Webheads, Lend Me Your Ears

Do people want Net info on the phone? Tellme thinks so

It's a mouth-watering market for sellers of information and e-commerce: the 150 million people now linked by computer to the Internet. But what if that market could suddenly grow 10 times larger, by allowing the world's 1.5 billion telephone users voice access to the same services?

That's the premise behind one of the hottest startups in Silicon Valley, Tellme Networks Inc. The 50-person outfit, which has been keeping a low profile in a former printing plant in Palo Alto, Calif., aims to turn lowly telephones into the easiest and most ubiquitous way of getting news, stock quotes, sports scores, and other data directly off the Net. By dialing a toll-free number, users will be able to speak directly to a net "portal" and retrieve computer-generated spoken answers. The service can even support online shopping, Tellme execs say. And reports can, for instance, be customized so a consumer can get a daily portfolio update while driving to work. "This will become a part of people's everyday lives," says Tellme CEO Mike McCue. He figures that most of its content will be delivered to people using wireless phones. "The Web used to be about grabbing eyeballs," says analyst Mark Plakias of Kelsey Group, a telecom researcher. "Now it's about eyeballs and eardrums."

Investors are sold on the idea. On Dec. 15, two of the top venture-capital firms in Silicon Valley--Benchmark Capital and Kleiner Perkins Caufield & Byers--joined in an unusual pairing to pump $47 million into Tellme. "The idea of a consumer service that lets you access Net information by voice is incredibly compelling," says Benchmark General partner Kevin R. Harvey. The startup will earn money from ads, e-commerce fees, and premium services such as online calendars. Plakias figures services like Tellme could be a $5 billion industry by 2003. "It has breakout potential," he says.

Info-by-phone is hardly new. Remember audiotex? Back in the mid-1980s, phone companies rushed to roll out 900- and 976-number services that let callers get everything from lottery results to psychic consultations over the phone. After peaking in 1991 at about $2 billion, revenues for audiotex have sagged to $1.6 billion, according to market researcher Frost & Sullivan.

NEW PLAYERS. What makes Tellme different is that the rise of the Web has whetted the public's appetite for instant info. And unlike audiotex, which required publishers to create custom content, Tellme allows them to use what they already have on the Web. What's more, computer speech technology is vastly improved, and Tellme plans to offer the capability to add speech recognition to existing Web sites.

Tellme won't be the only player in the new market, however. @Motion in Redwood Shores, Calif., has raised $13 million for a voice-based Net service it plans to offer through wireless phones. And Yahoo! Inc. paid $80 million in June to buy Online Anywhere, which has developed technology for publishing Web content on pagers, screen phones, and by voice.

Tellme was founded in January by an unlikely team of former archrivals. CEO McCue was vice-president for technology at Netscape Communications Inc., while Tellme Vice-President Hadi Partovi ran Microsoft Corp.'s Internet Explorer unit--Netscape's enemy. The two met at a trade show in 1997 and later gave opposing depositions in the federal antitrust case against Microsoft.

Tellme plans to launch its voice portal in the first half of 2000, after a test period starting in February. Its initial content partners will be announced then. The price hasn't yet been set. Nor is it totally clear that millions of consumers really want Net info by phone. If they don't, Tellme could become just another way to call your psychic.