Jaxtr Launches Free Calling Service. Why?

[qi:004] Updated: A few years ago we saw a gaggle of VoIP start-ups pop-up, each claiming to have their unique twist on cheap phone calls. Some offered anonymous calling services as their signature feature. Others labeled themselves as social voice apps. Some of them tried both and other features. Most jumped on the social networking bandwagon. And many of them – Jangl, TalkPlus and EQO for example — went bust, because they learned the harsh lesson — selling cheap minutes or offering free calls isn’t really a business. One such company – Menlo Park, Calif.-based Jaxtr – apparently hasn’t learnt that lesson.

It is still hanging around, thanks to $10 million venture capital infusion it received in June 2008 from Lehman Venture Partners. They fell from my active-coverage list. Today they sent over a press release touting Freeconnect, their free member-to-member calling service, that has been tried unsuccessfully by other VoIP start-ups.

FreeConnect is easy-to-use. Jaxtr members simply enter the number of the jaxtr member they wish to call. Jaxtr will then give them a local number to reach that person. Once they initiate the call, jaxtr notifies the person they are calling, and will give that person a local number to call, too – allowing the parties to connect directly. They can then talk for as long as they like, free of any charge from jaxtr. These assigned local phone numbers can also be used again by the same parties on an ongoing basis.

That announcement made me feel like Rip Van Winkle who just woke up. If my memory serves me right, this is just another variation on Rebtel’s initial model, one they launched with back in 2006. After realizing that they weren’t going anywhere, Rebtel (somewhat) re-focused and now (supposedly) makes a decent living. The whole process of using Jaxtr to make free phone calls seems so cumbersome and in this day of increasingly cheap wireless plans – almost pointless.

Now even if Jaxtr’s new offering does become popular — odds of that happening are lower than chances of baseball slugger Manny Ramirez returning to Boston — how is Jaxtr going to make money? Free calls don’t make money but they surely incur costs. Advertising isn’t going to cover the costs — at least not while this deep recession lasts.

“We believe a big portion of the free callers will convert to paid calling… The number of people who do that can make up for the people who only do free calls,” Bahman Koohestani, chief executive of the company told VentureBeat.

Maybe I should offer to sell him an investment opportunity in Bernie Madoff’s fund!

You should check out my twitter conversation with Jaxtr co-founder. 1. 2. 3. 4.