Jaxtr’s Challenge: Turn Try It Into Buy It

VoIP startup Jaxtr said today that it has attracted 5 million registered members, up from 500,000 users 140 day ago, making the company “the fastest-growing Internet communications service in history — ahead of Skype, Hotmail and ICQ,” according to its press release.

But where is the money?

Jaxtr logoYou might think that scaling to meet the needs of these millions of users represents Jaxtr’s biggest challenge. Indeed, Jaxtr expresses concern in its announcement over its ability to meet user demand. To that end, it recently hired Taneli Otala, former CTO of MySQL, as VP of engineering.

But Jaxtr has bigger problems than scaling and tuning their systems for millions of users. To make Jaxtr a real business, they need to convert sign-ups into satisfied users, and from there, transform those users into customers who pay.

Even then, there are no guarantees Jaxtr will succeed. If the promise is cheap calling, it’s just the same old VoIP thing.

How Jaxtr works

Jaxtr widgetJaxtr offers free international calls via a web-based widget. To use it, you sign up for an account then publish your Jaxtr widget on your blog, web site, or social networking profile page. You can also email callers a link to your Jaxtr page, which shows the widget. Callers click on the widget, enter their phone numbers, then Jaxtr rings the caller phone and your phone to connect you with one another.

If the caller is located in one of 50 supported countries, they will be given a local phone number they can use to call you next time — without paying long-distance charges. Otherwise, they will be provided with a U.S. number.

Each Jaxtr user gets 100 “jax” a month. Jax represent a Jaxtr-specific currency that is exchanged for minutes at different rates in different countries. Currently, once you run out of jax you have to wait until the next month to get more. In the future, you’ll be able to buy jax — and that, along with web and mobile advertising, is where Jaxtr plans to get its revenue.

The big challenge for Jaxtr: Turning try it into buy it

It’s no surprise that Jaxtr is seeing so many sign-ups: the promise of free international calls, mobile-to-mobile, is compelling. And compared to Skype, Jaxtr doesn’t require any special client software. A caller simply uses the widget once, then subsequently dials the number the widget gave them for future calls. But turning registered members into ongoing users — and paying customers — won’t be quite as easy.

First, the Jaxtr service is somewhat complicated, as a quick glance at the frequently-asked questions list proves. Plus, though it does provide for mobile-to-mobile calls, the first time a caller uses it, he or she must use that web widget.

Second and more importantly, there are doubts as to whether the Jaxtr money-making math adds up. The company must be spending some serious cash on those local numbers it gives out, as well as on connecting phone calls. Will they be able to come up with a pricing scheme for jax that makes the business economically feasible?

Five million users is impressive, but how hard can it be to find 5 million people that want mobile-to-mobile international calls for free?