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Google Buys Gizmo5: A Look Back

Call phones from Gmail

About a year ago I sold Gizmo5 to Google and I want to tell you about that experience. I started Gizmo5 (initially called SIPphone) 5 years earlier because I believed all calls will go over the net and "SIP" is technology which will allow every device (PCs, tablets, smart phones, dumb phones, etc) to communicate with each other. (Similar to how MP3 makes all music devices work together, SIP does the same for calls.)

Our initial strategy was to partner with hardware and software companies and encourage them to use our directory system. We assisted companies in building devices for the home which let people use the cordless phones they were used to, but move the call over the internet. (This is now commonplace thanks to companies like Vonage.) On the software front we didn't build our own software but tried to work with other software companies Xten. Users did not quickly adopt these software programs because the interfaces were clunky and the calls were low quality (problems connecting, echo, etc). Meanwhile the innovative Skype software came along which allowed people to place calls PC to PC. To garner initial usage Skype bundled the software with Kazaa, the now defunct music file sharing software. This quickly gave them a sizable user base which they continued to grow.

After a year, we realized that we were going to have to build our own software program if we wanted to compete with Skype. We then built Mac/Win/Lin software which became the Gizmo5 software. By now Skype had a big headstart and had captured the "network effect". This is when a large number of users makes a service attractive to other users (because in this situation it meant more people to call) so you get even more users. And even more users makes the service even better and creates the snowball effect of growth. If you're a late competitor it's tough to catch up in these situations. eBay is another company that benefited in this fashion. As they got more sellers, they got more buyers. And the more buyers makes it even better for sellers and so on. Gizmo5 continued to improve our service over the next few years and grow but we were always a small fraction of the size of Skype.

In mid 2009 I received a call from Andreessen Horowitz. This was a new venture capital fund that was secretly negotiating to buy Skype from eBay. They were concerned that the original founders were claiming ownership of Skype's core technology and they were scouting around for a technology and team which could be used to handle internet calls. Outside of Skype, Gizmo5 was the largest net calling service so it made sense. We met multiple times with business and technology personnel. At the same time the Voice division at Google had contacted us inquiring about an acquisition. They were well aware of our technology because our services worked together nicely. Users could sign up for Google Voice telephone number and then make/receive calls using Gizmo5 software on their PC. (Outside of this, you could only use Google Voice with a traditional phone.) It was beneficial to have two companies that were interested in Gizmo5. When there's urgency that's when deals happen.

After some back and forth, we decided to sell to Google. Even after both firms committed it took months to do the requisite paperwork. When we sold I was pleased, but not elated. I felt like we had lost to Skype which had out maneuvered us and since I was the CEO that responsibility falls on my shoulders. Still it was rewarding that my team was going to work with the finest technology company on the planet to help with their voice initiatives.

For the next 6 months, I flew weekly from Gizmo5's base in San Diego to Mountain View where Google is located. Spending time on the Google campus was enlightening. There's a squadron of bikes outside most doors you can jump on to zip between buildings. There's a wide variety of restaurants where Googlers can eat for free making it convenient to work early and late. Most striking is there are loads of smart people.

I'm happy to report that Google Voice has launched a PC calling solution directly from within their popular email service Gmail. This service lets you make calls from your browser and answer calls to your Google Voice number right from your computer. I'm a long term Google Voice user who love the screening ability and it's how I'm able to make my mobile number public. The new PC calling was ultra handy when I recently traveled overseas.

Selling Gizmo5 to Google was a great experience. It was the culmination of a 5 year effort by a team of hard working people. Now, the Gizmo5 DNA will help Google bring PC calling to an ever greater audience.


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