MagicJack: It’s on TV – so it must work right?

If you’ve seen the numerous commercials for MagicJack — the little USB phone thingy that plugs into your highspeed connection via your computer and gives you unlimited local and long distance calls, you’re probably wondering if it works.

Well if you do a massive amount of Google searches and spend time reading as much as you can, you will find that the majority of the people DO say that the MagicJack works and is well worth the money.

So how do they do it?

Well – I can tell you.  Basically the MagicJack is cheap to manufacture when you buy them in the hundreds of thousands.  The cost of the hardware, wholesale wise, is fairly cheap.

The problem begins with:

a) Marketing

b) Support

c) The network the needs to convert this internet traffic into analog phone line calls, where these calls are placed via the internet and converted over to the regular phone lines..

Now, to be honest, I really do not have any insider information whatsoever. I am approaching this issue from a completely logical standpoint.

If “I” was the MagicJack people (which I am not)… and I wanted to get my device into the hands of many, I’d offer it at a break-even cost… Sell as many of them as I could in Year 1 and Year 2…

Then in Year 3, I’d raise the cost and go into profitability.

What does this mean for the consumer? They’re getting a great deal in the ramp up stage.

What could this mean for MagicJack if I am right?  Well they are building a very nice little consumer empire, which could result in lots of future profits…

So who is behind the MagicJack, where is it going, and why is it so cheap?

Well Dan Borislow is named the inventor of MagicJack.  He’s not new to the Telephony business. However, he is a Thoroughbred RACE horse owner and breeder, which means he’s got a gambling streak to him.   So he must be betting the odds that MagicJack will make it to the finish line, and be a winner.

Now I found a good article about MagicJack’s Network that explains the behind-the-scenes technology that has to exist to make MagicJack work. It also mentions that $17 MILLION DOLLARS has been invested in MagicJack.

So Today’s cheap offering, and service quality is great for consumers.

BUT! Expect the near future (next year, or the following year) to yield some surprises.

So while its cheap, go get a MagicJack and enjoy.

Just get ready for new announcements coming your way, once the user base hits the numbers they are anticipating.

Not every great deal lasts forever.

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