Tellme rings in $125 million investment

The voice portal is swimming strongly against the stream of the financial markets, with plans to announce $125 million in new funding.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
Voice portal Tellme Networks is swimming strongly against the stream of the financial markets, with plans tomorrow to announce $125 million in new funding.

The massive influx of funds will be used in large part to realize a third stage of the start-up's business plan. The company has previously offered portal-style voice services to consumers as well as services for application developers. It's now kicking off an initiative it hopes will bring commerce giants to its doors for help in building and hosting their own voice-activated services.

With that project comes something like a business plan that can justify the huge expenditures Tellme has already put forth developing its services. By bringing Net and offline businesses into its voice-access model, the company can gain potentially substantial revenues from helping develop the services, hosting the voice applications, and even selling the outside companies keywords like "books" or "music" on Tellme's own portal service.

But all of that will be expensive--hence the hefty price tag on the newest round of funding. Because Tellme will be managing much of the network for these voice-activated services, it must have absolute reliability. Any signs of lost calls, busy signals or other infrastructure issues could drive away the big companies that Tellme hopes to land and keep as clients, analysts say.

"Credibility comes from capacity," said Mark Plakias, an analyst with the Kelsey Group. "Tellme needs to put in the highest number of voice ports anyone can get if they're going to be in that side of the business."

Tellme is one of the most prominent of a host of companies that have sprung up over the last year purporting to offer Internet-style information and services over an ordinary telephone. Long-term consumer demand has been difficult to gauge, although several of the services have reported considerable subscriber interest and early predecessors such as America Online's Moviefone have been popular.

The business has already won the financial endorsement of several technology giants. AT&T invested $60 million in Tellme earlier this year, with plans to integrate the voice-recognition products into its own business services offerings. Just a month ago, AOL bought Tellme competitor Quack.com for an undisclosed sum.

Little progress has been made publicly in bringing the business beyond the initial consumer voice portal stage, however--and that's where Tellme hopes to make its mark.

The company says it already has a list of about 5,000 developers using its services to create new applications for the Tellme service. Some of these are individuals or small organizations creating niche products like weather conditions for boaters or card games. But others are big companies creating voice-activated telephone interfaces for their Web sites, Tellme executives said.

"This completes the picture of what we do for companies," CEO Mike McCue said. "We'll actually be answering the phones for businesses."

The company isn't saying much about which companies are already developing these services, aside from citing restaurant review service Zagat Survey. The publisher's reviews are tied to Tellme's restaurant-finding service and are accessible by saying a "Zagats" keyword. Tellme is already gaining revenue from that and from developing similar services for other businesses, McCue said.

Businesses that want their own version of the voice-activated site can get their own 1-800 number that connects to Tellme's network or can let their services live on the Tellme portal, the company says.

Analysts say the business focus is a good direction for the company, which has yet to prove it can gain revenues proportionate to the huge amount of funding it has attracted. But the long-term success of that model still depends on a few open questions, such as whether companies will use Tellme consistently or just during peak periods of telephone traffic.

"The question is not so much can (Tellme) get one or two big programs running on this. It's can they keep it filled on a regular basis," Plakias said. "Whether this is a seasonal or recurring business remains to be seen."