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Rounds video-chat service expects millions of users from mobile

By Tova Cohen

TEL AVIV (Reuters) - Rounds, a free video-chat service that is also a social network, expects to add tens of millions of users with the launch of its mobile phone application.

Israel-based Rounds operates on top of existing platforms with the goal of bringing friends together irrespective of their preferred operating system or device.

Besides video-chat there are photo-sharing features and the ability to watch YouTube videos, play games or listen to music with those contacts, who see exactly what the other sees.

"We are the first hangout network, offering online entertainment with video communication to bring people closer together," Rounds co-founder and Chief Executive Danny Fishel told Reuters.

Rounds has over 6 million users who spend an average of 40 minutes a day "hanging out", mainly via the Facebook app.

Last month Rounds launched its first application for Google Android-based phones and Apple iPhones. It expects mobile to bring the number of users to tens of millions, reaching more than 80,000 new users in the first 48 hours.

"From our perspective, I can be on an Android device and you on Facebook, we merge the contact lists together," Fishel said.

Rounds also gives these "hangouts" an afterlife, allowing users to take pictures of themselves and fuse the images so it appears as if they are physically together. Users can follow, share, like and comment on the photos.

For now Rounds is concentrating on expanding to different networks and will work on bringing in revenue in the second half of 2013. It is considering various models such as micropayments to unlock special video effects.

Competitors include Google Hangouts and Airtime, founded by Napster founders Sean Parker and Shawn Fanning.

Airtime offers video-chatting but not games while Hangouts is only for Google+ and Google Talk users.

"Our platform agnosticism sets us apart," Fishel said. "You can be on Google+, Facebook etc."

Fishel noted that U.S. Marines stationed abroad often use Microsoft's Skype to talk with their families.

"But when they wanted to communicate with a 5-year-old son, after saying how much you've grown, the son had little patience to speak. In Rounds, they have 25-30 minute talks because they can watch YouTube clips and play games together," Fishel said.

Rounds has raised $5.5 million from investors including Verizon Ventures and investment firm Rhodium.

"We believe towards the middle of this year we will do another financing round," he said, adding the company will likely seek to raise $8-$10 million and will look for new and strategic investors.

One purpose of this funding will be to relocate the CEO to the United States and open a marketing office while maintaining research and development in Israel.

(Reporting by Tova Cohen; Editing by Steven Scheer)

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