WSJEurope003

Little VocalTec

Uses Internet as Market place.

By Douglas Lavin

Staff Reporter

BRUSSELS – Even a tiny company can make a big splash on the Internet.

With only 15 employees, VocalTec Inc, A tiny Israeli company launched a software product earlier this year that allows inexpensive telephone calls over the Internet, The international computer network.

Though the company was thrust into the limelight as a potential threat to phone company giants, it’s “phone service” is scratchy and its user base tiny.

The phone companies aren’t too worried about VocalTec as of yet. The product allows long distance and international calls at a fraction of the cost of the telephone, but it has some serious disadvantages, users can only speak with other users who are logged on to the Internet. Sound quality is rough. The software can’t be used to ring someone unless he already is using a computer and is connected to the Internet. And it can be used only in conjunction with a computer equipped with a sound processor, a microphone, a speaker and Internet access.

What’s more impressive about VocalTec, but has gone largely unnoticed, is the company’s use of the Internet to contact and sell to thousands of consumers world-wide with almost zero cost for marketing, packaging, or distribution.

Only a few months after launching its system – which in practice works more like amateur radio than a telephone – VocalTec’s Internet Phone has become well known among Internet users and is in use in such distant corners of the globe as South Africa and Malaysia.

“how long would it have taken a traditional company to set up distribution in Malaysia? Months? A year? ” asks Elon A. Ganor, the chief executive officer of VocalTec. “We sold on the Internet to a global market from day one,” he said in an interview at a conference of converging technologies sponsored by the Wall Street Journal Europe and the Centre for European Policy Studies.

Of course, Internet Phone is almost custom-built for distribution via the Internet, The product itself is a computer code that can be easily be shipped electronically to its Intended market: Internet users.

It’s a prime example of how, particularly in the computer industry, the Internet has allowed entrepreneurs to establish new companies and services quickly.

John Scully, the former CEO of Apple Computer Inc. says that when he was a young marketing executive he was taught to plan on seven to eight years to build a major brand, “Now you can build a brand in less than a year on the Internet” says Mr. Scully.

He points to Netscape Communication Corp. pf Mountain View, California, as an example of a company that is “less than a year old and already has a good brand name.”Netscape makes software that allows for commerce on the World Wide Web and sold VocalTec the system it uses to present and sell its product on the Internet.

VocalTec, Based in a suburb of Tel Aviv with US offices in Northvale, New Jersey, will not say how many copies of the software it has sold, or how profitable the businessis. Mr Ganor says only that more than 250,000 consumers have learned about the product over the internet and that a significant percentage of those have purchased the 69$ product.

Of course, as any business student knows, the ability to quicky and inexpensively reach consumers cuts both ways. It means would-be Netscape or VocalTec competitors can also use the Internet to establish new brands.

Camelot Corp. of Dallas Texas, which is developing a product similar to VocalTec’s called Digiphone, hope to do just that. But so far Digiphone’s debut has been delayed by technical difficulties.

Consumers and businesses that have used the VocalTec product to call inexpensively from South Africa to Belgium or the US to Hong Kong say it’s an invaluable product.

As for Mr. Ganor, he says he is expanding his staff from 15 to 35 people and is making a tidy profit thanks to his electronic sales system. “People order via electronic mail, and pay in dollars with credit cards. It is the global village dream come true.”