Oct 2, 2000 12:00 PM,

The Analyst's Corner: Revenge of the telephone

Mark Evans

Combine speech recognition with the Internet and you have the next killer app...right there on your plain old telephone

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What do you get when you combine speech recognition with the Internet? Voice portals. Is this another “a-ha!” technology—or a product needing a consumer?

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Forget about the wireless application protocol (WAP). The newest gizmo on the block is your father’s telephone. But the operator never yielded as much information as your new phone friend can.

Companies like Tellme and BeVocal are taking the concept of the now traditional Internet portal, adding some interesting speech recognition technology by Nuance, SpeechWorks and others, and transferring it to an 800 number. Callers using traditional phone lines or cell phones can dial a number and get audio updates on the stock market, sports, weather and traffic, as well as information on movies and other events by speaking their one-word preference.

'I call it instant gratification technology. It’s very personal
in that it’s in your ear....When you add to that
a wide variety of audible bells and whistles...
it’s more high touch than a cold Web browser interface.'
--Mark Plakias
Vice President of The Kelsey Group’s
voice and wireless commerce group

The question that needs to be answered is this one: When consumers are already flooded with information sources, ranging from the daily newspaper to the Internet, is this something they really need, or is it just another product that solves a problem that doesn’t really exist?

“This is a great application for the road warrior. They’re looking for quick hit information; they’re not doing major Web browsing,” says Dana Thorat, an analyst with IDC.

Because users don’t need sophisticated phones with WAP technology, Thorat believes that voice portals will draw more subscribers than WAP.

“Everything will be voice activated; you won’t need to use a keyboard or a screen,” Thorat says.

Mike McCue is chairman and CEO of newly launched voice portal TellMe. The former Netscape veteran says that this technology is truly mass market.

“It’s not just for the road warrior. It’s for everyone,” he says. “Most people don’t have Internet access. We’re trying to provide a service used by the mainstream American market, both connected and not connected.”

The Kelsey Group, for one, is impressed with the revenue possibilities.

300,000
The number of wireless portal users by the end of 2000.
Source: The Strategis Group

“We believe this new medium will create a $12 billion ‘voice e-cosystem’ in 2005,” says Mark Plakias, vice president of The Kelsey Group’s voice and wireless commerce group. “This includes hosting services, transactions, advertising, software and incremental network transport. We see 45 million users of wireless phones using voice portals to perform their everyday cyberchores.”

Currently, he says, they’ve measured between 500,000 to 750,000 users.

Instant Gratification

“I call it instant gratification technology,” Plakias says. “It’s very personal in that it’s in your ear. You say ‘weather’ and it gives you the weather. When you add to that a wide variety of audible bells and whistles like music or a certain sound while it’s searching for information, it’s more high touch than a cold Web browser interface.”

One issue that has come up, however, is how willing users will be to listen to the advertising that supports these ventures. After all, it’s possible to ignore banner ads on the Web, but on the phone, listeners are captive.

“It’s important to make sure that the advertising is done so as not to annoy the consumer,” McCue says. “We do things like sponsorship and directory placement. That’s smart advertising and not intrusive.”

BeVocal’s Co-Founder and Vice President of Product Marketing Amor Joshi, agrees. “Our core demographic is the busy, wireless professional who doesn’t like to have time wasted, so we have to be careful.”

Joshi explains that there are a number of creative ways to advertise that won’t put off users. “You may want driving directions faxed to you. We can print out a coupon for a nearby business,” he says. “The same goes for travel information. If we send you flight information, we can put in a promotion by American Airlines. A lot of our advertising will be non-audio.”

Additional revenues will be transaction based. The voice portal companies will get a cut from plane ticket and rental car reservations, as well as lead generation or referral fees for directing people to a place of business, like Federal Express or a stock brokerage.

And there are hosting fees. “There are companies that have developed voice applications but don’t have the capability of hosting all the phone calls they get,” says Joshi. “We can do that. We’re talking to a company that wants to do a localized restaurant service in San Francisco, but they’re too small to build their own infrastructure, so we’ll host it. We’ll charge for the capacity they use on our network and the minutes of phone use.”

But, notes McCue, controlling expenses is tricky. “You have to do very creative, strategic business development,” he says. “You have to leverage the technology to bring the costs down. The good news on the expense side is that costs, like 800 calls, are dropping like a rock.”

More Telecom Than Net

But no one knows for sure how these companies will fare since most are still in the pre-launch beta testing phase. “Right now, they’re all at the starting gate,” says Thorat. “We’ll see more coming out this year and next. WAP will be getting into it. Already companies like Motorola are putting voice on their platform. And telcos like BellSouth are getting into it as well.”

And that, says Joshi, is because this business is more like a telecom-enhanced service company, not an Internet company. “Yes, there’s a big fixed cost up front, but we’re making money on every call because we’re facilitating a real business transaction.”

While in the long term McCue and others see their services as applicable over a variety of devices, including the PC, they’re enjoying the irony of its emergence through Alexander Graham Bell’s brainchild.

“It’s the revenge of the telephone,” says McCue.
Mark Evans is Managing Director of Deloitte & Touche's Technology & Communications Group. He can be reached at mevans@deloitte.com.
This column originally appeared on the internetTelephony.com website.

Visit Deloitte & Touche on the web at www.us.deloitte.com.

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Tellme

BeVocal

Nuance

SpeechWorks

IDC

The Kelsey Group

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Fundamentals of Speech Recognition
by Lawrence Rabiner, Bilng-Hwang Juang
Textbook Binding - 496 pages 1 edition (April 12, 1993)
$73.00
Order this book.

Speech and Language Processing:
An Introduction to Natural Language Processing,
Computational Linguistics and Speech Recognition
by Dan Jurafsky, James H. Martin, Keith Vander Linden
Hardcover - 960 pages 1 edition (January 18, 2000)
$64.00
Order this book.

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