The Voice over IP scene began with an idealistic approach - offer customers improved voice services - for less money. A few years later these ideals have been shifting as the key players grows up, and decided to be a profit machine. Long gone are the days when networks concentrate on giving free service to all who agree to take. These days, services are increasingly concentrated on one thing - profit.

While this in itself is no surprise - the scope of commercialism going on behind the scenes may very well surprise some. A great example would be so-called Voice over IP review sits. The two largest VoIP review sites have been bought by a single company, who in essence now rules this market. Both websites used to be more-or-less non-commercial in the past, but were bought for an undisclosed amount, probably in the tens of thousands of dollars.

The buying entity has been very generous in their offers to Voice over IP providers from my personal experience. Personally I have had good experiences advertising with them. However, this is not the point. The real point is that a single company managed to take over a huge chunk of the VoIP Review market - a market that did not even exist a few years ago. With the way the web ebbs and flow, and with Google always changing things, they are not likely to remain the market leaders for many years, however for now they are a force to reckon with.

Many, many providers that used to get free or very cheap advertisement opportunities with these non-profit sites, have now been essentially cast out of the market completely. Some providers who have been in the scene for years have gone out of business this year. We can blame the economy, or the fact these providers weren't any good to begin with - but the single fact remains: as a company it matters not how good you are, if you have no customers. Those who elected to skimp out on advertising costs, paid the ultimate price.

These two review sites are not alone. Rather, they're the norm. There is a whole mass of so-called "review" and "comparison" sites flooding the internet. Nine times out of ten such sites are biased and display only sites who pay to be included, run pay-per-click campaigns, or pay-per-sale affiliate profit sharing. Not the I have anything against such sale techniques, but the market at this point in time is almost 100% pay-to-play.

Such pay-to-play tactics impact more than just the providers themselves. It goes without saying that the more providers pay for advertising, the more expensive they would be to the customer. This is especially prominent with the leading providers - some of which spend over $100 on average to aquire a single customer. Such crazy figures, combined with churn rates to the tune of 3% a month, spell financial crisis for bigger players. In today's financial scene, hot-shot VoIP providers can no longer borrow millions of dollars without account for how they're planning to pay it back. The credit-crunch is on, and the largest borrowers are feeling it harder than most.

Smaller providers in essence are living off the scrapes, so-to-speak. With 3% churn from the big guys there are a lot of scrapes to go around... smaller providers typically have far less cost to aquire new customers, and in turn price anywhere between 25-75% of the big guys. More often than not, smaller providers are actually profitable rather than living on credit. It is much easier to turn a profit when you have a few thousand customers with a new customer aquisition cost of a few dollars each - than millions of customers who cost you millions to acquire.

In the coming year I think we will see great changes in the Voice over IP world. Some bankruptcies and providers going out of business are inevitable. As a result, financial institutions will get scared and start pressuring to get their loans paid. This will result in even more bankruptcies. This is a rather grim prediction for the big guys, but the next year will see profitable, better managed smaller providers propel forward in growth as they eat up customers from old, failing larger providers.

Recession? for the big guys - very much so. For smaller providers 2009 means full steam ahead and insane growth for those who manage well and are conservative with their spending.
Nitzan is the President of Future Nine Corporation - a leading Internet Phone Service. Nitzan also is involved with Compare VoIP - an ongoing comparison of VoIP Provider call rates worldwide.