A new start-up called Pudding Media is offering free PC-based telephone calls–if users allow the company to listen in on their conversations and serve targeted ads based on what they’re talking about (NYT). This is one of the worst business ideas we’ve heard in years (and we’ve heard some doozies).
Why will Pudding Media flop? Four reasons:
- Free or nearly free phone calls are already available from dozens of companies, including Skype. The difference between 2 cents a minute and 0 cents a minute (for SkypeOut users) is negligible.
- Except for people trying the service to see how relevant the targeted ads are (of which there will be many, especially after the NYT article), users will be absolutely freaked out by the idea that someone/something is listening to their phone calls.
- Advertisers will be absolutely freaked out by the potential consumer backlash.
- PC-based calling is a niche market to start with.
*Pudding execs and TechCrunch invoke the Gmail analogy to suggest that this nutty idea will take off, but this ignores a few things. First and foremost, ThePudding.com does not already have millions of users visiting the site for other reasons every day. Second, Gmail actually triggered a major brouhaha when the ad targeting was announced–a problem that would be much more harmful to a revenue-less start-up than a global behemoth. Third, most humans will be a lot more freaked out by the idea that someone/something is listening in on their phone calls than that a crawler is scanning their emails.
Given all this, it’s not surprising the that company’s beta sign up page doesn’t explain what the company does. New York Times.