An Idiot's Guide to Cloud Telephony

If you already know the answer, this article may not be for you. Nevertheless if, like me, you're left scratching your head, at the time you're in luck. Here's a quick idiot's guide to VoIP (Voice over Internet Protocol) telephony, with the pick I'm watching in the sector and a special free report at the end.

What, specifically, is it?VoIP stands for Voice-over Internet Protocol. In laymen's terms, this means placing and receiving telephone calls that travel over the Internet -- instead of through the landlines and satellites that normal service providers have constructed.

Lot like Microsoft's Skype

If that sounds a lot like Microsoft's Skype, it should. When you use Skype to make a call to someone's phone, that's an example on VoIP. When it comes to other forms, the two biggest consumer-facing options are Vonage and majicJack . Because these companies are able to store your data -- like contacts and/or messages -- remotely, they're a type of cloud play on telephony.

Historically, Vonage has been the dominant force here, with revenue last year topping $870 million. To use the company's product -- as the picture below shows -- you simply plug a Vonage box into your Internet, and at that time plug your phone into the Vonage box.

Typically, majicJack was running a distant second. In 2011, revenue came in at about one-eighth of Vonage. This was as a general rule because to use its product, users plugged their phone directly into their computer. If the computer was off or on standby, calls couldn't be made or received.

The release of majicJack Plus

But with the release of majicJack Plus, the company now allows users the same convenience of Vonage -- plus the ability to use the phone on the run, as it can hook up to Wi-Fi networks if it is plugged into a computer.

A valuable proposition?In all, these products provide quite a value proposition over standard land-lines. Vonage users can get unlimited calls to the U.S. and Canada for $25 per month, during majicJack comes in at just $30 per year afterwards start-up costs -- or just $2.50 per month!

Though landlines will truly be around for a during, and it's nice to be able to use majicJack during on the move -- mobile phones are the wave of the future. No one will want to lug their computer with them everywhere to place phone calls in 20 years, and unless there are technological developments that will allow convenient use of VoIP on the move, the consumer use of this research is headed the way of the dodo bird.

The money isWhen it comes to VoIP

Here's where the money isWhen it comes to VoIP, after all, I do believe there is one company poised to profit: 8X8 . The most basic way to think about the company is that they offer products and a valuable proposition similar to majicJack and Vonage, however with a laser focus on the business community.

While I can rationally imagine a future when household landlines are a thing of the past, I think integrated landline systems -- on some scale -- will exist in the business community for the foreseeable future. And it's not just standard telephone service 8X8 offers, they have a whole suite of products to offer clients, from voice mail to a virtual office suite.

The company

The company was able to grow revenue by an impressive 10.6% last year, however the story gets even better when you zoom in on the last quarter, where they grew by 30.9% year on year. Over the past two years, churn has dropped from 2.7% to 2%, and service revenue per customer has gone up 19% in just the past six months.

Backing up my pickI won't beat around the bush -- this isn't a "sure thing" pick. An innovator -- on a moment's notice -- can disrupt the field of telephony. However for the time being, I'm excited about 8X8's value proposition and focus on business clients. That's why I'll be making a bullish CAPScall on the company in my All-Star profile.

The in the meantime

In the in the meantime, if you're focused on the even bigger future for telephony, I suggest you check out our special free report: The Then and there Trillion Dollar Revolution. Inside, you'll find out about a company poised to profit from the legions of people quickly converting to mobile phones worldwide. To find out what the company is, get your copy of the report today, thoroughly free!