Tango’s Early Days

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Voice app Tango screenshotMobile voice and social messaging app Tango just collected a whopping $280 million in fresh funding. Seems like a good moment to look back at an interview I did with co-founder Eric Setton back in May 2011 for an article about the mobile telecommunications revolution in the now-defunct Earlybird Magazine. All stats and figures quoted are vastly outdated by now, of course, but I hope Setton’s daughter still knows how to celebrate her birthday Tango-style, in a way that makes her daddy happy.

Eric Setton likes to bring his family along wherever he goes, even when his wife and daughter stay at home. That’s why the 32-year old Stanford graduate co-founded Tango, a Skype rival for the mobile world that allows users to make video calls on-the-go, from one smartphone to another, independent of operating system or network – so that iPhone owners can chat with Android fans, not only on Wi-Fi connections but also while roaming on advanced 3G or 4G mobile networks. “Smartphones open up a new world of opportunities and convenience”, says Setton, a Frenchman transplanted to California by a life in high-tech, just like his co-founder Uri Raz, an Israeli by birth. “We both have families all over the world”, explains Setton, and for years, both had been avid Skype users in order to keep in touch with loved ones – but they sensed that now, with habits in transition and the electronics industry undergoing a fresh revolution, there might be an opportunity to try something new. “Mobile changes everything”, says Setton, “particularly for the user experience.”

Tango-Android_Spotify_messageOn desktop computers, finding and setting up new software tends to be time-consuming and laborious. By contrast, in the smartphone world a wealth of apps is always just a finger tap away – be it in Apple’s App Store, Google’s Android Market or Microsoft’s Windows 7 Mobile Marketplace. With user and billing information on record, transactions happen in a heartbeat. “Typically it takes 15 seconds from installation to the first call”, claims Setton. For developers like him, life has become much easier as well. Mobile software can access address book data or ask the phone for its location, and many standard elements, such as buttons and query fields, are quickly implemented with a few lines of code.

Platform builders make every effort to lower the barrier for anyone with an attractive app idea – after all, this the new frontier of technology where fortunes are made, much faster than in the traditional PC business. By 2014 market researcher Gartner expects worldwide revenue with mobile software to reach $59 billion per year, a breathtaking increase of 1,000 percent over 2010. “It’s the gold rush all over again”, says Roger Entner, founder of Recon Analytics, a research firm. The spark that ignited the boom was the shift from analog networks carrying voice calls to digital networks transmitting bits of data. “It’s a tremendous transition”, says Entner, impacting companies in both the IT and telecommunication industries in a multitude of ways. “For some, it’s a mere ripple effect, while others are being completely uprooted.”

Among handset manufacturers, Nokia stands out as a former undisputed champion now trying to catch up with rapid change – while Apple, which entered the mobile market fairly recently, in 2007, is generally considered the king of the smartphone world. “Apple with the iPhone has changed the perspective”, says Kurt Scherf, Vice President of Research at Parks Associates, a consultancy. Network carriers used to cherry pick among mobile phone makers, controlling what models their customers were offered – until Apple succeeded in making the iPhone a must-have device, to the point where many consumers were willing to switch carriers. “Now hardware is driving services”, says Scherf, “forcing carriers to think about network enhancements.”

The result is a reversal in power. In the smartphone era, controlling an ecosystem of devices and software tends to be more valuable than owning cell towers or cables in the ground. “Apple is dictating its terms to AT&T and Verizon”, says Roger Entner. “Can you see anyone tell Steve Jobs what to do? That’s not going to happen.” In fact, carriers are grappling with a confluence of challenges: worldwide data traffic is expected to roughly double each year, exceeding 6 million terabytes per month in 2015, according to a Cisco study – putting an enormous strain on networks which require constant, costly upgrades.

On the other hand, operators are struggling to turn mobile growth into profits. In developed markets such as Europe, Japan and North America, “average revenue per user”, a key metric, has been has been falling for years. “The differences between carriers are shrinking, and they have to offer more and more for the same price”, explains Entner. Many consumers perceive the real value of their mobile experience to be in the elegant interplay of hardware and software. “If the operators don’t watch out”, warns Entner, “they are becoming the mere pipes.”

Similarly, the transition from voice to data has upended the traditional business of landline carriers. In the U.S., regional telecom giants that used to enjoy near-monopolies for decades, suddenly find themselves embroiled in multiple turf fights, simultaneously attacking and defending: while voice-over-IP rivals such as Vonage are gnawing away at their bread-and-butter telephone service, big telcos like AT&T and Verizon are trying break into home entertainment, offering television programming over advanced digital networks. Cable companies, meanwhile, try to lure customers with unlimited voice calls bundled into their own services.

Companies that want to emerge from this battle royal as winners need to give consumers “more choice and convenience”, says Parks analyst Kurt Scherf, pointing to innovations like multi-room digital video recorders and mobile apps that allow TV streaming to tablets like the iPad. “These are the types of services that all operators will need to put in place”, argues Scherf. Ultimately, he sees carriers in a good position to benefit from a networked world. Operators have an advantage over new entrants like Apple and Google, Scherf argues, because they can subsidize content and bundle services. “If anybody is going to be able to give you a seamless multiscreen experience, it will be the carriers, because of their scale.”

For smaller competitors, a world of constant upheaval makes innovation more than just a winning strategy – it’s the key to survival. When Thilo Salmon co-founded Sipgate in 2003 as one of Europe’s first voice-over-IP providers, the fast-growing business depended mostly on individuals trying to save a few pennies here and there. By now, the company’s focus has shifted to businesses looking for an allround service solution, complete with call forwarding and voice mails sent as e-mail alerts. “There’s a slew of offers now for people simply looking to make cheap phone calls”, says Salmon. “Our differentiator is to provide additional value.”

The VoIP pioneer’s newest offer is “Sipgate One”, a cloud service that allows users to combine multiple phone numbers into a single one and manage all calls, voice mails and text messages via a web portal. Not long ago, the idea would have seemed as radical as making video phone calls whenever, wherever, with the mere touch of a finger. “Now is the time where the foundation for new empires are laid”, says Recon analyst Roger Entner, predicting the best chances for companies that manage to bring their services to “every device on any screen”.

Eric-Setton_TangoThat’s exactly where Tango is heading. Banking on its proprietary technology, the Californian start-up hopes to stay a few steps ahead of its much bigger rival Skype. “We have a good head-start and we’re not standing still”, says Eric Setton. With almost 500 million smartphones to be sold in 2011 alone, as Gartner predicts, the mobile market alone would be enormous. But the Tango founders are dreaming a bigger dream for their company of 45 people. “There’s a tremendous opportunity, and smartphones are only a part of it”, says Setton. “We want to be on all the screens around you.” After all, it’s nice to have the family travel along on a smartphone – but even nicer to imagine that they’d be there on a big screen. “The other day I was in Beijing”, recounts Setton. It happened to be his daughter’s first birthday, and as a seasoned beta tester she knew what to do. “She came to the screen and kissed the phone. That just made me melt. That was the perfect consumer experience right there.”

According to Tango’s current Fact Sheet, the company now has 200 million registered users – ten times as many as in 2011 – and 160 employees from all over the world. Most of them at headquarters in Mountain View, California, so they probably Tango a lot.