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Voice portal companies overshooting demand

A new generation of Internet companies has sprung up almost overnight, aimed at providing Web-like information to people who dial up a toll-free number over the telephone.

A new generation of Internet companies has sprung up almost overnight, aimed at providing Web-like information to people who dial up an ordinary toll-free number over the telephone.

Ranging from early-stage start-ups to giants like Lucent, the services aim to give callers quick access to things like stock quotes and movie listings, even if no Web connection is available.

But the explosion of new companies trying to enter this market--in which consumer demand is still untested, at best--is producing a case of too much too soon, analysts say.

"There are probably too many people on the bus at this point," said Mark Plakias, vice president of voice and wireless commerce at the Kelsey Group. "There are only so many people that can introduce a first-generation product."

That likely means a shakeout, an unwelcome idea for an industry that has barely taken its first steps into the market.

The dozens of companies now involved in the "voice portal" market are hoping to get in on the ground floor of a wave of new services sweeping through the telecommunications industry, sparked as Internet features slowly filter back to the traditional telephone. Already the big telephone companies are adopting services such as Web-accessible voice mail and fax services and are looking for new ways to boost use of their networks.

It's this hunger that many of the start-ups hope to fill. The "voice portal" companies are lining up at the big carriers' doors, hoping to win the right to become a kind of default voice-activated service on every telephone.

The stakes underlying this effort are high, particularly for the smaller companies with solid technology but limited funding. Building a consumer brand in the niche, in which it's necessary to persuade listeners to call a toll-free number on their own, requires substantial marketing muscle, which could be difficult to come by in a day when Wall Street has curbed its enthusiasm for untested business models.

The carriers say they're interested. But they're not yet giving any clues about which companies they might partner with, or when.

"We're always interested in exploring any opportunity where we see there is customer demand," said Ashley Pindell, a Sprint PCS spokeswoman. "We definitely think people are interested in it."

Although the game has barely begun, a few companies are rising to the top of the market. Tellme Networks, which launched its beta service last month, has spent a considerable portion of its initial $53 million venture funding in creating a service that sounds like real humans reading the information. That means high production costs, particularly for a service that plans to cover every movie, restaurant, sports event and weather pattern in the United States.

Of all the services aiming for market, Tellme may be the most comfortable in declaring its independence from the telephone companies, at least for now. Chief executive Mike McCue says his long-term plans are to be "part of people's dial tone"--a goal that requires partnering with carriers. But for now, he's content to drive the consumer marketing campaign himself, he says.

Others are springing up by the day, however. Rival BeVocal has its own well-stocked war chest, with a $45 million round of funding still fresh in its account books. The whimsically named has launched its own full national service and is getting valuable information about how people use its service. It's also beginning to bring this information to carriers.

But some smaller players are taking an inside path. has partnered with giant Lucent, aiming to ride that company's connections and technology into the carrier world. Another start-up dubbed Voice Access Technologies is working with GTE to provide voice recognition services.

While the carrier route may prove more stable in the long run--if the start-ups can break through the inertia of the traditional communications companies' buying cycle--analysts aren't confident that the deep-pocketed telephone companies can market any better than the start-ups.

"Carriers are really not good at marketing enhanced services such as voice portals," Plakias said.

The Kelsey Group has taken an optimistic look at the young market, predicting that advertising and transaction revenue for these "voice portals" will produce $5 billion in revenues by 2005 and another $6 billion for associated hardware, software and Net service provider companies.

But long before that time, the scores of companies now heading for market will have to be winnowed somehow, analysts say.

"Fifteen of these guys are going to launch," said Jupiter Communications analyst Seamus McAteer. "But there's no room for more than two or three companies in this space."