Sold To Telefonica For $207M In 2009, Now-Neglected VoIP Provider Jajah Is Shutting Down

Chalk up another casualty in the consolidation of Internet voice services. Nearly four years to the day after getting acquired by Telefonica for $207 million, VoIP provider Jajah has announced that it is shutting down, effective January 31, 2014. Registered users of (its web-based service that provides a price-reducing VoIP bridge between two landline or mobile numbers) and Jajah Direct (which assigns local numbers to international contacts) started to receive notifications of the closure this weekend, with details of where to apply online for refunds.

We’re embedding a copy of the note below, which is also posted on its website.

The note doesn’t explain why the service is shutting down. We have reached out to Telefonica for more clarification (which we have now recieved, with the update below, noting that while Jajah is closing, the backbone is alive and kicking.)

My guess is that it was probably due to a couple of reasons. The main one is that the service simply was not growing — not in terms of new products, nor new users.

The second one is that Telefonica has been pursuing other ways of using VoIP to pick up more users, namely with mobile apps like Tu Go. That left the consumer-facing part of Jajah more or less neglected and underdeveloped.

Just how ignored was Jajah? Most pages on Jajah’s site now redirect to an announcement of its closure. But if you go to its corporate blog (at least at the time of this writing), it’s still live, and frankly surreal.

The last two months of entries, from March to May 2013, provide a nearly-daily run-down of a hole for a parking lot(?) getting dug next to Jajah’s Mountain View headquarters. Yes, a hole in the ground.

The entries have mundane headlines like “Very substantial activity” and “Looks like one more level down” with equally dull pictures to match. (The one I’ve used to illustrate this post was called “More reinforcing”, which seems particularly ironic when you consider that the exact opposite appeared to be happening to Jajah itself.)

The message: nothing of any interest whatsoever going on at Jajah, and no one seems to notice or care that that’s the case.

The entries prior to that record a couple of employee trips to South America. Before that, the last product announcement was from 2011, when Jajah released a mobile app with Facebook calling features.

It’s a whimper of an ending for Jajah. Founded originally in 2005 by Roman Scharf and Daniel Mattes (who then went on to found payments company Jumio), it was backed with $33 million from the likes of Sequoia, Intel and Deutsche Telekom’s T-Venture.

Jajah was once viewed as a real competitive threat against the likes of Skype and Vonage. Part of that was because Jajah actually offered VoIP alternatives that easily integrated with what people already used to make calls. While Skype required users to download an app — and then it worked within that app, with Jajah, users only had to go online to enter their number, and that of the number they were calling. That then provided a VoIP bridge between two basic landline (or mobile) numbers, reducing the price of the call in the process.

Hype and interest in Jajah ratcheted up further in 2009, after Google acquired its competitor Gizmo5. Rumours swirled that Telefonica, Microsoft and Cisco were all eyeing up the company for a price between $200 million and $400 million, with reports of some 25 million subscribers and growing. (Interestingly, Microsoft did get its VoIP service in the end with Skype.)

Ultimately, the sale to Telefonica was at the low end of that range, and for what turned out to be 15 million users. And the spin on the deal was not so positive. At the time, we wrote:

“The sale was not a happy affair for everyone involved, however. The deal was largely driven by Jajah’s investors, particularlySequoia. We hear CTO Amichay Oren has left the company because he and his engineering team in Israel didn’t get treated the same as their counterparts in the U.S. In these types of deals, not everyone ends up winning. Jajah turned out not to be the next $1 billion company in Sequoia’s portfolio.”

Still, it seemed like a strategic fit for Jajah to go to Telefonica. And on Telefonica’s side, it looked like a bold move by a staid, incumbent carrier to propel itself into the future of telephony. Alas, perhaps Telefonica wasn’t really ready to take such a disruptive leap at the time, or perhaps the tech wasn’t really there for that leap, or perhaps something else.

The bigger picture is that today, Skype is enormous, and there are dozens of other alternatives out there that do things like connect your voice calling up seamlessly with people who you message. And besides all that, we all now get hundreds of minutes thrown in with our mobile phone plans.

As is customary when a telephony service shuts down, its users have the right to put in an appeal to the Federal Communications Commission. The FCC needs to authorize the discontinuation of the service, “unless it is shown that customers would be unable to receive service or a reasonable substitute from another carrier or that the public convenience and necessity is otherwise adversely affected.”

Given that there are a number of other VoIP as well as non-VoIP services available today, offering this option to customers seems like more of a formality than an actual possibility to keep the service going.

Dear Jajah Customer,

You are receiving this email because you have registered a
or Jajah Direct account.

As of January 31, 2014, Jajah will no longer offer any or
Jajah Direct services to its users in the United States or elsewhere.

This means that, as of January 31, 2014 you will no longer be able to
make any calls through Jajah’s website or using any Jajah Direct
numbers you have set up.

You will be able to continue using your account in the normal way
until this date however it is important to note that as of January
31, 2014 it will not be possible to add new funds to your account or
make any calls or send SMS.

Users who wish to apply for a refund of any balance remaining on
their account prior to the service closing may do so by submitting a
request at the support page,

After requesting a refund, your account will be closed and refund
processed within 30 days.

If you do not receive a refund you may contact Jajah at no later than January 31, 2014 and, if
necessary, you may be asked to provide PayPal account information to
which Jajah can post the credit.
Jajah will not be responsible for providing refunds except as
provided above.

Thank you for having been such a valuable user.

200 West Evelyn Ave,
Suite 120,
Mountain View,
CA 94041,

Note Regarding FCC Application to Discontinue Domestic Service

The FCC will normally authorize this proposed discontinuance of
service unless it is shown that customers would be unable to receive
service or a reasonable substitute from another carrier or that the
public convenience and necessity is otherwise adversely affected. If
you wish to object, you should file your comments as soon as
possible, but no later than 15 days after the Commission releases
public notice of the proposed discontinuance. Address them to the
Federal Communications Commission, Wireline Competition Bureau,
Competition Policy Division, Washington, DC 20554, and include in
your comments a reference to the § 63.71 Application of Telefonica
Digital, Inc., d/b/a/ Jajah. Comments should include specific
information about the impact of this proposed discontinuance upon you
or your company, including any inability to acquire reasonable
substitute service.

Update from Telefonica:

Jajah’s technology and expertise continues to represent the core of Telefonica’s communications capabilities. Fully integrated into Telefonica Digital, Jajah is the key VoIP network platform for the Group and its engineering teams are behind innovative products such as TU Go, International Favourites, International Extras and Global Friends. Since the acquisition in 2010, we have significantly invested to grow and reinforce the Jajah team in Israel by over 70% and earlier this year it was re-named Telefonica Digital Israel.

As part of a re-focusing of resources to support future products we will be closing Jajah’s legacy direct to consumer services, including Jajah Direct and Customers can continue using the services until January 31st 2014 or can request a refund of any credit on their account. The closure will ensure that all of the Jajah capabilities and resources are focused on developing and supporting the new communications services we plan to bring to our customers.

The closure of Jajah Direct and has no impact on communications services offered by Telefonica Operating Businesses, such as TU Go or Global Friends, and it has no impact on our presence in Israel which continues to represent the bulk of our communications engineering capabilities.