It was nice to see the acquisition of Grand Central by Google announced yesterday. I have liked the Grand Central service a lot since its beta launch months ago, but always felt reluctant to embrace using the free phone number they provided as more than a party trick to show friends, since I wasn’t sure about the eventual outcome of the company, and my ability to “reclaim” the phone number if they didn’t succeed. That concern prevented me from using it on any website, business card, or email signature block – any real use case.
My first exposure to the virtual attendant space goes back to the 90’s, and the launch of Wildfire. a really nice virtual phone assistant service that friends of mine who were running investment funds or small businesses swore by. The challenge with Wildfire was its cost, and the fact that most of the development was done in the pre-web, pre-voip, pre-Linux world, which I am sure saddled them with a pretty high operating cost. It did, however, give you a tantalizing taste of what was to come.
Grand Central is a 2.0 version of the virtual attendant – more functionality at a much lower cost. There are longer descriptions of all the features and functions of Grand Central, but the fundamental premise is that you provide one phone number to the world at large, and the intelligence of Grand Central gives you lots of flexibility on how calls are treated, and how best to reach you when a specific caller gives you a ring (policy-based call handling). All of its rich functionality is wrapped in a very intuitive front-end that give you immediate functional payoff with minimal configuration.
The challenge for a service like this, unlike low variable cost services like a web word processor, an email system, etc., is that the cost structure is high enough to prevent it from being a free service. Someone has to pay for acquiring the pools of phone numbers to assign in each area code, funding the cost of outbound calling, and running the underlying switching infrastructure. The costs aren’t massive, but having launched a similar service in the space (AIM Phoneline), I know how hard it is to make ends meet relying on only an ad/search-based model.
What does this imply for Google? To me, it seems like a further step into subscription services, much like their earlier move with Google Apps (which I use to power Great Falls Ventures). That’s fine by me, and isn’t counter to Google’s fundamental organizational principles (as some might believe) - it just allows them to expand much more broadly in terms of their market offerings. In this case, I think the combination of a simple to use email and application suite, coupled now with a best-in-class telephony offer, really moves Google into a different league with regards to their value to the small-to-medium business (SMB) market.
Why it makes long-term strategic sense to me is simple: one of the biggest, more fertile opportunities left in mature advertising markets like the US is that fact that most small businesses are still off-line operations, and the company or firm who cracks the code in allowing them simple steps to reach out to the online world will benefit hugely. This is a segment that exhibits little switching behavior, and is less aware of efficient market pricing – once you have them as a customer, as long as you offer good customer service and reasonable pricing, they are yours for life.
Google has lots of the pieces and parts in place (Google Apps, Google domain sales, Google Base, etc.). Grand Central is a great next step to reach critical mass to compete for the lion’s share of SMB online spend. Who will they compete with? Intuit, Yahoo, eBay and Microsoft all have existing scale and unique value propositions in the sector. It will be interesting to see what other moves result by these players as they fight for share and thought leadership here. Ebay has yet to figure out how to best leverage their Skype asset – maybe this move will jumpstart their efforts here.
Regardless, with the ongoing operations risk now firmly behind Grand Central, I now feel confident enough to start using them as part of my own bag of tricks, and that’s huge for me.
