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3/29/2006
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Three Competitors Threaten Skype With A Smackdown: Analysis

Skype's once-rosy future is now looking less sure. Europe-based Jajah is a particularly intriguing entrant.

It's been a good few weeks to be a VoIP user, and a bad one to be Skype.

To a great extent, up until now Skype has had a lock on the consumer P2P VoIP market, and even though its recent move into business VoIP hasn't been universally well-received, things looked rosy for the company in that market as well.

But a trio of competitors makes the future less rosy for Skype. Yahoo, the well-financed startup Jajah, and the big Web site Lycos have all released no-cost or low-cost VoIP P2P solutions within the last few weeks, attempting to muscle in on Skype.

Watch Out for Jajah

Possibly the most intriguing of the group is the European-based Jajah. The service requires no client to download, and doesn't actually use a user's PC to make the call. Instead, someone logs onto the site, types in his number and the number he is calling, and the site calls him and connects him to who he wants to call. For the most part, the call goes over the Internet, although the last-mile connection uses the PSTN or mobile service. The calls are low-cost, but not free, and are comparable to Skype PC-to-landline rates. But Jajah does not offer free PC-to-PC calls, like Skype does.

So why should Jajah be a competitor in the VoIP market? In two words, money and pedigree. Its has the backing of the big Silicon Valley venture capital firm Sequoia Capital (the companies won't reveal terms of the backing) and with that cash and pedigree behind it, it's bound to be a contender. And there's another pedigree that bodes well for the company as well; one of its board members is ICQ co-founder Yair Goldfinger.

Some say that it's not Skype, but Vonage that Jajah has in its cross-hairs, because Skype offers presence as well as free voice. But if people are looking for inexpensive phone calls, presence is a secondary consideration. In any event, both Vonage and Skype may need to worry.

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