Jajah turns to ads, free calls in Europe

Not quite sure what to make of Jajah’s announcement today of free in-country, ad-supported calls in parts of Europe. As Jeff Pulver notes, Jajah is not the first to try this twist of marketing-supported telephony, but the world is still waiting for the first one that is a runaway success.

Our pal Alec Saunders says that Jajah’s turn to ad-supported calling (apparenty diverging from its previous plan to focus on upselling conference calls, etc.) “has a plausible revenue model,” but put me in the skeptics’ corner on this one.

The good thing about the VoIP-based minute-stealers (as Om calls them) is that they help shatter the old telecom per-minute, long-distance billing model. And maybe by leveraging partners via a “powered by Jajah” strategy, the company can sign up new users it wouldn’t have reached before.

The skeptic question is — how many of those users will turn to ad-supported calls as their primary mode of communication? And even if that starts happening, how long before big telcos strike back with their own low-cost, no-cost plans? My problem with zero-cost telephony is that it eventually becomes a war of attrition, and those usually go to the outfits who can withstand a revenue drought. Skype may have such a war chest now, but others like Jajah and Rebtel face a more uncertain future.

Erick Schonfeld has done the math over on Business 2.0 blogs, and it isn’t pretty.

The economics, however, are not exactly clear. Today, Jajah charges 2.5 cents/minute for a call between Germany and Austria or within those countries. The free ad-supported calls are only national, and not international at this point, so Jajah might be eliminating costly cross-country termination and connection fees. Scharf gave me a scenario of two banner ads per call with a $2 CPM (i.e., $2 per thousand ad impressions). That would mean he is getting only about half-a-cent per call in advertising revenues ($4/1000 = $0.004)—and even less if he has to split those ad dollars with the media companies he is partnering with to power free phone calls on their sites.