Small startups should go up, not down
Telecom APIs existed before WebRTC came to life but the opportunity WebRTC brings to web developers, coupled with the missing parts on the server side as well as complexities on the client side (mobile support and browser compatibility) were all fertile soil for the sprouting of new startups that targeted to solve the problem of easily enabling web/mobile developers to add real-time communications to their app.
A few years have passed and we see some of these companies going out of business, being acquired or trying to change focus.
A recent example is bit6 that just opened up their internal STUN and TURN infrastructure for the public to use as a service independent of their WebRTC API PaaS.
There are many WebRTC API platform vendors but only a handful of them are doing well on the business side. The companies that are doing OK are those that had previous assets in the field of telecom APIs or those that were acquired/launched by larger companies (service providers, OTTs).
Many of the telecom API companies will not survive as independent companies for years to come. Going down the food chain and trying to offer lower level components such as NAT traversal as a service will not make the change on the revenue side.
Functional components are great
I believe that functional components such as STUN and TURN as a service are great for companies looking to launch a service. It is not a solution for all, it is mainly for those who know what they are doing, know all about VoIP and real-time but just don’t want to deal with this commodity service of STUN and TURN right now while they work hard on their application secret sauce.
They can always tackle this later when cost of service is too high, when more control and quality management are required or when their engineers are too bored.
For some reason, companies don’t agree with my thought on this and don’t jump on the opportunity in masses to use such similar services offered by XirSys and Twilio (or maybe people just don’t talk about it too much).
Functional components will not solve your business problem
While I believe that functional components are a great thing for companies to use, they are not going to change the business fundamentals of an API platform struggling for more revenue.
A quick look at the pricing Twilio publishes for STUN and TURN makes that pretty clear. For a company as Twilio it is just another way to attract more developers and later move them to the more lucrative services but not every company has the luxury of dedicating resource to a non-profitable service.
Segment specific service
While larger companies can service multiple segments and offer each the things they need and win accounts in a competitive landscape, smaller companies can’t afford to do so.
A customer would take the risk of using a service from a very small startup only if this service has well enough differentiation compare with similar services offered by larger companies.
The lower level the service is, the harder it is to differentiate.
The conclusion of this is pretty clear. If you are a small API platform company that has a hard time competing with the larger elephants, go up the food chain, offer a more specific and complete service and focus on a specific segment.
The tricky part is what to offer and which segment to cater to that will allow you to be the best company in that segment.
There are several things to consider some of which are specific to your company:
- Below the radar segment but with good enough potential
- Your experience in the segment
- Your market reach to that segment
- Are there areas of differentiation that are specific to that segment
Even if you have a specific service component as part of your existing service, breaking it out of your current service and offering it as a standalone service has its price. There is work associated with this task (always) and work associated with supporting the customers.
The price you could charge for the service will of course be lower that your current pricing as it is a lower level service.
Going up the food chain and focusing has its better chance to bring in that revenue you are seeking.