Viber is a new free VOIP app, currently available only for the iPhone. I’ve been trying it today, and have a few notes.

The Good

  • Initial setup is very easy. Your phone number is your Viber identifier. You launch the app, tell it your phone number, and a moment or two later they send an SMS to that same number with a code to confirm it. Enter the code in Viber and you’re done.

  • It works over 3G (and Wi-Fi, of course).

  • It’s designed as a replacement for, or at least an alternative to, the built-in Phone app. Call another Viber user and the call goes through Viber over IP; call a non-Viber user from Viber and it switches you to the iPhone’s built-in Phone app and initiates a regular voice call. The idea is you can always go to the Viber app when you want to make a call, regardless if the recipient is on Viber or not.

  • Incoming Viber calls work even when the app isn’t running, thanks to push notifications.

  • Call quality, even over AT&T 3G, is pretty good — far superior to actual phone calls. The poor audio quality of iPhone voice calls in the U.S. is shameful. A call to a friend in the Netherlands sounded great too — a few very brief glitches, but good sound overall and very low latency.

The Bad

  • Poor matching of existing phone numbers. The Viber app detects when your friends sign up for Viber by matching their numbers in your address book. But I had a friend (who signed up for Viber) whose contact entry in my address book was in the form “1 (###) ###-####”. The Viber app couldn’t identify him until I edited his phone number to the form “(###) ###-####”.

  • No custom ringtones — you’re stuck with the single default one Viber provides.

  • When you sign up for Viber, they send a push notification to everyone in your address book who has already signed up for Viber. I’m not sure it’s right to call this a privacy issue, per se, because it’s only sending notifications to people whose phone number you have and who have your phone number, but I’m opposed to any service that sends notifications to others on my behalf without my consent. And there is no way to turn this feature off.

  • As stated above, the Viber app attempts to serve as a replacement for the built-in Phone app — acting as a front-end for both Viber VOIP calls and regular cellular voice calls. But it’s not really a replacement for the Phone app — it can’t access your voicemail or your recent (voice) calls list. So you still need the Phone app.

  • You don’t pay Viber a cent for using it, but when you’re on 3G, calls using Viber count against your data plan limit. And, given that Viber is iPhone-only and AT&T offers free calling between AT&T users, it raises a question as to why you’d use it. (One answer: the audio quality really is far superior.)

The $64,000 Question

So the app is free, accounts are free, domestic and international calls are free, and there aren’t any ads. How do they make money, or plan to make money? According to this interview with TechCrunch’s Robin Wauters, they have no idea:

So how does the company intend to make money, considering that its apps will be completely free? Value-added services, Marco tells me, although it seems that they haven’t quite figured out which ones those will be yet.

Presumably they’re burning through a pile of venture capital to do this. I suppose if that makes sense for anyone, it does for a service like Viber, where it’s essential to get as many users signed up as quickly as possible to make it a viable communication network. They’re going head-to-head with Skype, which claims to have over 50 million daily users. But eventually the shoe has to drop. Jason Fried said it better than I can, in an interview with HP Input/Output:

The things you do more often are the things you’re going to get good at. So if you get really good at spending money, you’re going to be really good at spending money. If you have to work on making money from day one, you’re going to get really damn good at making money. And that’s what you need to be as an entrepreneur. […]

The problem I have is when companies’ business model is free only. And then they say, “We’ll figure out how to make money later.” As if there’s going to be this magic switch they can flip. […] If you’re not practicing making money, you’re not going to be able to flip that switch and just know how to do it really well. You need to have some time. You need to have some experience at making money.

Color me old-fashioned, but I’m skeptical of any company that comes out of the gate with a product that generates no revenue whatsoever. I know, all sorts of companies launched with no revenue — Google, Flickr, Twitter. Maybe I’m wrong to dwell on this.

Update: John Nack asks if I’m equally skeptical of Instagram, the popular new photo sharing service/app, which also is free of charge and ad-free. (And which, not coincidentally I say, is also iPhone-only for now.) I am, sort of. I really like Instagram a lot, and wish they’d let me pay for it. But it seems obvious to me how Instagram could make money. They could go the Hipstamatic route and sell additional photo editing filters as in-app purchases. (Their FAQ even mentions this.) They could start showing ads on web pages displaying shared photos. Likewise with Google in its no-revenue salad days — it was always obvious they could eventually just start serving ads. It certainly wasn’t obvious what kind of ads Google might go with, but it was obvious they could go with some kind of web page advertising in search results. With Viber, I’m not sure they have an obvious revenue route if all calls are already free of charge. Charge for voice mail?

Update 2: Robin Wauters, via Twitter: “For the record, the company hasn’t raised funding, it’s the iMesh folks bootstrapping.”