BT announced that it has acquired Silicon Valley based Ribbit for $105 million in cash. On July 9 we reported that Ribbit executives were telling friends the deal was done while simultaneously denying it to the press. One thing we got wrong was the price, though. We were hearing $55 million, $5 million more than competitor GrandCentral managed to wrangle out of Google. Ribbit got nearly double that.
BT will keep the Ribbit team intact in Silicon Valley and use the acquisition to try to win mind share among developers. Ribbit is a platform for creating voice-based applications over the Internet. BT will now be able to run those applications over its backbone network at a lower cost than Ribbit was able to lease those lines (calls to landline and mobile phones need to go over regular telephone lines at some point). Ribbit is an attractive way for BT to ramp up software revenues. And its soft switch technology (a software-based telephone switch) could start to pop up throughout BT’s network, where it would add more flexibility and create cost savings.
Whether or not developers want to rush into the arms of a telco is another question. By becoming part of BT, Ribbit will no longer be seen as a neutral player. And developers may fear getting locked into a relationship with one large telephone company, especially if they are trying to create apps to displace telephone companies in general. BT and Ribbit will have to overcome that fear by being more open than anyone else and offering the best platform for creating voice-enabled apps. Skype and Google’s GrandCentral are other potential competitors.
Update: I just spoke with Ribbit CEO Ted Griggs and JP Rangaswami, a managing director at BT. Griggs says:
At the end of the day we are trying to make BT into a software company. BT has never acquired a pre-revenue company before.
Rangaswami emphasizes that what BT is buying is the team, the technology, and access to developers in Silicon Valley (Ribbit has already attracted about 5,000 to its platform). He adds:
It is very unusual for us to even be making a play across the pond. It is not an experiment.
We wanted to up the ante in the global communications platform trade. We could have been an AT&T and provide pipes. We could have been an Apple and innovate around the pipes. Or we could have been a Google and serve ads around the pipes. But as we envisioned the world of open-based platforms, it had to be global and scale digitally, so it had to be about software.