paidContent - Video Chat Service Paltalk Buys Back Shares From Softbank
This story was written by David Kaplan.
Video-based social net Paltalk is repurchasing the 20 percent stake it sold to Softbank for $6 million in its second round five years ago. Jason Katz, CEO of the New York-based online video chat service, told us that doing so gives the company more flexibility. “We’ve been profitable for several years and this seemed like a good time to pay Softbank back,” Katz said. “We had a choice. We could have either used our cash flow to buy another company or we could have bought our shares back. For the moment, we’d like to remain a small company and I’d like to configure Paltalk to be able to pay out a dividend. We couldn’t do that operating under Softbank.”
Before the Softbank funding in April 2004, 11-year-old Paltalk raised $4 million in funding in 1999 and 2000 from private individuals. Since the collective 20 percent it sold then weren’t preferred shares, Katz said there are no plans to buy out those past investors any time soon.
Though most of its video chat offerings are free, Paltalk generates roughly 80 percent of its revenues from subscription fees, Katz claimed. He didn’t divulge the company’s annual revenue amounts. The company also says it has about 4 million users, with roughly 5 percent representing paying customers. The pay services are mostly aimed at companies who want to set up a virtual conference room, which Paltalk charges between $90 and $1,000 per month to access. Advertising is a much smaller component of its revenues. “That has helped us get through this period,” he said. “Last year was our best year.”
Rafat adds: Paltalk is in a tough and competitive sector, and besides video chat competition from all major IM clients and likes of Meebo and Userplane, the market has moved towards more social/livestreaming options. The more buzzy—and newer—companies like Livestreaming, Justin.tv, Qik and others have focused on live streaming rather than chat, and are racing to configure their services on mobile, as both the originator of the live feed and a consumption platform. Paltalk subscription fee may help it now and near term, but the direction of the market is clear. Softbank Capital, meanwhile, is not raising another venture fund in U.S., as it said when the news about Eric Hippeau joining HuffingtonPost as its CEO came out last month; it can take any exit it gets at this point, and this is one way, I suppose.
By David Kaplan