MagicJack and the problem with gadget start-ups

You have a great idea for a product. You have a great designer. You have a manufacturer willing to pump something out for not much money. You’re on your way to gadget riches, right? Wrong.

Dan Costa wrote a cautionary tale for all those looking to produce a consumer electronics product. His focus is magicJack, a company that we wrote about in August 2007, a post that currently has 167 comments, none of them particularly good. Here’s an example from our own comments:

How do you CONTACT these people I can find NO way to send them a message?

MagicJack is basically a VOIP dongle that plugs into your USB port. You then add a telephone and make calls. It costs $40 and then $20 a year. It should be plug and play but, as with everything in life, it often isn’t. Fair enough, you say. Just make a phone call to the support line and you’ve got it solved. Sadly, this is not the case.

MagicJack is one of the reasons we gadget writers are so cynical. We see a great idea but there is something missing either during the review or on delivery. After a while you get a sixth sense about these things but unfortunately I couldn’t see the problems with this device until far along the product life cycle. I didn’t know the company would fail so badly at support and marketing.

When designing a product – any product, really – you deal with a life cycle. At its core you have something like this circular design. The best products – I’m not going to say the best companies, because everyone is entitled to a dud – excel or negate each of these steps. By negate I mean they produce something so amazing one of the steps is unimportant – maybe marketing or support. No real examples of this come to mind. If one step is bad, however, you’re sunk totally and completely. MagicJack failed on two fronts: support and marketing.
First, magicJack is now probably the most reviled company in CE in terms of customer service. As Costa points out, there is no contact information on the site. The only recourse you have when the dead-simple product fails is a chat session with someone in the Philippines who may or may not ask you to edit your registry settings. While magicJack should be easy enough for anyone to use – as evidenced by their predilection for selling it in late night infomercials – support is key in post-purchase scenarios.

Then someone at magicJack thought it would be a great idea to spam the Internet. Take a look at this comment from Tim L, snipped for sanity:

Over the last few months I’ve been closely following the blogs and growing media coverage on the magicJack, the coolest product to hit the marketplace in a very long time.
For those who do not know or do not have a full understanding of the magic behind the magicJack (and how its different from Skype and others…) my product overview is below.
magicJack is a USB phone jack that allows users to make FREE local and long distance phone calls anywhere in the US and Canada. Users can bring their magicJack anywhere in the World and make FREE calls to the US and Canada, as well.
It’s easy to use. After plugging the magicJack into the USB port of your computer, the software that resides in the magicJack self-loads, a brief & standard registration process follows (during which time you get to choose a telephone number for your magicJack from a large inventory of area codes/numbers in most every major metro area in the US)and when done you simply plug any standard corded, cordless or portable phone (headset or Bluetooth also works) into the magicJack, pick-up the phone and dial-tone has been delivered! You’re free to make FREE phone calls anywhere in the US and Canada! So, much different than other IP telephony options since it can be used with ANY regular phone and you get your own telephone number for LIFE!

Thanks, Tim! What a great… wait a minute… You seem to be everywhere! That’s right: magicJack resorted to a spam marketing campaign. Strike two.

What I originally considered a great product is now highly suspect thanks to two systemic failures in the launch process. The company do two things: solve these problems with a US-based support line and rethink their marketing strategy or ignore the problems because they’ve already sold 2 million of these puppies. As Costa writes:

It’s a mistake to think of YMax in terms of the $40 adapter it hawks on late night TV. YMax is a phone company, and a pretty big one. Yes, it uses VoIP, but its business model is very different from those of companies like Vonage or the cable operators that offer phone service. The magicJack service has its own nationwide network of media gateways and session border controllers, and has CLEC (competitive local exchange carrier) certifications in all 50 states. YMax is a huge company with a vast technical architecture to support. Unfortunately, it doesn’t seem to be spending enough to take care of that customer base.

This is an important lesson to start-up CE providers. You might have a great idea and a great manufacturer, but if you miss or fail to deliver on any one of a few complex steps, you risk losing a new and repeat business as you expand.