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Tango Challenges Apple, Yahoo in Smartphone Video-Chat Market

November 4, 2010 | Chris Payatagool
Tango_video-chat.jpg By Ryan Flinn via Bloomberg

With a newborn baby to show off, Eric Setton was looking for a way to do video calling on the go. And he wanted to be able to reach people on any smartphone or network, which his iPhone's FaceTime application can't do.

So Setton and business partner Uri Raz created a videoconferencing app called Tango that connects phones from different makers, across any network, carrier or geographic boundary. The software has caught on with users. More than 1 million people downloaded the app within its first 10 days.

Their company, also called Tango, is capitalizing on the surge of smartphones with cameras, along with consumers' growing comfort with videoconferencing. About 7 percent of U.S. adults with mobile phones have made some form of video call, according to a survey by the Pew Internet & American Life Project. In total, about 23 percent of Internet users have done videoconferencing, Pew found.

"The fact that Tango did 1 million downloads in 10 days, from a cold start with an unbranded app, is very respectable," said Peter Farago, vice president of marketing for Flurry Inc., a San Francisco firm that analyzes mobile-application use.

Tango has since reached 2 million downloads, less than a month after the software made its debut. Compare that with Foursquare Labs Inc., the mobile service that lets users broadcast their whereabouts to friends. The New York company took about a year to get its first million members.

How to Make Money?
The Tango app is free to download. The Palo Alto, California-based company may eventually make money by offering premium services, said Setton, who serves as chief technology officer. Some companies with free apps rely on advertising, though that isn't likely to work with video calling, he said.

"We think it is very important to say video calling will remain free forever," said Setton, 31. "We will monetize it at some point."

One hurdle to Tango's growth: More people will need phones with a camera that faces the user. Most devices have the camera lens on the back side. Over a three-month period ending in August, only 9 percent of new phones sold in the U.S. had cameras on the front and back, according to NPD Group Inc. in Port Washington, New York.

Apple Inc. helped popularize front-facing cameras with the June introduction of the iPhone 4, along with its FaceTime videoconferencing software. In October, the Cupertino, California-based company said it has sold more than 19 million devices that can use FaceTime in the past four months. Apple also unveiled a version of the program for the Mac, making it easier for computer users to communicate with people on iPhones.

Open System
FaceTime currently works over Wi-Fi connections, rather than mobile-phone networks, and only with Apple products. In contrast, Tango lets iPhones communicate with other smartphones -- including models that use Google Inc.'s Android software, such as Samsung Electronics Co.'s Galaxy S. And it works over phone networks.

"When FaceTime came out, for us it was the most amazing thing that could happen," said Setton, who has a doctorate in electrical engineering from Stanford University. "Apple has the power to create these types of markets, and we saw this as really helping us and educating a lot of the market."

Tango, which has raised $5 million in funding, will also have to compete with Sunnyvale, California-based Yahoo! Inc. That company added video chatting to its Messenger service for computers last year, and updated the feature on Oct. 11 to let mobile phones use it.

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