Google pays $30M for Gizmo5; Did the search giant just blow up the phone biz?
Filed under: Google , Apple, AT&T
Search giant Google (GOOG), which looks increasingly like a phone company, paid $30 million for Gizmo5, the Web-based calling startup, DailyFinance has confirmed with people familiar with the matter. The deal is done and the startup's staff has begun work integrating into the Google Voice team in Mountain View, Calif. Skype was also in negotiations to buy Gizmo5 before the VoIP (voice over Internet protocol) giant's founders reached a settlement to re-take an ownership stake in the company. TechCrunch first reported the news earlier this week. The deal is a crucial step for the search titan because Google Voice now gains the technology to connect inbound and outbound calls to standard land-lines and cell phones, something it had lacked.
The Gizmo5 acquisition makes a world of sense for Google because it adds a major piece to Google's mobile network puzzle. That's because Gizmo5's open standards-based web calling system allows incoming or outbound calls to real phones. In other words, this deal gets Google one step closer to realizing its goal of forging a parallel communications network independent of the incumbent cable and phone companies.
Gizmo5 also offers a client for mobile-phone users, meaning that, in theory, if you had Google Voice with Gizmo5 and a Wi-Fi connection, say, at an airport this holiday season, you could utterly dispense with your traditional mobile phone service.
I'll repeat that: this development gets Google one step closer to providing a product that could allow you to ditch a conventional phone service -- forever.
"It's a potent recipe," wrote Wired.com's Ryan Singel. "Take Gizmo5's open standards-based online calling system. Add to it the new ability to route calls on Google's massive network of cheap fiber. Toss in Google Voice's free phone number, which will ring your mobile phone, your home phone and your Gizmo5 client on your laptop."
Google intends to merge Gizmo5 with its nascent Google Voice service -- currently the subject of a bitter war of words between Google and mobile phone giant AT&T (T). Apple (AAPL) has refused to allow a Google Voice application on its iPhone, available exclusively on AT&T. Meantime, AT&T has complained to the Federal Communications Commssion about Google Voice blocking certain calls to high-priced rural numbers frequently used for "free" sex chat and conference call lines.
"Gizmo5's engineers will be joining the Google Voice team to continue improving the Google Voice and Gizmo5 experience," Google wrote on the company blog. "Current Gizmo5 users will still be able to use the service, though we will be suspending new sign-ups for the time being, and existing users will no longer be able to sign up for a call-in number."
Gizmo5 was founded in April 2003 by Michael Robertson, the Internet entrepreneur best-known as the founder of MP3.com, and has raised $6 million to date.
Prior to the Gizmo purchase, Google Voice has lacked true VoIP capability. That changes now, pushing Google into direct competition with Skype, which just emerged from limbo with the settlement of a bitter legal dispute between the company's founders, eBay which owns Skype, and a consortium of private investors trying to buy Skype for $2 billion. Skype had viewed Gizmo5 as a possible alternative should the settlement fall through.
Google's purchase of Gizmo5 for $30 million -- a song, really -- should put the entire phone industry on notice, from the incumbent telecom and cable companies, to entrenched VoIP players like Skype. Head's up: Google's coming at you.
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Reader Comments (Page 1 of 2)
11-12-2009 @ 10:18PM
gozman said...
With all the hype about VOip nobody has asked Goggle or any of the IP providers of Voice over IP. What happens when the power is out for any length of time????? It means that you have not computer for voice over IP whereas your local phone company can continue service because of emergency generators at the switch. Google may be purchasing a public switched network but how reliable will this be. Also keep in mind that any thing that travels through the air waves is not secure. After all isn't that how we defeated the Japanese in WWII we broke their radio code.
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11-13-2009 @ 2:39AM
mickey said...
Then I guess everyone will know what I'm bringing home for dinner!!
11-12-2009 @ 10:43PM
Dennis said...
Oh, how fun... Anti-trust legal case in the making. Google is shooting itself in the foot after weeks of saying they are not a telephone company and they shouldn't be regulated. All I can say is "LOL"!!!
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11-12-2009 @ 10:54PM
annette said...
I would like to know if the affilate that send out the stuff for google work at home is for real
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11-12-2009 @ 11:26PM
bitflung said...
@gozman
you're really missing a major point here, and inventing another one that doesn't exist:
1. in assuming that the existing telcos are better equipped to handle faults (power outages in your example) you're failing to realize that VoIP isn't tied to any one particular connection vector. if storms knock down the power lines in my neighborhood they stand a good chance to knock out telephone too; but no matter what gets knocked down in my neighborhood, if i physically leave here and go anywhere with internet access then my phone will be back online. AT&T dropping your calls because too many iphones are nearby? fine, use wifi. local wifi not dependable? find another wifi - doesn't matter which one you use. this is more robust.
2. inventing an issue: "any thing that travels through the air waves is not secure". right. so therefore your mobile phone is already insecure. same with your landline if you have a cordless. your mobile phone has a built in mechanism to somewhat obfuscate your voice data, but it's pretty weak. cordless phones don't really even bother. VoIP? built into the protocol. not everyone uses it - but just like secure websites versus nonsecure ones, the infrastructure is there and can be used to create a secure voip call. gizmo encrypts all communications between two gizmo users. so voip to voip on gizmo, TODAY, is secured better then your mobile phone secures your voice data. and landlines? personally I think they are a thing of the past, but if you're REALLY WORRIED about someone listening in to your calls, airwaves are not your problem. physical wires are the easiest way to get access to that communications channel. copper is easily tapped. telcos have a responsibility to provide access for legal government taps. voip? if the security is implemented on the endpoints (currently the case) then no one, not gizmo nor google, has the immediate ability to disable that security. what about cracking it, like we did to the japanese? well, EVERYTHING can be cracked. voip is no more susceptible than any other comm channel however but in fact much less so in many cases.
basically, your comment looks like nothing more than FUD. its make-believe. its a guess based on emotion. i can do that too: i'm guessing you're republican, mid to late 30's, a windows user sticking with XP, and drive a volvo. whether or not i'm right doesn't make my guess any more or less legitimate: it's a guess, barely based on logic.
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11-13-2009 @ 1:14AM
Dee's said...
If anything, I hope this breaks out into price wars. Cell phone market is obscenely overpriced. Break 'em Google!!!
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11-13-2009 @ 1:54AM
L R said...
Thank you -You are correct. It is not that this is not going to happen* it is when this is going to happen. The Beamers *Hughes *Dish * DirecTV and other satellite companies and developers have pumped 100 of millions into getting this to a final result. Reaching a balance in beam width* strength and safety are the issues that need to be resolved. They don*t want the kind of controversy that cell phones are now struggling with. Where they introduce a service and 8 years later everyone is walking around with Polosi eyes. Oddly enough China is working O T doing the same thing. Their economy is growing at a horrific rate* they realize they can*t afford to string wire the entire country* it would take 15-20 years. Besides bamboo telephone poles would just keep growing.
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11-13-2009 @ 7:41AM
ttrexxx said...
you reach a point in life where you don't need or want all the bells and whistles.I will tell you right now the government is to involed with the cell network to allow a change in the network so lucks of luck.and like they said there's that antitrust thing.don't go buying stock just yet.
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11-13-2009 @ 8:39AM
the forgotten piece said...
did everyone here forget where this wif or cellular internet access originates? uhhhhhhh....at&t, verizon, quest, sprint, t-mobile, comcast, time warner....hmmmmm i dont see a google nationwide network do you? DUHHHHH!!!
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11-13-2009 @ 8:54AM
BjohnDawg said...
Google is sitting on mountains of Dark Fiber.
Began buy it, somewhere around 2003,2004.
They can build a nation wide network any time they want.
If I were a Telco that had invested billions is a wireline network or a 3 G network, I could see a need to figure out something to do. Google is now a major threat to them.
Should be interesting to see if there is a price failout.
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11-13-2009 @ 8:57AM
csr said...
What I envision is a company, Google, that controls the world and the pricing for all communications, and reports directly to the governments of all countries. We need to 'break up' all these companies, apply strict regulations, and stop the BS of allowing Companies to control our diets, our job situations, our communications, our lives.
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11-13-2009 @ 9:25AM
Paul said...
No thanks, I'll stick to my conventional Land line phone. No batteries to charge, no interuptions, Nothing to break when dropped, No constant ringing in my pocket, No Spies ( I do have special filters for that ) No temptations to use while driving, No Hackers
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11-13-2009 @ 10:38AM
eric said...
Conventional land line? You have got to be kidding. There is no such thing any more. When Verizon FIOS customers enroll Verizon disconnects the copper to that home as the central office. No phone company in the US is putting money into land lines because their customer base is shrinking 7-10% every yer.
I switched to cable company VOIP because my land line had tremendous amounts of static on it and AT&T came right out and told me that they are not doing repairs on land line copper any more.
And what do you think happens to your "conventional land line" call when it gets to a central office anyway? It gets digitized and sent as VOIP over the internet. Old fashioned switched connection copper has gone the way of the Passenger Pigeon and Duck Billed Platypus.
As far as 'no spies' you have got to be kidding. The Patriot Act requires that anyone making telephone equipment has to put in a back door for the spies to listen in on.
11-13-2009 @ 9:28AM
Paul said...
I forgot to mention - No Brain tumors
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11-13-2009 @ 9:33AM
Paul said...
And I forgot, No Brain tumers
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11-13-2009 @ 1:25PM
bill said...
How will this this affect VZ and T stock price. I am 70 and depend on meager Dividends. They need to make Money to pay Divies and if Google comes out with a superior Tech where will that leave their profits?
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11-13-2009 @ 10:04AM
Tony said...
Thanks Forgotten Piece! You still need WiFi and High Speed to make the call! That's why Google only paid $30 million! This is not a game changer but a small chess move to nowhere! Anything to play up Google's overpriced stock!
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11-13-2009 @ 10:49AM
John said...
Keep a copper landline. FIOS will only last about 4 hours in a
power outage. Copper is cheaper too. Your cell phone is better than FIOS in a prolonged outage.
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11-13-2009 @ 12:01PM
eric said...
Cell phone towers and the phones themselves die with power outages too. Ask anyone who went through Katrina.
The FCC is trying to force cell towers to have backup power because of experiences like Katrina but local regulations on storage of combustible materials make this impossible in many locations.
And as I said, it doesn't matter if you have a copper land line or not - get FIOS and they disconnect the copper. And after your call gets to the local office it gets digitized and sent out on the internet anyway. There really is no difference between copper and VOIP reliability any more.
11-13-2009 @ 11:11AM
TexasT said...
Gizmo5 also offers a client for mobile-phone users, meaning that, in theory, if you had Google Voice with Gizmo5 and a Wi-Fi connection, say, at an airport this holiday season, you could utterly dispense with your traditional mobile phone service.
Of course G covets Net neutrality as they look to dominate while sapping the Telcos that built the networks.
WhosObomasDaddy? Google!
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