Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Don’t Look Now, But Vidyo Is Messing Up the Videoconferencing Business

It has been almost a year since I declared that the videoconferencing business was about to get interesting, and it has, due in no small part to the trouble that the New Jersey-based start-up Vidyo has caused its entrenched rivals.

Vidyo just completed what it is calling a record-setting year with billings up 82 percent in fiscal 2011 led by a 115 percent surge in both the North American and Asia Pacific markets. It ended the year with 1,850 customers, up from 1,000 the previous year.

In September, the company landed a $22.5 million series D round of venture capital funding led by QuestMark Partners, with Menlo Ventures, Rho Ventures, Star Ventures and Four Rivers Group participating, bringing its total capital raised to north of $97 million.

Compare Vidyo’s fortunes with those of Polycom, whose shares tumbled by more than 20 percent in a single day earlier this month after it announced a nasty earnings miss. The shares are down nearly 57 percent from this time a year ago. On a conference call earlier this month, Polycom’s CEO Andy Miller complained of slow sales in key markets including North America and several Asian countries.

Could Vidyo be the one causing all that trouble for Polycom? It certainly looks that way. Vidyo’s technology is based around a piece of hardware called a Vidyo Router that is installed in a customer’s data center. I’ve already written about the Brady Bunch Effect I once noticed during a meeting with Vidyo. The company’s VidyoPanorama product (pictured), for example, can support as many as 20 screens at a resolution of 1080p with 60 frames per second and sells for 20 percent of the price of a similar system from the bigger companies, and supports smart phones tablets. Sounds like a disruption to me.

But if you don’t trust me take the word of Baird Equity Research, who in late 2011 declared Vidyo a disruptor who “appears uniquely advantaged to democratize video conferencing and is unhindered by an installed base that is tied to a traditional hardware-based architecture.”

Vidyo’s technology is also showing up in a lot of places where you won’t see its name. It is the power behind Google+ Hangouts, and is proving popular in tele-health applications like the ones operated by the Ontario Telemedicine Network.

In fact, the Dutch electronics giant Royal Philips Electronics, a.k.a. Philips, will announce today that it is collaborating with Vidyo and working its unique Adapative Video Layering technology to deliver a better video experience in medical applications.

Adaptive Video Layering is basically Vidyo’s secret sauce. It works by constantly watching the network’s underlying conditions and then adapting to meet them. If there’s a lot of interference, the Vidyo system throttles up and down on the picture and sound it’s trying to deliver based on the condition of the networks, but it also adapts dynamically to the device that’s being used: It supports Apple’s iOS devices and also Google Android devices. The deal amounts to a pretty strong vote of confidence by a $29 billion company.

So I stand by what I said last June about the videoconferencing business getting interesting. In fact it looks like an honest-to-goodness market disruption is under way.


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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus