by Larry Hettick
Last month, Paltalk announced it completed a buyback of its shares from investor Softbank Capital Partners after having achieved years of profitability. The Paltalk platform was launched in 1998 and has more than 4 million unique users a month with nearly 100,000 people simultaneously chatting in rooms at any given time. The company combines voice and video into instant messaging, and has enabled user-created chat rooms, supporting as many as 5,000 people in one live video chat room. Following the announcement, we interviewed CEO Jason Katz about his company.
We asked Katz how a company that charges $14.95 a month or $60 a year can compete with free video chat available by using a Web cam and Internet service. He suggested that several factors contributed to Paltalk's success. First, the ability to support user groups with thousands of members has attracted users who can't find this feature on a peer-to-peer Web chat. He also noted that users can use the service for free if participating in groups of 10 or less, so the main attraction is all about bringing large groups together. "People can connect with people they know and people they don't know" Katz said, bringing together communities with common interests.
Another success factor has been the quality of audio and video his company offers. Using H.264 for compression, Paltalk gets excellent video quality at relatively low bit rates. (Katz said that a connection with 1Mbps upstream and downstream would typically offer a TV broadcast quality picture with 15 frames per second.)
When we asked about the mix of consumer vs. enterprise customers, Katz said that while most of his users were consumers, he has seen an uptake of enterprise users as well.
Our observations: whether enterprise or consumer, Paltalk's financial success proves that facilitating social networking with voice, text and video chat can be a profitable business model. As enterprises learn to better user the social network model to business advantage, they would do well to consider how Paltalk or a similar business process can help improve internal and external communications.
