recently took a small stake in Speechworks
International, a Boston-based voice
recognition software maker, and acquired
voice portal Quack.com.^19
Tellme’s key competitive advantage may
not be its technology or toll-free service
offerings, but rather its seasoned manage-
ment team, its blue-chip investors—includ-
ing Kleiner Perkins and Benchmark
Capital—its strategic alliance with AT&T,
and its $238 million war chest. That is signif-
icantly more money than all of its rivals com-
bined.^20
Some of Tellme’s competitors are also its
suppliers. (See Exhibit 5 for a list of infra-
structure companies supporting the voice
portal market).
TELLME ALLIANCES
As a voice portal, Tellme needs content
providers such as CNN Radio and The Wall
Street Journal to feed news reports. However,
Tellme’s most important alliance has been its
deal with telecom giant AT&T. Both AT&T
and Tellme are gambling that consumers will
want Web access when there is no good Web
connection available.
For Tellme, AT&T’s $60 million invest-
ment gave the start-up much-needed vali-
dation and credibility in the eyes of con-
sumers—not to mention the much-needed
cash. The alliance also solidified Tellme’s
leadership position in the voice portal mar-
ket, and gave Tellme access to a wide range of
advanced networking capabilities, a scalable
infrastructure, networking management,
professional services, and Internet hosting.
In short, AT&T brought McCue & Co. one
step closer to replacing the dial tone.
For AT&T, the deal gave the telecom giant
a foothold in the voice portal market, putting
it first in line to reap any benefits if voice por-
tals really take off. In essence, AT&T was
able to outsource its research and develop-
ment (R&D) in this area to Tellme. In addi-
tion, AT&T stood to benefit with increased
phone traffic as more and more consumers
started using voice portals.
THE CHALLENGE FOR TELLME
2000
The day after McCue’s latest pizza
delivery/recruiting mission at Stanford,
Tellme held a staff meeting that was part
company meeting and part evangelical
revival.^21 McCue sent out a rallying cry: “The
next few months are the most important
we’ve had—perhaps we’ll every have—at
Tellme. We need to stand and deliver now!”
After the meeting, McCue wondered how
Tellme would maintain its lead in the voice
portal market in the face of increasing compe-
tition to eventually become Dial Tone 2.0.
The company’s latest round of investors had
very high expectations and wanted Tellme to
push ahead in offering more business-to-busi-
ness services. McCue asked himself: Should
Tellme continue to build out its consumer-
based Web site, or should it concentrate on
increasing revenues from business customers?
Could it do both? Or would Tellme be spread
so thin that it would never become the
Yahoo! of the voice portal market?UPDATE: TELLME IN 2007In the seven years since the founding of
Tellme, the company has undergone many
changes. The first was the bursting of the
Internet business bubble in 2001. Many of
the companies that were financed in the late
1990s and early in the twenty-first century
did not have sustainable business models.
They could not generate revenue, profits, or
both. And these firms folded. Billions of dol-
lars in risk capital were lost and many paper
millionaires in Silicon Valley and on Wall
Street found their net worth considerably
diminished.
Tellme survived, though the experts dis-
agreed on what the future held. In 2005 the
Kelsey Group estimated that over 45 million
people had registered on a voice portal.^22 This
number exceeded earlier estimates, but had
not yet been reached. In fact, instead of the
$450 billion market forecasted earlier, the new
estimates for the industry were $12.3 billionTellme Networks: Dial Tone 2.0? (Revised) 495