By Gwen Ackerman Feb. 8 (Bloomberg) — Israeli startup Fring , backed by founders of instant messenger ICQ, is bringing free video calls to mobile phones and offering wireless services similar to those of Skype Technologies SA. “We overlap with what Skype does, but our starting point is different,” said Chief Executive Officer Avi Shechter. Skype lets users call each other for free via the Internet. “We don’t even have a computer solution,” said Shechter, who previously headed ICQ , sold to AOL for $287 million in 1998. “We believe in mobile and that mobile is where the growth will be.” Fring is adding more than 500,000 users a month and allows them to call, message, and chat with each other over mobile phones. The average user is on Bnei Brak-based Fring’s service for four hours a day, Shechter said in an interview. “The company has a good chance of coming into a market dominated by Skype by offering something marginally better,” said Gilad Alper , an analyst at Tel Aviv-based Excellence Investments Ltd. He added that it could take years “to become very important in terms of mass adoption.” Fring, set up three years ago, also lets users see one another’s locations and integrate friend lists from other social networks, such as Facebook and Twitter. Its investors include Yossi Vardi , who backed ICQ, and Pitango Venture Capital, an Israeli fund with $1.4 billion under management. ‘The Hottest Space’ “Fring’s potential is that it is operating in maybe the hottest space, mobile internet,” said Rami Kalish , Pitango co- founder and managing general partner. Mobile Internet use in the U.S. grew 34 percent from the first quarter of 2008 to the first quarter of 2009, reaching 51 million mobile Internet users in March 2009, according to California-based TMT Strategic Advisors. Fring’s mobile instant messaging component is “a good example of how mobile instant messaging can successfully evolve,” researcher Gartner Inc. said in an October report. Skype, with more than 520 million customers, lets users call each other for free over the Internet from computers and mobile phones. It makes money when customers use the service to call regular phones and pay for voice-mail, call forwarding and text messaging services. EBay Inc., which sold its controlling stake in Skype for about $2 billion in November, had predicted Skype sales will exceed $1 billion in 2011. Advertising Revenue Fring is making money on advertising and plans to start add-on paid services soon, Shechter said. The company has signed deals with Telefonica 02 Slovakia and Telekom Austria AG’s domestic wireless unit Mobilkom. Phone companies are seeking to make more money from data services such as mobile Internet as voice revenue falls. Israel in 2008 drew more than twice the venture capital per citizen than the U.S. and 30 times as much as continental Europe, according to Saul Singer , co-author of the book “Start- up Nation,” which made the New York Times list of hardcover business best sellers. Israel currently has 64 companies trading on the Nasdaq and is the second-largest foreign contingent after China, according to Nasdaq official Asaf Homossany . To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net .
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Skype Rival Fring of Israel Lures Mobile-Phone Users to Free Video Calls
