There are a lot of video conferencing platforms out there. Everyone knows about Zoom, and there are no shortage of services that enable people to talk to each other on camera.
Jason Katz, CEO of Paltalk Inc (NASDAQ:PALT), knows this. He’s seen the rise — and the fall — of plenty of them.
Katz founded Paltalk in 1998. He’s something of an internet old soul, who enjoyed tinkering with computers and was an early adapter of AOL (NYSE:AOL) instant messaging. Even then, he knew something was missing.
READ: Paltalk ends 2Q with $16M cash; seeks further merger and acquisition opportunities
“It occurred to me, why are we just typing,” Katz said in an interview. “Why can't we talk or video? And that was in 1998, so nothing existed except AOL (NYSE:AOL)...it was a dial-up world. But once I figured out it didn't exist, I was able to hire a couple of people, which I bootstrapped myself, to build the first version of this.”
The result was Paltalk, a click-to-talk instant messenger with free conversation worldwide. It took off, and in 2003 caught the attention of Forbes magazine, which, while impressed, issued a warning: “It's one thing to be a couple of months ahead of a plodding MSN...it's quite another to demonstrate staying power,” the article said.
Spoiler alert: Paltalk is still here, with more than 5,000 chat rooms including just about any topic you can think of. It even got caught up in the meme stock trading frenzy of 2020. If you want to talk bitcoin, discuss romance novels and sing karaoke with people across the world, all of that and more is there on PC, Mac, Apple iOS and Android.
“The real differentiator in what we do is we really connect people who don't know each other around interest,” Katz said. “We're a social network where people meet virtually around interest on camera, on audio in groups. Not just small groups, but 50, 100, 200, 300, 500 from around the world.”
Growing organically
Palktalk offers 10-person conferences for free, and revenue comes from tiered subscriptions, which allow users to remove ads and join multiple rooms simultaneously, among other features. People can also pay to send other users virtual gifts, like a virtual pint of beer or a bouquet of flowers, to strike up a conversation. Users can also play games, like virtual chess, backgammon and cards.
“We have a fairly stable business model and conversion where people measurably move from free to paid, a percentage of them all the time,” Katz said. “So for us it’s about getting more people into the software in a pretty busy internet.”
Luckily, Paltalk has been able to rely on organic growth.
“The great thing for us is most of our users come organically, even now,” he added. “That's something you can't pay for. That is because I have tens of thousands of people online in real-time who recommend the software.”
Significantly, Paltalk also has 18 issued patents, including ones licensed by Microsoft, Sony and Activision Blizzard. While the revenue from those is confidential, Katz said, its significant for a company like Paltalk to have that in the chamber.
The company is currently entangled with Cisco Systems (NASDAQ:CSCO) Inc, having asserted patent infringement on the telecommunications giant’s WexEx products. A trial is scheduled for February 2023.
Bringing people together
Paltalk is also looking to grow. In August, the company reported its second-quarter results and announced its intention to seek more strategic opportunities after successfully acquiring the assets of live streaming software and virtual camera ManyCam in June.
After all, Paltalk is about bringing people together.
“The actual utility of what we do is great,” Katz said. “You can walk outside, you could go to a bar or a park, you could go wherever you go and see lots of people — a lot of the world’s not like that. They have internet, so that means they’re connected, they’re never alone. Ans that’s a powerful thing. We touch the entire world that way.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel