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TalkFree offers cheap VoIP services in developing countries–Taps the fortune at the bottom of pyramid

By Alok Saboo on August 2nd, 2010

If you have been following the VoIP industry, you would have noticed a few things:

  1. The number of companies offering VoIP services is growing leaps and bounds. The ease with which one can start a VoIP or a calling card business has only helped the cause.
  2. The industry is already showing signs of maturity – there is little to distinguish one VoIP provider from the other.
  3. It can be very difficult for a new provider to compete in this crowded market.

Given these realities, I was pleasantly surprised with the approach taken by TalkFree to create a space in this market. Unlike the majority of VoIP providers, who are catering to relatively affluent, educated, and internet savvy consumers, TalkFree has taken a completely contrarian approach.

Talkfree_logo

TalkFree targets citizens and migrant workers in emerging countries who (1) cannot make online payments because they do not have access to Internet or mechanisms (e.g., credit card, Paypal) to make online payments; or (2) do not have access to VoIP due to legal restrictions. Unlike other VoIP providers, who cater to customers in developed markets, TalkFree focuses on markets such as Middle East or Africa. TalkFree’s products and overall strategy are highly customized to its target markets.

TalkFree Program Chart around Resellers

  1. Instead of relying on the Internet channel, TalkFree has designed its system around resellers. Resellers promote TalkFree’s services, provide market intelligence, distribute the products, and provide payment services. So much so that TalkFree does not even offer its services through its website.
  2. TalkFree’s products are typically consumed at an Internet café, where consumers make calls using the computers and Internet facility available at the cafés. TalkFree offers a wide array of solutions for Internet cafés, Callshops, Mobile callshops, CallBack and Mobile VoIP (mVoIP) providers. Here are some of the products that it offers:

    Booth Billing is a billing software for the resellers.

    1LegCall is a mobile VoIP dialer that works on most Nokia phones (remember, Nokia rules in this part of the world). This can be used by the end user by purchasing credits from the reseller or by the reseller to add more capacity.

    Blackdialer is a browser based dialer that can be used by the end consumer or call shop owner to offer VoIP services.

    BuzzMeBack is a call back service for consumers in Angola, Kuwait, Malaysia, Qatar, Saudi Arabia, UAE, Oman and Yemen.This can be valuable for consumers who do not have access to Internet to make calls.

  3. It’s VPN solutions allow the VoIP services to be accessible even in regulated markets.

TalkFree’s strategy reminds me of the classic strategy piece by C. K. Prahalad and Stuart Hart on Fortune at the Bottom of the Pyramid. By focusing on the market overlooked by other major players, TalkFree has been able to more than double the number of calls handled from 15.8 million to 33.4 million and increase total revenue by 37 percent from last year (2009).

Fortune at the Bottom of Pyramid

The strategy to focus on the bottom tier of the market has enabled TalkFree to:

  1. Operate with little competition: TalkFree is operating in the market segment that is not of primary interest to most VoIP providers and hence TalkFree does not compete directly with the major players in this industry. Carving out this niche allows TalkFree to be insulated of competitive pressures in this otherwise competitive market.
  2. Expand the Pie: Instead of competing for the same pie, TalkFree worked on expanding the overall VoIP market. As TalkFree has demonstrated, a segment of the population, which has otherwise been ignored, can be very profitable. Companies can be better off by identifying such segments and targeting them with products designed for these segments.

TalkFree is a textbook example of how to grow your business in a crowded space. Remember, customers that are easy to acquire most probably have already been acquired. As a firm, you can either offer an extremely compelling value proposition and acquire customers from your competitors or target customers that have not been acquired by existing competitors. TalkFree is taking the latter approach and seems to have done quite well in this regards.

Let’s hope other VoIP providers take a lesson from TalkFree and serve some under-served geographies.

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