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AOL Has a Message for Local Phone Companies

"You've got voice mail."

That's the message AOL Time Warner's (AOL) America Online unit likely is contemplating with a small but significant -- and unreported -- acquisition last week of a privately held Silicon Valley company.

The start-up, eVoice, provided a Web-based alternative to voice mail. In an effort to snatch revenue from the lucrative "enhanced services" bin of offerings from local telephone companies, the 100-employee company in Menlo Park, Calif., provided a voice mailbox to users and notified them of calls by email. One of many start-ups that originally tried supporting a giveaway service with advertising, eVoice eventually started charging customers. Now it's given up and sold to AOL. It notified customers last week that its service would be ending, but it didn't tell them the company had been sold to AOL. People familiar with the transaction said the deal was small; eVoice raised a total of $51 million in venture capital. But the move is potentially meaningful for AOL, far and away the leader in email and instant messaging, if it attempts to add voice mail to its services.

"In AOL's world, messaging is everything," notes Jim Forbes, editor of DEMOletter Mobile Edition, an International Data Group-owned newsletter, who says he's heard from sources at eVoice and AOL that the online giant has acquired eVoice. "This is another strong attempt by AOL to build a messaging platform."

A spokeswoman for AOL declined to comment on eVoice. Other than confirming that eVoice had been acquired, company CEO Jonathan Fram also declined to comment.

What's clear, however, is that voice messaging is the logical next step for AOL. In October it began offering AOLbyPhone, a service that allows AOL users to receive emails and other information, like stock quotes or movie listings, by telephone. The service uses text-to-voice software from SpeechWorks International in Boston and is built around a so-called "voice portal" AOL acquired last year when it bought Quack.com, another Silicon Valley start-up. In May, AOL acquired InfoInterActive, a publicly traded call-management services company in Canada. Among its nifty offerings: a call-waiting service that alerts users by instant message that a telephone call is on the line.

The AOLbyPhone service is starting in the way big consumer technology companies typically introduce complicated services: slowly. In January, AOL said it had convinced 200,000 of its users to try the service, which would be priced at $4.95 a month after a 30-day trial. A spokeswoman declines to say how many users the service has today and says AOL didn't start charging for it until April. Presumably, not that many people care to have their emails read to them on the phone. After all, wasn't the whole idea of email to eliminate a phone call? But it's obvious that if AOL can add enough attractive features to its service, the extra five bucks a month would start to add up.

Quack.com co-founder Alex Quilici, now chief product officer for AOLbyPhone, says the unit's next feature is telephonic email reply. In other words, users can hear emails and reply to them by phone. AOL expects to introduce a new version of AOLbyPhone in the fall.

The investment implications of this relatively small move are subtle but large. "Voice mail has been the enhanced service," says Stuart Patterson, CEO of AOL voice-software supplier SpeechWorks International. "Messaging is clearly a killer app, whether it's text or voice or unified." Presumably, the more AOL and its competitors use any kind of voice-recognition and conversion software, the bigger the market for SpeechWorks and its Menlo Park, Calif.-based competitor, Nuance Communications.

And then consider the impact on the phone companies, who charge several dollars a month for voice mail services that cost them very little to offer, if the leader in email and instant messaging invades their turf.

The message to the phone companies is clear: You've got competition.

Venture Capitalists Are Godlike Enough to This Web Site

I naughtily suggested at the beginning of the year that it probably would take a miracle for Christianity.com to succeed, despite a $14-million infusion of venture capital from the likes of Silicon Valley's Sequoia Capital. The Hayward, Calif., organization aims to make money by selling ads to its site as well as hosting Web services for religious organizations. Its Web site features such page turners as "Is Drinking Alcohol a Sin?" and a section on "Giving Online."

Alas, the day of reckoning is drawing closer. The VentureWire newsletter reported last week that Starwire, the new name of Christianity.com's parent, let go of 31 employees, or 43% of its staff, in an effort to cut down the depletion of its cash reserves. Starwire has raised a total of $44.5 million, according to the company.

Interestingly, Starwire describes itself as a "software service company that delivers Web content management tools to organizations over the Internet and enables them to create, maintain, syndicate and exchange content across sites within Web-based networks."

It's common for failed dot-coms to remove the "dot-com" from their name. It's another thing altogether for a religiously focused organization to remove all traces of spirituality from its name and description. One wonders how far away last rites could be.
In keeping with TSC's editorial policy, Adam Lashinsky doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, frequently guest hosts the TechTV cable television news show Silicon Spin, and is a regular commentator on public radio's Marketplace program. He welcomes your feedback and invites you to send it to Adam Lashinsky.

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