NOW WE'RE TALKIN': VOICE-ENABLING THE WEB
05:36pm EST 18-Jan-00 Robertson Stephens (Powers, John F. 415-693-3314) JPWK NOW WE'RE TALKIN': VOICE-ENABLING THE WEB
JPWK: (Page 1 of 4)
January 14, 2000
Robertson Stephens
Network Stocks Weekly, Vol. 2, No. 2
John F. Powers (415) 693-3314
Mailto: JP@rsco.com
Unsubscribe to: networkstocks@rsco.com
Website: www.networkstocks.com
"NOW WE'RE TALKIN': VOICE-ENABLING THE WEB
In this issue we focus on the emerging market of Web voice enablement.
We believe voice will become a common and important feature of several
critical Internet applications. We believe the companies outlined in
this week's newsletter are poised to become leaders in this space.
SUMMARY
The Internet began as a two-way text based medium for communication. E-mail
communication was first introduced in the 1970's to send and receive simple
text messages. Then, in the early 1990's, the World Wide Web and HTML emerged,
bringing more sophisticated visual graphics to simple, text-based delivery of
content over the Internet. The popularity and usage of the Web grew
dramatically over the next several years. The Web was becoming a commercial
medium, widely accepted as a means of communication. Developers continued to
seek new, innovative ways in which to increase the power and capabilities of
the Internet. In the mid-1990's, the introduction of streaming media
technology promised to dramatically enhance a user's Internet experience by
bringing audio and video broadcasts to the Web.
While improvements and innovations in presentation of information and materials
over the Web to end users has increased greatly, what the Internet still lacked
was a means for the end-user to communicate with the content providers.
Upstream communication was limited to discrete keyboard entries. We have begun
to see the Internet breaking free from its text-based limitations and become a
medium for non-Web based services with the advent of Internet telephony, an
application that uses the Internet to transmit voice packets.
We believe the next major wave that will hit the Web and change the way people
perceive communicating over the Internet will be voice-enablement of web sites.
While Internet telephony represents a voice application, we believe that voice-
enablement will become a standard feature of many new and existing Internet
applications. Voice-over-IP technology has existed for many years; however,
increased bandwidth and improved technology has made voice communication over
the Internet cheaper, clearer, and better. Due to latency and Quality of
Service issues, we believe there is still a while before Voice over IP
significantly replaces traditional telephone phone service. However, we do
believe that voice-enabling web sites to add voice as an enhancing feature to
chat rooms, messaging, e-commerce, and other online applications, currently has
the potential to greatly impact the user's online experience.
Companies are beginning to realize the potential and need for real-time voice
communication to enhance applications such as e-commerce, community chat,
business services, and to reduce costs, attract users, and increase user
stickiness. By 2001, we believe voice will become a standard feature of web
sites, allowing customers to communicate in real time with businesses and each
other.
VOICE-ENABLED APPLICATIONS
As companies increasingly rely on the Internet as a marketing, sales, and
distribution channel, effective customer service and communication are critical
components of a successful eCommerce business. However, according to Jupiter
Communications, of 125 Web-based content, commerce, and services providers
surveyed, over half the sites either took longer than 5 days to reply to e-mail
inquiries or didn't reply at all. Adding voice to critical customer
relationship applications can eliminate the inefficiencies and delays involved
in non-real time, text-based communication. We have highlighted the following
applications in which we believe voice will be a critical element:
E-commerce: Voice enablement can greatly enhance customer service and sales
transaction for eTailers. This market is marked by rapid growth. We estimate
that the eTailing market has grown from $1.1 billion in 1996 to $17.3 billion
in 1999 and project that by 2003, total sales over the Internet will grow 420%
to reach $90.1 billion. As more and more people shop online, it should become
increasingly important for eTailers to offer competitive and immediate customer
service, and we believe adding voice capabilities to retail sites will become
an important aspect of eCommerce applications. Companies such as HearMe and
Net2Phone have identified the potential for voice-enablement in this market
segment and are offering products such as HearMe's VoicePresence and
Net2Phone's Click2Talk that allow customers to click a button and be
immediately connected to customer service or sales representatives and engage
in live voice chat.
eTailers such as Snap.com shopping, 1-800-Flowers, and others have incorporated
Click2Talk voice enabling services to their customer service features. 1-800-
Flowers is currently beta testing Net2Phone's Click2Talk feature and is
optimistic that immediate voice communication will be a popular customer
service enhancement to their site. A 1-800-Flowers customer may connect to and
engage in live, real-time voice communication with a sales or customer service
representative by clicking on its "eQ&A Chat" link. From there, customers can
either chat online with a customer care associate by clicking on and "enter
chat" link or e-mail an inquiry.
Online Financial Services: We believe online financial services will be
greatly enhanced by voice-enabling technology as important, time-sensitive
activities conducted online can sometimes require immediate personal attention.
Without having to disconnect from the Internet to establish a traditional
telephone voice connection, voice-enablement of the Web will allow customers to
connect to a live person at their financial institution through the Internet.
SouthEastTrading.com is an example of an online trading and investment sites
that uses HearMe's Voice Presence technology to offer live voice trading
commentary.
Chat rooms: Voice-enablement of Web sites allows chat rooms and community
sites to become even more interactive and personal. Instead of being limited
to text conversations, users can speak with each other in real time, creating a
more robust user experience. We believe this application will be an early
adopter of voice services since the end-users it targets are computer- savvy
individuals who enjoy meeting new people and engaging in interactive
correspondence.
Many community sites are beginning to offer voice capabilities to their users.
HearMe hosts their own community chat site, HearMe.com. This site allows users
to enter a live voice chat based on their chosen topic area such as career,
music, entertainment, travel, sports, and more. By downloading free HearMe
software, users are able to speak live with other people anywhere in the world.
The chat browser is also equipped with text-based backup for those without
voice service.
Portals such as Excite have also incorporated voice-enabling technology to add
voice features to their community chat services. Excite uses Voice by
Lipstream to power its Excite Voice Chat, allowing its users to create voice
chat rooms and talk to up to ten people in real time over the Internet.
Business Services/Conference calls: Businesses can engage in conference calls
with many people over the web for free, tying in Internet-based presentations.
While typical conference calls can take hundreds of dollars to set up and host,
companies can use products such as Multitude's FireTalk to instantly connect to
multiple people for free.
Entertainment/Gaming: Online gaming was the origin of many voice-enabled
applications. Companies such as HearMe and Multitude were once community sites
for gamers that including voice communication. According to IDC, 43% of game
console owners have access to the Internet. Video game consoles are beginning
to come complete with Internet access. Currently, the Sega Dreamcast includes
a 56K modem and other manufacturers such as Sony and Nintendo plan to integrate
Internet access into their gaming consoles. IDC estimates that U.S. Internet
Game Console Shipments will increase from 981,000 in 1999 to 15.57 million in
2003.
As online gaming increases in popularity and reach, voice capabilities will
likely become increasingly demanded. Voice-enablement of game sites allows
participants to speak live with their competitors, adding an interactive
element that should attract players and increase stickiness. HearMe's gaming
site, Mplayer.com, hosts games for users to play against each other over the
Internet. The site offers over 80 games encompassing action and strategy
games, as well as a variety of card games. Users of the site can also chat
with their competitors while they play by downloading HearMe software and
engaging in live voice chat.
Distance Learning: The Internet is being used for educational purposes as
classes are being offered online. While distance learning has typically
inhibited a student from interacting with instructors or fellow students,
voice-enablement of educational sites has the potential to offer distance
students a more fulfilling "classroom" experience. Voice-enabling Internet
courses would allow students to have immediate, personal attention from
instructors. Voice-enabled chat rooms would also give distance students an
opportunity to interact with their virtual classmates, making the educational
experience more robust and social.
EF Education, a language school serving over 400,000 students in 60 countries,
will use Lipstream's voice-enabling services to enhance its Englishtown.com
site. Englishtown.com is a leading site for teaching English over the
Internet, where students can take self-directed Internet courses, take tests
and engage in chat sessions with other students. Englishtown.com is planning
to launch voice-enabled discussion sessions to allow students to practice their
English conversational skills with other students in the near future. EF
Education also plans to use voice services to facilitate the orientation of
students into the program. We believe voice-enabled educational sites offer
students important interactive elements of the learning experience.
POTENTIAL MARKET DRIVERS
The market for voice-enabling services will likely be fueled by:
1) The growth of the Internet
a) Growth of installed base of PCs
i) We estimate the installed base of PCs will grow from 278 million in
1998 to 465 million in 2002.
b) Growth of Web users
i) We estimate that the number of Web users will increase from 97 million
in 1998 to 365 million in 2003
c) Growth of application-specific markets
i) e-Commerce
(1) We estimate that the e-tailing market has grown from $1.1 billion
in 1996 to $17.3 billion in 1999 and project that by 2003, total
sales over the Internet will grow 420% to reach $90.1 billion.
ii) e-Finance/Online Brokerage
(1) We estimate online brokerage revenues to increase from $402
million in 1998 to $4.8 billion in 2003.
iii) Distance Learning
(1) IDC estimates that the market for distance learning will increase
from 710,000 enrolled students to 2.23 million in 2002.
iv) Entertainment/Gaming
(1) IDC estimates that Internet capable game console shipments in the
US will increase from 980,000 in 1999 to 15.5 million in 2003.
v) Business Services
(1) IDC estimates that the worldwide customer relationship management
application market will grow from $1.9 billion in 1998 to $11
billion by 2003.
2) The rise of broadband
a) The rise of broadband makes voice technology accessible to many
households as well as corporations. We believe U.S. households with
broadband access with rise from just over 1 million in 1998 to 26 million
by 2003. As greater high-speed access pervades household computers, the
quality and feasibility of voice-enabled Web sites will make this a
common and essential part of Internet applications.
3) Customer adoption:
a) Now, it's a lot easier for the end user to engage in live chat.
Companies such as HearMe and Lipstream have developed light downloads
(150K for Lipstream) that take less than a minute to download on a 26k
model.
b) IDC's 1999 U.S. Residential Telecommunications Survey found that 28.2% of
US online households surveyed are interested in using the Internet for
Voice Applications. 36.4% are interested in Internet Call Waiting, and
36.4% are interested in Unified Messaging.
MARKET OPPORTUNITY FOR VOICE-ENABLERS
The growth of voice-enablement for applications will be driven by end-user
adoption of Internet voice communication. We believe that as hardware
requirements become readily available voice has the potential to reach almost
every Web user out there. IDC estimates the number of end-users that take part
in Internet voice communication will reach 301 million by 2003.
We believe that, by 2001, most Web pages that contain the applications
previously described (e-commerce, chat, ect.) will be voice-enabled. According
to IDC, there were 1.45 billion URLs on the Web. We estimate that this number
will grow to 13.25 billion by 2003. Given the rapid growth in the number of
web pages, we estimate that the market opportunity for voice service providers
will be $33 billion by 2003.
TECHNOLOGY
Voice-enabling works by digitizing a voice signal and transmitting that signal
across broadband networks. Analog voice signals are encoded using technology
such as Qualcomm's PureVoice vocoder or Lucent's SX 20. These voice packets are
then transmitted and monitored over a company's network of choice, such Qwest
Communications and Uunet, or a company's private network.
After the voice signals are encoded, they are sent over the Internet through a
number of different protocol options, particularly, UDP/IP and TCP/IP. The
TCP protocol is a reliable protocol that requires receipt acknowledgement,
otherwise it resends the packets. While it guarantees that you will receive a
voice signal from the sender, the re-transmission can take up to 10 seconds,
causing voice conversation to become cluttered and clogging congested networks.
Therefore, typically, voice-enablers chose to transmit voice packets over the
UDP protocol. While UDP sometimes results in up to 5% packet loss, voice
signals are still intelligible for the end user, and the system does not occupy
itself by re-sending late packets.
Latency is another issue that voice-enablers must address and customers use as
a differentiation between the quality of service of our various service
providers. Latency, or the delay between when voice is spoken on one end and
heard on the other, is a result of the time it takes for a packetized voice
signal to traverse the network. People generally can not detect latency below
200ms. While latency has not been fully eliminated from voice-enabling
technology, service providers typically demonstrate latency between 150-350 ms.
On the front end, users must download software from their service provider of
choice. Lipstream and HearMe have light-weight downloads under 150k which take
less than a minute to download. Multitude's download is a bit larger, with a
1.8 Mb download that can take up to 8-9 minutes. The installation process for
Multitude is also a bit more complex, as it requires users to enter in basic
information about themselves such as their e-mail addresses. However,
Multitude's service uses this data to provide a sustainable community where
users of FireTalk can look up their friends through the FireTalk directory.
We believe as companies continue to make voice-enablement applications better
in quality and easier to use, this technology will become rapidly adopted. So
get ready to talk. "
ragingbull.com
Regards,
John M. |
