PhoneTag: The Customer Comes First, Voicemail Second

James Siminoff ‘s professor at Babson College was Steve Spinelli, a co-founder of Jiffy Lube, which pioneered the quick lube industry. Steve drummed it into James that “it’s always about the customer”.

After college, James became a co-founder of Noble, the largest online phone card company in the US and he grew this to over $100m in sales before selling out. At Noble he honed the low cost, zero middlemen approach and when deciding on the model for his next business he infused his key learnings about margins and customer control into the mix.

In 2003 he co-founded PhoneTag, a provider of voicemail to text services and visual voicemail applications. The two initial founders each put in $100k and then, after being covered by the New York Times, raised $3.5m from angel investors. They have since raised a further $2m from private investors and are now almost at break even.

They launched their private beta in late 2005. At that stage it wasn’t more than a hobby. The public beta opened up in 2006 and they started charging for their service in January 2007.

They currently have 10 full time staff and around $5m in sales in the US. Globally the market is about $10-15m in size and James believes it will grow exponentially.

PhoneTag is totally focused on the voicemail to text niche and they have not tried to expand into the wider voice recognition arena. Their take is that broad voice recognition is between 50-60% solved, whereas for a specific task, like the one they are taking on it is 100% solved.

His reasoning for tilting at this windmill. James hated the inefficiency of voicemail. James believes they are solving a problem, without creating disruption. They are tapping into the scanning nature of our modern approach to media. With a long voicemail you need to stop and listen, whereas with text you can see and scan through the data.

PhoneTag’s business model is to charge a subscription for the service. This ranges from $30 per month for unlimited, $10pm for 40 messages, with 25c a message thereafter or 35c a message on an a la carte plan.

They decided to launch in Australia as their first international market. Their reasoning is that it is an English speaking country with lots of travelling professionals and it is a well contained market. They recently appointed a Director of Sales and have now signed up 95% of Australia’s carriers.

Their core product is voicemail transcription. They are also expanding into the broader unification area by giving their subscribers convenience for example by including contact integration so that when someone calls they have the same feeling as getting an email.

PhoneTag is a consumer product and as such is carrier agnostic. Their service enables a subscriber to stop listening to voicemail and save both time and money by being able to read these messages instead. PhoneTag converts voice messages to text and send them to a subscriber as an email or SMS. Just in case a user wants to actually hear the voicemail, the original audio file is either attached to the message or can be accessed via PhoneTag’s website.

From a marketing point of view they’ve focused on virality by creating fanatical customers who they have found to be their best sales agents.

They have also spread by tapping into business and especially Blackberry users who treat email with immediacy. They’ve done some corporate seeding with CEOs and have focused heavily on the real estate niche. High profile customers include Donald Trump’s lawyer.

From a viral point of view the service includes a message that says, “Please speak clearly, your voicemail is being transcribed by Phonetag”. This is a smart move and reminiscent of how Hotmail spread so rapidly, by including a tagline on every email.

His lesson for entrepreneurs is that business is simple: don’t blow your focus apart. Keep the military precision and always, always focus on the customer.

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