Vringo bets on video ringtones

Neal Sandler
30 Aug 2007

The idea for his new startup came to Jon Medved two years ago at London's Heathrow Airport when he was trying to reach the Hertz (HTZ) call center. While waiting on hold, the Israeli venture capitalist was forced to listen to audio ads from Hertz about the various cars available. It suddenly struck Medved that it would be far more effective for Hertz to serve up images or even videos of cars.

Thus was born the idea behind Vringo, a startup launched last year by Medved and David Goldfarb, a leading Israeli mobile software expert. The idea is to capitalize on the popularity of social networks and digital video, marrying them with the phenomenon of downloadable audio ringtones"”a business that already racks up $6 billion in annual revenues for mobile operators and content owners worldwide. Medved describes Vringo as a 'sort of ICQ [instant messaging] combined with a personalized YouTube (GOOG) on your cell phone.'

With conventional audio ringtones, customers download a short music clip"”say, the theme to Hawaii Five-O"”onto their own phones. Whenever somebody calls, the song plays instead of a regular ring. Aside from some possibly annoyed people in the vicinity, the only person who enjoys it is the owner of the phone.

Vringo Defined

Vringo's video ringtones turn that model on its ear. To use the service, customers join the Vringo community for free and install a small piece of software onto their phones. Then, when one Vringo member calls another, instead of a ringtone, the recipient of the call is treated to a video clip chosen (and paid for) by the sender. Every call thus becomes an opportunity to share content and to establish identity"”the wireless equivalent of the 'hey, dude, check out this YouTube video' culture of the Internet.

If it catches on, Vringo has the potential to be about far more than just sharing clips, though. Advertisers are intrigued by the idea of using mobile phones to pitch their products; Vringo offers the possibility of adding viral marketing to the mix"”essentially, having enthusiastic consumers spread the word for you. What's in it for Vringo users‾ Instead of paying for a clip, a caller might get five minutes of free talk time for sending his buddies copies of a new ad.

Such opportunities already have attracted the interest of investors. On July 31, Vringo announced that it had raised $12 million in funding from New York-based private equity firm Warburg Pincus, which it will use to launch video ringtones this year and next. 'Vringo is uniquely positioned to shape and ride the second wave of mobile personalization,' says Warburg Pincus principal George Allen, who has also joined the company's board, in a statement.

Teaming Up

Running his own show is a switch for Medved, 51, who worked for a decade as a venture capitalist. He was the founder and co-manager of Israel Seed Partners, a Jerusalem-based firm that raised $262 million in four funds. Among its biggest success stories: Shopping.com, acquired by eBay (EBAY); Cyota, acquired by RSA Security (EMC); Xacct, acquired by Amdocs (DOX); and Compugen (CGEN).

After his Heathrow revelation, Medved went to see Goldfarb, an MIT graduate and veteran of the vibrant Israeli tech scene, to find out whether his idea for video ringtones would work. The biggest constraint was that most phones are designed to stop playing video if an incoming call interrupts.

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