Ribbit Chose British Telecom Because Size Matters

British Telecom bought Web telephony startup Ribbit yesterday for $105 million. Here's the scoop for those who missed it.

During a demo last January, Ribbit co-founders Crick Waters and CEO Ted Griggs assured me that they had the technology and tools to make a go of it alone as Silicon Valley's first phone company, even as Google, Skype, IBM, Microsoft and others are forging forward into VOIP.

They had a cool software tool in the SmartSwitch, essentially a softphone that lets users click to call from the Web to landline and mobile phones, as well as Web applications such as Skype and Google Talk.

They offered an API to this technology. With it, programmers were able to add these capabilities in Salesforce.com's CRM app.

I spoke to Waters, who remains as executive vice president of Ribbit. Waters explained why he and Griggs decided to sell the company and how the deal went down with BT.

Waters said after doing some research, he and Griggs realized only 40 percent of their developers were based in the United States. In order to build the global presence that befits a phone company, it needed strategic partners with a global footprint.

Ribbit went looking for telecommunications partners and BT came calling, pressing home the point that the companies shared a lot in common, namely the resolve to let users communicate across devices and networks without being bound to a specific carrier, contract or device manufacturer.  

In realizing the common goals, BT and Ribbit realized they each had things the other didn't. BT lacked apps to enable VOIP, such as the Ribbit Salesforce.com app.

Such services were exactly the type of apps BT wanted programmers to build for its W21C SDK (Web 21st Century Software Development Kit), which let's developers write apps that will mesh with BT's services.

Ribbit, meanwhile, didn't have any telco infrastructure on which to hang these apps, so scalability was an issue. Indeed, BT has networks in 170 countries. Oh, sweet synergy! Waters told me:

They said, 'If we can take the things that we have and give them to you, you can achieve your goals and dreams as Ribbit, but we'll do this by buying you and you can operate as Ribbit in the United States as a BT company. It was a perfect way to take two things that were not competing with each other and join them to accelerate what both companies were trying to do.  

Waters said Ribbit's other option was organic growth, which would mean trying to build its own revenue base, add distribution channels and forge interconnect arrangements with global telco partners while competing with these folks, which would include Verizon, AT&T, Sprint, BT and France Telecom.

That's a dicey proposition in this day of entrenched telcos, so Ribbit said no dice.

"The large incumbents are starting to focus their sites on the platform telephony model," Waters noted. "It's a little bit risky to try to organic growth on a global scale."

SMBLive CEO Matt Howard called me from Washington, D.C., this morning with love for the purchase. SMBLive makes 1StoreFront social shopping software to help smaller businesses sell their products and services via the Web. BT licenses the software in the form of  BT TradeSpace.

Howard told me BT has been strongly pushing to expose telco services to a programmable interface so that software developers can innovate applications that inherently consume communications services.

"We always thought the Web 21C story that BT was quite clever and we think that with the Ribbit acquisition. We're looking forward to working with the Ribbit SDK and platform so we can do more innovation around blending communications services with software services."

ReadWriteWeb  cheerleads the deal here, with a largely correct cautionary note. Will, as Marshall Kirkpatrick wonders, BT strangle Ribbit?

I'm not sure, but it's good to see a larger telco make a move in the future of Web communications. Now BT has the inside track on Verizon, AT&T, Deutsche Telecom, et al.

GigaOm offers reasons to be skeptical here.