VOICE RECOGNITION FINDS AUDIENCE

By Barbara Rose,
Tribune Staff Writer
Published: Monday, January 29, 2001


Section: Business Page: 1

Cindy Nygren, a thirtysomething working mother, hits the speaker button on her kitchen phone and dials a familiar, cheery voice at a toll-free service called ShopTalk. ShopTalk's female voice guides her through a menu of special offers for everything from restaurant meals to oil changes at Jiffy Lube, prompting her to respond with simple spoken commands.

By the time Nygren hangs up, she has emptied her dishwasher, put away her groceries and purchased discount passes to a movie theater. She has also instructed ShopTalk to e-mail her more information about an offer from an online video store. She'll log on to her computer to check it out after putting her 8-year-old to bed.

Nygren is not a big online shopper, but she dials 800-ShopTalk an average of four times a week. "A phone call is so easy to make," she says. "You can do it when you want. I can do it when my daughter's brushing her teeth."

Chicago-based ShopTalk is one of the pioneers in the latest Internet investing craze: extending the Web to a device that everybody keeps handy – the telephone. The 2-year-old firm is one of dozens of companies experimenting with rapidly improving speech technology to let people use their voices to get information and to perform simple transactions, anytime, anywhere. "Voice could ultimately be the most powerful tool on the Web," says ShopTalk CEO and co-founder Eric Linn.

Yet the effort to move voice commerce into the mainstream just as easily could turn out to be the next big Internet bust. Voice-recognition services, when used ineptly, can be as annoying as some of the touch-tone programs that automate many companies' information and ordering systems.

"To the extent that service providers use this in a way that's of marginal value, or even frivolous, it will raise a lot of hostility," says George Rosenbaum, chairman of market research firm Leo J. Shapiro & Associates in Chicago. "We're going to see a lot of false steps, very much in the way we've seen on the Web."

For ShopTalk, the next several months will be critical. The company, which since inception has raised $30 million from venture capital investors such as Maveron of Seattle and Bay Partners of Cupertino, Calif., is now looking for a third round of capital. It's also facing an important test of its business strategy while initiating service with a leading voice portal, Mountain View, Calif.-based TellMe. Voice portals are services that offer a wide variety of information that can be accessed using spoken commands. For instance, TellMe (800-555-Tell) can be used to get updates on stocks, weather, sports and other news, or to find a restaurant.

TellMe and ShopTalk signed a deal last year that is expected to help both companies grow. ShopTalk is being added as a feature to callers on TellMe's 800 network. Meanwhile, TellMe, which has invested tens of millions in infrastructure to handle huge call volumes, will provide operating and hosting services for the programs that ShopTalk is developing for corporate customers.

For instance, ShopTalk is working with Jiffy Lube to develop a reminder service that alerts customers when it's time for an oil change. Only customers who ask for reminders are called, and customers specify the times of day and the numbers where they want to be contacted. ShopTalk is betting on such deals to provide the bulk of its revenue. Customers pay a licensing fee for ShopTalk's technology – an integrated phone/Web platform that lets users alternate between the two to access personalized information. Customers also pay usage and transaction fees.

Analyst Mark Plekias, who heads the speech practice at the Kelsey Group, a Princeton, N.J.-based consulting and research firm, says the jury is still out on these services. But ShopTalk is better focused than some others of the dozens of fledgling voice-commerce players.

"They're not technologists all excited about getting the Web to speak over the phone," he says. "They're people who understand direct marketing, merchandising and how to sell campaigns. For that reason, I think they've got a competitive jump on many of the voice services out there."

ShopTalk has its roots in a marketing business called U-Access (the "U" stood for university), which offered promotions and special offers to students via an 800-number. The idea--ShopTalk's Linn calls it "anti-telemarketing"--was to give people access only to the deals they want, when they want them.

Linn and two partners, Tom Peterson and Russell Torres, cleared out a storage room in the basement of Northwestern University's technology incubator in Evanston to set up shop in 1996.

By 1999, with $3 million from venture capital firm KB Partners, they had shifted their target customer to busy moms and built a pilot group of 5,000 ShopTalk users. At the time, the voice-commerce investing craze was taking off.

ShopTalk forged a partnership with a pioneer in speech recognition software, Nuance Communications, now publicly traded. Meanwhile, Nuance's main competitor, SpeechWorks International, struck a deal with America Online, which began offering telephone access to e-mail and other key AOL features in October.

"The premise," Linn says, "was that everyone will have access to Web commerce because the voice will replace the mouse." Although the mouse isn't disappearing anytime soon, investors have poured millions into voice portals. Among the early players: Quack.com (now part of by AOL), BeVocal and TellMe, which has raised more than $250 million from investors including AT&T Corp. A recent report by Dain Rauscher Wessels lists more than 50 companies – portals, software and infrastructure providers – offering speech recognition applications. Yet it isn't clear that consumers want telephone access to the Web, or whether they're willing to pay for it. "The phone tends to be a very focused, task-oriented medium," notes Plekias. "It's not a browsing medium."

People such as Tom Pirelli, founder of a Vernon Hills start-up called ArialPhone, have become addicted to services like TellMe to keep tabs on stock prices while they're driving. "I've been using TellMe for stock quotes when I'm traveling for three months," Pirelli said. "It's more convenient than my Palm [Pilot]. It's faster and I don't have to look at my little screen."

Yet the numbers of people using free voice portals is still small. Two of the leaders combined, TellMe and BeVocal, have about 1 million registered users. AOL's fledgling Voice by Phone service has about 200,000 subscribers. ShopTalk claims 500,000 registered users.

Meanwhile, all the players are scrambling to find profitable business models. ShopTalk distinguishes itself from pure information-based portals by offering commerce. Advertisers get an immediate, direct response that can result in a sale. ShopTalk gets paid between 5 cents and 25 cents when an advertiser's message is played, and between 25 cents and $1 if the customer asks to be transferred to a call center or makes a purchase.

ShopTalk's marketplace includes about 30 businesses, including Eli's Cheesecake, Pizza Hut, Red Lobster, Bennigan's, Sony Loews Theatres, Blockbuster and Toys "R" Us. ShopTalk claims its response rate is much higher than for traditional direct marketing, where the percentage of customers responding is in the low single digits.

As part of a test, ShopTalk in late fall asked a group of consumers whether they wanted to be alerted to special offers from companies they knew about and liked. Eighty percent said yes. Of those, 70 percent answered the phone to receive the alert, and 40 percent made a purchase.

"This is a very significant new medium," said Leo J. Shapiro's Rosenbaum. "The phone, even if it's a virtual voice, is a way of giving a personalized message. It's going to be increasingly used, and increasingly abused."

© Copyright 2000, The Tribune Company.
Unauthorized reproduction prohibited.
The Tribune Company archives are stored on a SAVE (tm) newspaper library system from MediaStream, Inc., a Knight-Ridder, Inc. company.