Wharton Interview With Tellme’s Mike McCue

Tellme Networks hasn’t exactly lived up to its 1999 vision of becoming the “Yahoo! of voice portals.” Using the portal has been a clunky experience, and ad revenues have never really developed.

But Tellme has stuck it out by providing directory assistance to key carriers and voice mail systems for FedEx, Merrill Lynch and other corporate players. Right now, it makes “tens of millions of dollars” on mobile search, where it provides DA to carriers like AT&T (Cingular) and Verizon, giving it roughly 40 percent of the mobile search marketplace.

It has also positioned itself with newspapers by providing free stock quotes and other voice services for The Oregonian, The Dallas Morning News, Newsday, The St. Louis Post-Dispatch, The Las Vegas Review-Journal and “hundreds of others.” This has been especially important as newspapers trim back the stock tables in the print editions to save paper.

Meanwhile, times change, integrated phones are in, and TellMe’s voice technologies now seem to put it squarely in the center of the convergence of the telephone, networked computing and local businesses  and probably on a collision course with Google, Yahoo!, Microsoft, AOL, Local Matters, Jingle (1-800-Free411) and others.

CEO and founder Mike McCue recently talked at length with Knowledge@Wharton about where the 300-person company is going. It’s a great interview that should be read in its entirely. But I’ve excerpted a few major findings here.

“Ten years from now, I don’t think people will be paying $1.80 [for a directory assistance call],” says McCue. “They will be doing searches for free. How do the carriers rectify the fact that you can do a search for free on Google now? We’re painting a vision for them  which they really need to think of directory assistance as a search on the phone.”

The free DA players have learned that the key to profitability is automated responses. McCue says that TellMe automates about 35 percent of incoming DA calls for wireless, and that the rate is higher for landline. But automation will never be front and center if live operators, rather than automated Internet services, are the default.

In this regard, Cingular is leading the way by switching entirely to an Internet default. “What Cingular did was unprecedented,” says McCue. “Now that this Internet-based platform is in place, they’re going to be able to do things that will really be amazing” because it can now rely on the intelligence of the phone (i.e., location, directory, etc.), rather than the limited intelligence of a voice query.

“Here is the perfect example,” he says. “I said, ‘pizza in Princeton, New Jersey.’ [If the pizza parlor were] a client of ours, I could also order a pizza. And [the system] knows what pizza I normally get. And then I can place the order and the order gets shipped to [the pizza parlor] and it just works. So you can basically say what you want and actually complete the transaction. Because [we can provide the 800-number service], we’re then able to provide this end-to-end search experience, which is unique in the industry. Nobody has anything like this. Meanwhile Tellme is monetizing this  we’re making money. Every pizza that we sell, we get a percentage of that order.”

Google, however, definitely looms on the horizon. But McCue thinks that Tellme has several points of differentiation. “They think of it more as a Web company, and we think of it more from a phone perspective intuitively. We believe that speech recognition is critical, for example. We’ve made it work really well with speech recognition, so that I can just say ‘pizza’ and I don’t have to type it.

“The other thing is that the ad models will be radically different than what they are on the Web,” he says. “They’ll be more transaction oriented  [based on] a percentage of the transactions people actually close with small- to medium-sized businesses on the phone. So the Web ad model that Google has done so well doesn’t really hold true as readily on the phone.

“Google also isn’t very realistic about supporting the mobile ecosystem,” says McCue. “Google said just the other day that ‘handsets should be free, that carrier services should be free.’ Well, who is making money then? I recently asked an AT&T executive, ‘Who is your biggest concern from a competitive point of view?’  expecting to hear Comcast or Verizon. It was Google. So I think that we can play an interesting role in this ecosystem.”

Looking to the future, McCue predicts phone numbers will go away within 10 years. “Yes, you can dial a phone number, but you are mostly going to type or say the business that you are looking for and it will connect. You will get a more personalized experience, both in how you reach people and in how you talk and interact with businesses. And you’ll be able to get other information  news, sports, weather, stocks, the kind of information that people need on the go  very readily just by saying it. You’ll hear it or you can see it on the screen.”

McCue also predicts that “voice mail” is headed toward the virtual trash heap. “It will be more of an integrated, persistent message store that is just mapped into your email and will look more like instant messaging.”

(Thanks to The Pierz Group for pointing out this interview.)