Why (almost) free will win the video conferencing game

The video conferencing market is getting inundated with new products focused on bringing collaboration tools to the masses — or rather, the large number of small and medium-sized businesses that can’t afford a full-blown teleconference room. They also hope to enamor themselves to businesses looking for a more robust product than the typical consumer video chat application. But is there a market for something better when good enough is, well, good enough?

Take today, for instance: A new startup called Blue Jeans Network came out of stealth mode today, with the promise to make video conferencing easy and more affordable than traditional telepresence solutions. The pitch is simple: one product to connect with video conferencing products that range from Cisco (s CSCO) and Polycom¬†(s plcm) room-based solutions, all the way down to consumer products like Skype (s msft) and Google Talk (s goog). And it’s got some serious backing: $23.5 million from Accel Partners, New Enterprise Associates, and Norwest Venture Partners.

Blue Jeans Network isn’t the only new video conferencing solution aimed at the mid-market. A few weeks ago, video conferencing startup Vidyo announced that it was coming to market with a software-based product priced well below traditional telepresence offerings from Cisco and Polycom. And Fuze Telepresence Connect, which is based on Vidyo technology, also aims to connect with multiple enterprise and consumer video conferencing services.

But while startups like Blue Jeans, Vidyo and Fuzebox today are aiming to capture the mid-market — small and medium-sized businesses that previously couldn’t afford enterprise-based solutions for video conferencing — consumer video conferencing technologies have already begun to take hold in those businesses.

Technologies like Skype (s MSFT) and Google Talk, (s GOOG) while aimed at the consumer market, have long been used by small businesses to connect workers. There’s a growing number of mobile video chat services — like Tango, Fring and ooVoo — that enable users to chat with users across a wide range of devices. Those services, which were mostly focused on one-to-one communication between users, are steadily adding multiuser video chat features.

For heavy enterprise users, those solutions might be lacking some important collaboration features. But increasingly, the consumer video chat services are beginning to look business-ready. The difference between consumer-grade video conferencing applications and those used by businesses continues to narrow, which brings into doubt the future of “in-between” products being launched today.

The improving capabilities of video conferencing technologies are only part of the story. More importantly, those consumer grade products are free, or close to it — and that’s the real draw to their usage in the enterprise. Today, Skype is free for single-user connections, but group video calling is less than $10 a month — which for business use, might as well be free. And the upcoming availability of Google’s Hangout group video conferencing solution has the potential to make distributed workforce collaboration available to the masses at no fee.

It’s what Om likes to call “The Economics of Good Enough,” i.e. why pay a premium for a full-featured product when you can get by on something else free, or inexpensive?

While today there’s surely a market for a mid-grade video conferencing products that have inserted themselves in between heavy enterprise offerings and consumer products, in the future that spot will likely be filled with cheap or free “good enough” products that just keep getting better.