A Real-Time, Multimedia Social Network You Might Not Know: Paltalk CEO Jason Katz (Part 3)

SM: When you first started were there any other companies competing in the social IM space?

JK: There were some companies that came out focusing on voice conferencing via the Internet. LibStream, FireTalk, and HearMe were the most significant, and all were well funded. HearMe was a public company and had $270 million in public and private funding. At one point it had a $1 billion market cap. Ultimately, all of those companies went out of business. The existence of those companies further reinforced the idea to me that companies wanted to do voice conferencing over the Internet.

We altered our Paltalk software as we went along to allow for the creation of groups. Not only could we do groups of two or three, but we could handle groups up to 500. We would broadcast voice through our servers to everyone in the group. Soon we started adding video capabilities into our feeds. We would denote who was publishing, and we would allow users to click on whomever they wanted to view. It is not possible to allow 500 people to be viewed, but we would allow the 500 users to select which individuals to view. A group might have five or six different people with video broadcast to a group of 500, and the ‘listeners’ could elect to watch all five or six, or just one or two.

SM: In 1999 when you started, it was audio software. When did you start doing video? Did you raise money from the VCs based on audio or video?

JK: We raised $1.2 million in 1999 based on the premise of audio-only capabilities. We had 30,000 users when we raised that money. People were certainly looking for Internet companies to invest in at that time.

SM: Soon after the market crashed.

JK: It did. My timing was just about perfect because a year later I raised another $2.7 million. Between April 1999 and April 2000 we raised $3.9 million total. To me that was a great deal of money, although many in the Internet world did not think it was a lot. Fortunately, I never stepped up in a great way. I always thought we needed to make money on an operating basis because that is what business is about. At that time people were just talking about eyeballs and not focusing on the money.

Some time in 2001 I was able to go cash flow positive by putting in a subscription model. That model was straightforward. If I wanted to do a video call from my buddy list, one on one, the service was free. If I wanted to be involved in one of the groups, of which we have 4,000 user-created groups, then you had to pay for that service. If you were in one of the user-generated rooms, you could type or broadcast for free, but if you wanted to view somebody else’s video feed then you needed to have a paid subscription account.

We were intelligent about the way we did it. If a user wanted to view somebody else’s video stream we did not make that person pay immediately. We would allow them to see ten to fifteen seconds of video and then we stopped it and put up the ‘paid feature’ notice. That induced a lot of people to pay, and that has been our model. We have focused on enhancing the quality and capability of our service since.

This segment is part 3 in the series : A Real-Time, Multimedia Social Network You Might Not Know: Paltalk CEO Jason Katz
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