its enterprise instant messaging software. Adding to this rumor mill is a kernel of fact from a company not mainly known for search: AOL. The Internet service provider reported at the conference that it will be launching a VoIP service across its broadband network. It will only be available to AOL customers at first, but observers expect the company to expand this offering beyond its own customer network.

So, from the look of things, the rumors seem to have at least some basis in fact. That brings us to the second question: why? What do these companies stand to gain? Or, put another way: what exactly do Internet search and VoIP have in common, besides the Internet?

The connection is not as far-fetched as it might seem at first glance. Back in October of 2004, both Google and Yahoo launched search features for cell phones. The two services were quite different, too. Yahoo offered localized search results that included maps and website icons with which users could point, click, and call. Google went for a more stripped-down approach, sending text-only messages to users. The offerings may have been in reaction to the fact that U.S. cell phone users show relatively little interest in surfing the Internet by phone; the companies probably hoped that these services might encourage cell phone Web surfing by making it easier for users to find what they want.

A number of observers believe that search, combined with carefully targeted advertising, has the potential to do much more. Let us say, for instance, that a search engine asked you to share some personal information, which they shared with advertisers only under certain conditions as part of a service. The service might work like this: if a New Jersey resident who signed up for the service uses the search engine to look up information about Broadway show dates in New York, he might also receive a coupon from a restaurant, a parking garage, or maybe even a hotel in the area. Carefully planned, this kind of marketing would not be considered obtrusive; it would be more like presenting information and options exactly when someone wants it most.

VoIP, as already mentioned, is a growing field. Two VoIP competitors alone boast half a million subscribers between them. One of them saw their subscriptions jump 1000 percent in just one year. Both cable companies and telecommunications companies are getting into the VoIP business. For regulatory and infrastructure reasons, VoIP can offer its users unlimited phone calls for monthly rates that are more than competitive with cell phone rates. Additionally, for some versions of VoIP, the user is not tied to his or her computer.

Let’s put these two thoughts together. Take the potential for targeted search, and combine it with VoIP. Given that VoIP is relatively cheap to maintain, and is not – as of yet –  regulated in the same way that older telecommunications forms are, a search engine faces relatively few barriers to entry. At that point, putting its own search service with targeted advertising on its VoIP service becomes a no-brainer. Since a user needs to include some personal information anyway when signing up for VoIP, the targeted search service could be offered for free. The search engine would then make its money from the advertisers it signed up as part of the service – a now-familiar revenue-making model among the major search engines.

The big point is, search engines and portals cannot ignore VoIP, any more than they could ignore the market for mobile search. While it’s true that so far most people in the U.S. have not been that interested in Web surfing on their cell phones, not all cell phone users are necessarily Internet savvy – or at least, they may not be so Internet- or gadget-savvy that they want to surf on something with such a small screen. That is not as true for VoIP users; by definition, anyone with VoIP has access to a broadband Internet connection.

While there are 200 million people in the U.S. who own cell phones, broadband users in the U.S. number somewhat less – about 63 million or so as of the latter half of last year. And every one of them is a potential candidate for VoIP. Moreover, it can be argued that those 200 million people using cell phones might be VoIP candidates as well. Remember, VoIP costs users less than cell phone service. While cell phones have been around long enough to not be considered “new” anymore, there will always be some fraction of cell phone users who are interested in adding new features that make their phones more useful or convenient to their lifestyle. Why would we see cell phone makers constantly expand the capabilities of their offerings if there was no market?

We already know that many people have signed up for VoIP. If a person can get a service that combined something akin to the convenience of a landline with the portability of a cell phone, and all they needed was a broadband connection (which they might be interested in getting anyway) and enough money to pay, say, $25 a month for unlimited calls across the U.S. and Canada, why wouldn’t they sign up? Adding the type of individually targeted search that the various search engines can provide sweetens the deal. The major search engines have surely thought of this; hence the rumors that they are looking for VoIP partners.

Is it possible, though, that some of them might go one step further, to outright acquisition? Some observers have suggested just that. Vonage, as the major player in the VoIP arena, might be too much for any of them to swallow, though the company could make a very good partner for a firm like Google. On the other hand, Vonage has rivals that might prove ripe for purchase.

Take Skype, for example. This Europe-based peer-to-peer VoIP provider gives its users the capability to make free international calls from their PCs. Is this a popular service? You’d better believe it. The company’s website has handled more than a million people using the service at the same time.

In short, no one should be surprised to hear about VoIP partnerships – or even acquisitions – among the major search engines over the next couple of years.

What we’re talking about here really isn’t new, it’s just the combination of technologies that is new. If a search engine purchases a VoIP company, and then proceeds to offer its search services with the VoIP services, it can be described as “vertical integration.” We have seen this before; in fact, vertical integration has a long history in business. However, it does not always work. The merger between AOL and Time Warner could be looked upon in some ways as one form of vertical integration, and it has not played out the way either company hoped.

Perhaps, though, economic terms such as “vertical integration” are too limited to describe what is going on here. It’s all well and good to use that term to describe an automobile maker that owns a glass company and a tire or rubber company. Does it make sense when you are talking about a service company that purchases other vehicles on which to offer its service? And what model, if any, can we use to predict the possibility of success?

Once it does happen, though, online companies who advertise with search engines should be excited, and justifiably so. It has the potential to open up whole new marketing vistas. Even better: if the service is delivered correctly, advertisers could actually become the heroes that deliver the deals when and where users want them most, rather than the annoying voice, billboard, or pop-up ad that interrupts the fun.

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