nexmo

In The Age Of WhatsApp, Nexmo’s Addition Of Voice Tools Quickly Ramps Its Top Line

Next Story

Watch The Live Stream Of Edward Snowden’s SXSW Talk Here

After WhatsApp exited to Zuck, the service, perhaps the best known ‘over-the-top’ (OTT) message service announced that it will add voice capabilities in the second quarter of the year. That move makes WhatsApp an even closer replacement for the traditional services provided by carriers, namely phone calls and SMS messages.

Nexmo, a provider of telephony services, recently added full voice capabilities to its suite of tools, after previously offering a more limited ‘text-to-speech’ feature. Nexmo competes with firms like Twilio to vend digital telecom services to applications and companies that need them.

The company recently raised $18 million in new capital. Its previous voice tools generated 7.5% of monthly revenue, a fair percentage, but a quite minor one. Following the launch of full speech, that share for Nexmo spiked to 15% of its total revenue in under a month, according to its CEO. So, around one sixth of its top line comes from a similar effort to what WhatsApp recently rolled out on a first-party basis.

How much top line is speech generating for Nexmo? The company informed TechCrunch that its revenue run rate has increased to $60 million from $50 million in late January. $60 million on a run rate basis implies that the company is currently generating around $5 million a month in revenue. 15% of that sum is $750,000, or around $9 million in yearly top line.

Nexmo has a history of being very open with its numbers. The company, for example, provided valuation guidance for its last venture round (north of $100 million). Why? Well, when the numbers look good, and you want to kick up some dust, talk about your metrics. Most companies, even those doing well, tend to be reticent to discuss any damn thing, let alone their cash flow. Nexmo, a company looking to make more noise, is doing so by being open.

I spoke with Nexmo CEO Tony Jamous recently, in discussion regarding the industry his firm competes in, and how he intends to approach it. One key change: Nexmo is dropping being profitable. Its latest capital is being used to rapidly hire — sales staff now tips the scales at 22. According to Jamous, the goal for the year is to “build the scale engine” to “accelerate growth.” Growing in that way is not cheap. As such, Jamous merely expects to for the company to be merely “cash flow neutral for the year.”

It’s never a great day when you slip from profitability, even when you do it on purpose, but given the relative youth of Nexmo, and its competitive market, cash flow neutrality will likely suffice.

What’s driving growth at the firm? OTT apps like Line and Viber have been key customers of the company’s tools. Provided that other OTT apps follow WhatsApp into voice, that product category could offer more potential to Nexmo. But what’s more interesting is that the provider saw a bump in subscriber growth at OTT firms that were not WhatsApp (WhatsApp is not a Nexmo customer) following its acquisition by Facebook; people were looking for a new product.

It’s been interesting to watch Nexmo grow, given the window we have had into its data. For now, the company’s growth rate in its older text business appears to be leveling at around the time it is adding a new revenue stream. I’ll check back in with the firm in a few months to see if voice revenue can cross the 20% share mark, and to see if the company is still on track to hit 100% revenue growth in 2014.

IMAGE BY FLICKR USER JAN-HENDRIK CASPERS UNDER CC BY 2.0 LICENSE (IMAGE HAS BEEN CROPPED)