Two VoIP Services Challenge Skype

Skype is currently the frontrunner among peer-to-peer VoIP services. Two new services, Gizmo Project and PeerMe, are prepared to join the race.

December 8, 2005

13 Min Read
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Let's be frank: Until recently, it was easy to file Skype, the popular VoIP service, into the category of interesting but only marginally useful.

However, if the adage that competition is the root of innovation holds any truth whatever, the VoIP client category appears ready to undergo a remarkable transformation from "marginally useful" to "downright indispensable." Over the next 12 months, an unprecedented wave of new products and developers will enter this burgeoning market. While a number comprehensive commercial VoIP services such as Vonage provide full-fledged telephone service via a router that is plugged into a network, there has been a boom in smaller peer-to-peer VoIP services such as Skype, Gizmo Project, and PeerMe.

Utterly dominated by Skype over the last two years, client-side VoIP services have begun to flourish during the second half of 2005. This competitive rush makes sense when you consider that there are currently over one billion Internet users worldwide, only 40 million of whom subscribe to Skype.

In recent months, Gizmo Project and PeerMe have launched new VoIP client services. Additionally, Google has released its own service GoogleTalk, while AOL has announced plans to evolve AIM into a brand new platform named Triton. Even Sony is getting into the act with IVE, an Internet phone service with an emphasis on videoconferencing. Meanwhile, Skype isn't standing still: It has released a beta 2.0 version that includes free video calling.

The Mission: Beating Skype

Regardless of the competition, Skype (which was reviewed back in July) remains the 18-ton gorilla in VoIP, with an outstanding combination of ease-of-use, voice quality, and extra features/services that transcend other narrow peer-to-peer VoIP services that preceded it. (The fact that its basic service is free doesn't hurt either.)

For example, the SkypeOut service allow you to quickly and easily make phone calls to anywhere around the globe at extremely affordable rates. (Example: A 60-minute call to Barcelona would cost only a little more than two bucks.) Additionally, by setting up a SkypeIn account, you can set up your own telephone number in any area or country code you desire. Skype also offers conveniences such as voice mail and conference calls.

Skype remains the 18-ton gorilla in VoIP, with an outstanding combination of ease-of-use, voice quality, and extra features/services. The fact that its basic service is free doesn't hurt either.

Furthermore, in recent months, Skype has begun to market itself even more aggressively, with outreach programs at major retailers such as Radio Shack, and Skype conversion kits that allow you to use your normal phone for Skype calls.

So the billion-dollar question is this: Given Skype's head start and market dominance, can anyone beat it? To find an answer to this question, I investigated and tested two high-profile VoIP upstarts: Gizmo Project and PeerMe. Each group has Skype targeted squarely in its sights. Each has a singular offering that it hopes will set it apart from the competition.

(If you're already signed up with Skype, or plan to try another VoIP service, you may want to check out our evalution of several different USB headsets and an interesting array microphone.)

Gizmo Project

Launched in July 2005, Gizmo Project stakes its dreams of VoIP superiority around one key concept: That users should have convenient, easy-to-configure access not just within their network, but also across multiple VoIP networks and SIP-based PBX systems.

Gizmo offers the ability to generate conference calls involving more than 10 people. (Click to enlarge image)

This isn't a big surprise, given that the development team behind Gizmo Project is made up of members of the development team responsible for building the open-standard SIPphone VoIP platform. Because Skype and all other VoIP platforms use proprietary VoIP systems, their subscribers can only connect with other members of the same platform when using conventional peer-to-peer VoIP services. By adhering to the SIPphone platform, Gizmo Project allows its users to contact anyone with a SIP number, including users of Vonage and other VoIP networks. 

This is a potentially massive advantage, although admittedly the relative convenience of tapping into a larger network via open-source standards will largely depend on the adoption rate of VoIP-based services by homes, corporations, and universities. It's important to note, however, that the migration to VoIP networks is growing both domestically and abroad, which is a possible indicator that Gizmo Project is on the right track.

Jason Droege, president of Gizmo Project, states that this open-source conformity allows users to quickly and easily connect their main phone line to a VoIP router (such as those made by D-Link and Linksys) in order to map Gizmo's services to a conventional home phone.

Although Skype also offers a similar functionality, Droege insists that the proprietary nature of the Skype network means more effort is required to make the connection. With this said, Skype is beginning to partner with Internet- and communications-oriented manufacturers to release easy-to-use Skype conversion kits for home phone lines.

Another advantage Droege claims over Skype is that while Skype utilizes the CPU cycles of users' home computers to route calls, Gizmo Projects uses its own servers and computers to do the same. To be fair, during usage tests of Skype, I noticed little impact upon overall PC performance.

So, How Does Gizmo Project Work?

Beyond the open source conformity, one of the biggest surprises about Gizmo Project is how refined and functional the service's client software is, particularly given that it launched only half a year ago.

As an example, its CallOut service offers the same SkypeOut functionality of dialing out to mobile/land lines, and the CallIn service allows users to set up their own phone line across Europe and North America. An elegant interface makes pertinent subscriber information -- such as CallOut funds available, contacts, and more -- available.

In fact, in several ways, Gizmo Project actually exceeds Skype's feature set. One of the most notable advantages is the ability to record a call with the click of a button. Additionally, voicemail comes free with all Gizmo Project accounts, while Skype only offers voicemail as a premium service. Finally, the ability to generate conference calls involving more than 10 people represents another advantage over Skype (which only allows five participants), although setting up these calls in Gizmo requires more effort than in Skype.

On the downside, Gizmo Project's CallOut service to most major international metropolitan areas costs about 1.5 cents a minute more than Skype. And the service's audio quality was consistently inferior to Skype's by a slim margin in both peer-to-peer calls and calls to outside mobile/land lines.

But Gizmo Project's potential as a Skype-killer is clear. While this upstart VoIP service still needs to make tremendous strides in 2005 to catch up, the adherence to open standards and the rapid deployment of such a sleek, powerful VoIP client should have Skype greatly concerned.


Launched in September, 2005, and still in the initial phases of development, PeerMe is oriented in a completely different direction than the traditional VoIP usage model embraced by Skype and Gizmo Project.

PeerMe Founder and CEO Tom Lasater says that the competition's focus on Internet telephony as a "cheaper, better phone call" is misguided and misses the bigger picture of the communities that VoIP can graft onto and enable. This emphasis on community forms the foundation of PeerMe's roadmap. "Our view is that this is not a phone call," Lasater states. "We're allowing anyone in the world to talk to anyone else in the world, but you can't tie a phone to a database or a Web site."

PeerMe's interface is simple and easily understandable. (Click to enlarge image)

Currently targeted primarily towards the Asian markets of Japan, Korea, China, and India, PeerMe's emphasis is on the integration of voice functionality and Web sites. As such, it is reaching out to Web developers and database administrators across Asia. A common example Lasater uses to illustrate this connectedness is a blogging site where readers can immediately reach out and speak to their favorite bloggers.

In the future, the company hopes to generate revenue by tying their service to online databases. Lasater offers up two examples of services that will add value to users' experiences: a dating site where users can pay an extra price for voice contact with potential matches, and a language exchange where users pay a small fee on a monthly basis to find people across the world who are interested in practicing languages they're learning.

Another important aspect of PeerMe's blueprint for success is the point of convergence between the Internet and mobile devices. According to Lasater, the company sees a future where mobile phone users will use PeerMe to gain easy access to the types of communities described above, as well as more traditional content such as games, music, and more. Considering the walled-in, proprietary content monopolies that mobile providers currently embrace, this is an interesting prospect. However, it's not a slam dunk, which makes it even more imperative that PeerMe makes a name for itself. 

So, How Does PeerMe work?

PeerMe has a completely different approach to its VoIP client service than the competition. Unfortunately, while this may explain the service's limited functionality, it did not reduce the disappointment we experienced while using what can only be described as a bare-bones service. As far as VoIP clients go, PeerMe feels more like Google Talk voice-chat than Skype or Gizmo Project.

Currently, PeerMe users only get the most basic peer-to-peer voice communications, with no bells, whistles, or extra features. If you're looking for an elegant interface, call notifications, voicemail, the ability to dial out to mobile/land lines, or to receive calls from mobile/land lines, look elsewhere. This is consistent with the company's approach of keeping voice chat simple and absent of complicated and intimidating features.

At least the audio quality is good. While using the service, I was consistently impressed with the full, rich tones and voices coming through my headphones. In the future, PeerMe users can expect a few small-scale additions such as voice conferencing and text conferencing.

Because the key to PeerMe's success is integration with established Web presences, the company's road to success will likely be less public and consequentially, more difficult. However, at this point in time, it is the only VoIP service that is attempting to carve out this particular space for itself.


For those of you keeping score at home, it's clear that, right now, Gizmo Project is a serious contender for Skype's VoIP crown. It has a strong client, a knowledgeable development team, and the ability to more easily connect its VoIP client to others around the world.

However, Skype has gotten off to a considerable head start. Its base of 40 million subscribers is a formidable obstacle that any new VoIP service will have to reckon with. And the reality is that, despite such advantages as open architecture and the ability to dial out to land/mobile lines, the most convenient VoIP connection continues to be a call to a contact within your chosen network. This means that Gizmo Project, along with the swath of other new entrants, desperately needs to find innovative ways to build up its subscriber numbers. After all, if all your colleagues are on Skype, why would you use Gizmo Project?

With this said, the ability to record calls and the availability of free voice mail are outstanding features that could make Gizmo Project more useful and more valuable right now. Will Gizmo's developers be able to keep up their relentless addition of new features and extras? Time will tell, but I'll be watching closely.

I'll also be watching PeerMe with keen interest. If the company is able to successfully make the partnership deals that will allow it to bolt its client into a wide range of service-oriented online communities, databases, and Web sites, it will tap into an immediate source of revenue that will fuel future growth.

And then there's Sony, AOL, and Google, all of which have announced new plans for Voice-over-IP services. With the exception of Sony, each of these services will enter the game with large numbers of existing subscribers.

And how about Microsoft? Given the company's newfound emphasis on Internet services, I wouldn't be surprised to see VoIP or videoconferencing built directly into Windows Vista, or released as a Windows XP add-on via Service Pack 3. I also wouldn't be surprised to see some sort of acquisition before the end of 2006.

One final note: Across the board, acoustic quality exceeded my expectations. But I did experience slight but noticeable variances that were the result of the quality and proximity of the mic on the VoIP-oriented headsets I tested. A word to the wise: If you're going to be spending a lot of time VoIPing, make sure you get a top-notch headset that features comfortable earphones as well as a mic that rests close to your mouth. This will ensure maximum possible clarity.

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