A new version of the Viber application launched in the Apple App Store late last month. Viber is an over-the-top application similar to Skype, allowing free calls over the mobile data network with anyone else who has Viber installed.
There are of course more applications on the Apple App store that make 'free' calls possible. Skype is the most well known, but you can also use Nimbuzz for example. Viber is really nothing new, so at first glance one can expect that the success of this application is unlikely to vary much from its predecessors.
OTT services are an 'interesting' development to follow closely by operators with existing managed services. Interesting in the sense that they have a negative impact on current revenue flows. Viber is a voice service and competes directly with the managed service 'GSM voice' from mobile operators. When Skype was launched on the App store, it was controversially only available over Wi-Fi connections and operators blocked its use over the 3G network. Today, Skype works also on 3G networks. The Viber application is not new, so it's currently not expected to have an impact on existing services from operators.
The success of these kind of OTT services depends to a great extent on the ease of use of the service and the size of the group installing and using the service. In this sense, Viber has managed to avoid the early problems suffered by Skype. Using Skype used to require you to agree a time to be sitting at the computer - spontaneous use was not possible and it was far from easy to use. The addition of mobility and push notification features has increased the user friendliness, and users are no longer required to sit at the PC. Skype's user-friendliness further increased with the introduction of SkypeOut, SkypeIn (now called Online Number), video calls and clients for various OS, including mobile.
There remains the issue of the size of the user group and how do you know who's using the service. This is where Viber can make a difference. The problem with Skype is there's no simple way to see who's using Skype, or has it installed. You need to actively tell people you're using Skype and exchange addresses or look them up in the directory. Then there's also the waiting for the recipient's permission to contact them.
Viber uses your normal telephone number as a unique identifier, and not a special user name or e-mail address. As a result, the service can easily search your contacts list and check if each number is registered in its database of installed users. (The app does ask for your permission before searching the phone.) Users can then see easily who they can call for 'free'. The app checks regularly, automatically adding new users.
Of course the service is not 100 percent foolproof and there are still occasional problems. At the moment, the app is only available to iPhone users, but the company is working on Android and BlackBerry versions (and free SMS). The Viber user also needs to have an unlimited data subscription. Essentially, Viber is a simple application which, when its teething problems are resolved, is as easy to use as normal calling. And if there's no longer any difference in ease of use or quality, then the price will determine what gets used. The only remaining question is how will Viber make money?
They don't include advertising, the app is free and calls to normal numbers are not possible, so it can't earn a margin on termination. It does cost money to carry the traffic from A to B over an IP backbone and they have servers to manage. The company reportedly has expansion plans for services such as wallpapers, ringtones and LBS, so that must be when they are going to start asking for payment.
We take another look at Viber, an iPhone app offering free calls over 3G and Wi-Fi (see our earlier commentary ‘Viber: the killer mobile voice app?’). We looks at the user terms for Viber, in comparison with Skype.
First the terms and conditions (see www.viber.com/privacypolicy.html). The main benefit of Viber, that it searches your address book and places a Viber logo alongside the names of people who also have Viber installed, comes with a condition to which you may not want to agree: Viber copies your address book and calling history to its own servers: "All call and connection logs are maintained indefinitely". Viber also reserves the right to share the information with third parties ("We may provide personal information to trusted third-parties who work on behalf of or with us"). It’s unclear what this exactly means, but users should be on the alert. Who the third parties are and what they do with your information could lead to undesired consequences: quite possibly you or someone in your address book could be pushed information (via phone or SMS), advertising or worse, spyware. As long as there’s no clarity on this, there is a clear risk. It also appears to be too good to be true: free calls. We already know about this from Skype, but without a profit model no such thing can exist.
What exactly are the similarities and differences between Viber and Skype?
Both offer free on-net calling. Only Skype-to-Skype or Viber-to-Viber is free.
Viber selects other Viber users from your address book on its own, based on phone numbers, and also sees if they are available. This is not automated at Skype, which is based on user names. Skype dates from the computer era, when users were known by a name, not a number (IP address excluded). Viber is pure mobile.
Skype has various ‘clients’ available (for both fixed and mobile operating systems, such as Skype for iPhone and Skype for Android). Viber says it’s also preparing versions for Android, Symbian and probably BlackBerry.
Skype’s business model is based largely on SkypeOut (calling to fixed and mobile lines) and SkypeIn (‘Online Number’, available in 25 countries). With SkypeOut, Skype earns a margin on the termination rates, while SkypeIn charges an annual fee for maintaining the phone number.
Viber doesn’t have a business model yet and says it’s also planning to offer free SMS. It also says the free services will remain free and no ‘annoying ads’ will be added. It also wants to offer wallpapers, ringtones and location-based services, but it’s unclear whether these will be paid services. One needs to remember that Viber, even with just the Viber-to-Viber calls, is generating costs, namely for transiting IP traffic, managing its own server park and general business operations.
What can we conclude from this? First, that Skype has a major early mover advantage (downloaded around 700 million times) and a business model (sales of over USD 800 million), even if Skype is working off a relatively small number of paying users (8 million). Second, people need to be cautious about completely free services. We’ve seen this with Google, which starts with something innovative only to later add a profitmaking element (read: advertising). However, there is a big difference: Viber alone offers nothing innovative, apart from its price. And Viber is no Google, which can operate based on cross-subsidising.
Third, users need to realise that Viber is in their address books, possibly including the information on non-Vibers. Privacy groups are certain to follow Viber closely. It could still turn out well: Viber may want to offer LBS based on the address book information combined with other info. This could result in local and targeted advertising. The success of sites such as Yelp and Groupon shows that this type of advertising is not always seen as irritating. The question is then only if the user gets the chance to opt in or opt out.
