World’s Best VoIP Bargain?

Since 2008 Omar Onsi has been quietly building London-based Nymgo, one in a growing field of Skype want-to-bes. He spends almost no money on advertising and he’s only got about 25 employees.

Yet in two years some two million people have downloaded his software and another million have loaded it onto their SIP phones. Nymgo has sold a quarter of a billion minutes, Onsi said. The key to running a successful VoIP venture on a lean budget? Keep it simple.

Unlike competing brands, Nymgo gives nothing away for free. You don’t get video chat, computer-to-computer calls, or instant messaging. No free calls between Nymgo users (a la Skype). All you get is cheap international calls to land lines or mobile phones.

Really cheap: 1.1 cents a minute to India, versus around 9 cents a minute from other providers. Calls to Hong Kong cost three-tenths of a cent per minute and calls placed to the United States from anywhere in the world cost eight-tenths of a cent.

Onsi said he is able to keep the rates down by doing away with the extras. “We don’t increase our overhead with free services,” he said. It takes engineers, equipment, bandwidth, and tech support to offer video chat, “but all the end user wants is to pay the lowest cost possible for really good audio quality.”

Nymgo has staked out its ground on this premise. “If you want to use a free call or a video call you can use any of the other competitors in the market. If you just want to have low rates, this is where Nymgo steps in,” Onsi said.

With a business degree in his back pocket, Onsi entered VoIP in 2002 selling wholesale voice and prepaid calling cards in the U.S. and European markets. He self-financed the launch of Nymgo, believing no venture backer would be willing to support his business model.

“An investor wouldn’t go with you on this,” he said. “They need faster ROI and they need bigger profit margins. I’m not looking for those big profit margins right now. I am building volume.”

Except for a few ads during the World Cup, Nymgo doesn’t do advertising, relying instead on word of mouth, which so far has served the company well. Some may find that surprising, considering the service stakes its reputation on offering less than the competition: The prices may be lower, but you get fewer services for your money.

As Onsi explained it, the competition itself has made it possible for him to come in with this business model. They have laid the groundwork with their full-plate offerings, paving the way for something more streamlined.

“All this competition among the big names, it has educated the market. If this education wasn’t in place, we would not be here,” he said. “Now the customer has become accustomed to make a call over the Internet, they have become educated and comfortable using the software. So now the customer knows enough to start looking for a cheaper rate.”

Still, those bells and whistles serve a purpose. Video chat and other features are meant to draw in the customers who will eventually pay for services. Onsi is betting he can attract them without the freebies, simply by delivering cheaper calls.

He promises to keep those calls cheap, cutting rates as volume builds. In India for example rates started at 4 cents a minute and dropped every two weeks as rising volume gave Onsi leverage with his vendors. “The more customer base we have, the more we start pushing the price down,” he said.

In fact, volume is the key to the entire Nymgo formula.

“We are looking to have a major stake in the worldwide volume,” Onsi said. “There are 400 billion minutes a year [sold] in the world and we want major stake in that market, probably 12 to 15 percent over three years,” he said.

If he can hit those numbers, he said, all those fraction-of-a-penny rates will generate big dollars. “When you add up the volume that is available to you, it will turn out to be a huge business at the end of the day.”

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