Google, Vonage, Skype: Peas From The Same Pod?

Posted by: Olga Kharif on August 30, 2005

Search giant Google has been quietly buying up fiberoptic networks and it might, rumor has it, soon launch its own broadband network. It also is said to be in discussions with various broadband service providers. The idea, of course, is for Google to offer cool new applications, such as phone calling over the Web and even TV services.

What I am wondering about is, what kind of an impact a move by Google could have on Skype and Vonage, the popular providers of over-the-Web calling (VoIP). My advice: These companies better hassle with their respective sale and IPO.

A quick recap: Vonage is planning to go public. Skype is, reportedly, in talks with Yahoo to sell out for, oh, more than $1 billion.

So the question is, should investors grab Vonage's shares, and should Yahoo buy Skype only to see Google emerge as a formidable VoIP competitor?

I think the Yahoo deal makes perfect sense. As Google's direct competitor, Yahoo needs to match all of Google's offerings. Yahoo also needs to get moving since America Online already offers a VoIP service. And Skype, which is winning accolades for its service, just might be the perfect fit.

On the other hand, I am not so sure that Vonage, as a stand-alone company, can compete with someone like Google, whose market capitalization exceeds that of General Motors.

What's clear is that both Skype and Vonage need to hurry up. If the rumors are correct, and if Google does introduce a VoIP service soon, investors and potential buyers might not be as keen on these companies -- or offer as high a price.

Reader Comments

Jim Dermitt

August 30, 2005 1:28 PM

Sorry, but your dotcom stock isn't worth the paper they didn't print it on. I can't keep up with all of this, I'm rather busy following the gas prices into outer space. Running my truck is going to require a NASA budget soon!

Someone

August 30, 2005 4:53 PM

I'm confused. Both Yahoo and Google already offer VoIP services... So, I don't understand the argument as to why they would need to buy an overpriced VoIP service when they've already been building them out on their own.

Roger Rubinstein

August 31, 2005 9:44 PM

I think Skype may have more of a problem than Vonage. The cometition to Vonage is not Google or Yahoo! but the local telephone companies (and maybe Time Warner and other cable companies' digital phone service.)

Vonage is sold as a telephone service replacement that happens to use VoIP. It even has a "cell" phone that works at any Wi-fi hot spot. Skype (at least to-date) considers itself a computer-based telephony system.

Bruce Pietsch

September 7, 2005 1:42 PM

When will you guys figure out that VOIP seller like Vonage are not VOICE over the "WEB" while SKYPE IS!!
It is clear that Vonage shunts data off the internet as soon as it possibly can on to a PRIVATE IP network that it leases from the likes of Level 3 etc. to traverse and MPLS backbone that is NOT part of the net..
SKYPE on the other hand just simply traverses the net- I know little of how it figures out the least congested paths to allow it to work at all but it seems to me that SKYPE will NEVER EVER be a replacement for your primary line while VONAGE clearly is as is ATT CALLVANTAGE.

As long as magazines like yours DO NOT GET IT people will keep assuming that all VOIP is over the WEB and will keep on assuming that its not ready for prime time since how could anything that runs over the PUBLIC NET be guaranteed to deliver my voice service on time- answer it cannot and so CALLVANTAGE and VONAGE pluck the data off your Broadband internet connection at the earliest HOP- probably your cable provider or DSL providers Head end router where it is shunted on to ATTs private MPLS network or Vonages leased network.

Course this is another reason why ATT will beat Vonage as Vonage (not owning its own private IP backbone) is clearly not a long term competitive threat to the likes of SBC and Verizon who just both bought Data backbone providers ATT and MCI FOR A REASON- because without a PRIVATE "INTERNET" to send voice over you have SKYPE=HYPE=bad quality calls- cellular at best- snap crackle pop more frequently...

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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