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Entries tagged as ‘skype’

EBay – Skype Silver Lining for Net Neutrality

13 September 2005 · Leave a Comment

Some may say that I am becoming like an self-obsessed character from a David Sedaris story or one of those Ask a advice columns from The Onion. A few more thoughts on eBays acquisition of Skype have come to my mind.

First a bit more on why its a bad idea for eBay. Ive heard on NPR and read in a few places that eBay intend to make voice calling from bidders to sellers a feature of their service. This is actually a very good idea. It could be a very good idea that brings in billions of dollars in additional revenue for eBay in the form of higher sales volumes and higher selling prices. That remains to be seen. But what eBay did NOT need to do was spend at least $2.6 billion to make that happen. With all of the low-cost PC voice over Internet clients they could have purchased or licensed this was some serious low hanging fruit they could have implemented in the cheap. Considering eBays installed user base they didnt need Skypes user base to make this a reality. What we have here is a good idea motivating a bad decision.

Theres a potential silver lining in the deal for those of us concerned about network neutrality. This piece in the Washington Post even considers what steps incumbent telecommunications companies might take to thwart PC-to-PC voice over Internet calling. The article doesnt bring up anything that hasnt already been considered, such as applying universal service fees to VoIP calling or applying E911 or surveillance requirements to these connections. These lobby efforts at the FCC are to be expected. Ive also written a few entries about the possibility of incumbent telcos and cable companies could employ technical means to limit the quality of competitive VoIP calling or block those calls altogether. This is something Madison River Communications already tried to do, and they got their hand slapped by the FCC. Some have speculated that in a post-Brand X world the FCC would be less willing to go to bat in the name of network neutrality.

I think the eBay acquisition of Skype actually creates a ray of hope for proponents of network neutrality. With eBays large customer base, any attempt by a cable or telecommunications company to throttle or block VoIP performance would be noticed by a wide audience. While eBay may not be able to match the lobbying clout the Bell companies carry in Washington and the state capitals, what it can do is mobilize a genuine grass roots campaign should it come to it, and the Bell companies cant hope to match eBays folksy, grass-roots appeal. An educational benefit is that by aligning a VoIP provider conceptually with a web service provider a broader audience can begin to conceive of voice as an application rather than a network. No longer just the opinion of libertarian telecom nerds like myself, voice could come to be regarded as independent of the underlying network infrastructure just like web sites, e-mail or instant messenger.

Categories: Politics · Technology
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EBay Goes Ahead and Buys Skype

12 September 2005 · Leave a Comment

Evidently the folks managing eBay do not share my assessment of the voice over IP market, because they have gone ahead and offered $2.6 billion for Skype. Half of this is in cash and the other half is in stock, and according to this piece in MarketWatch the final purchase price could be as much as $4.1 billion should Skype meet certain performance targets.

I’m not going to continue to belabor why I really don’t think Skype is worth all that, but rather point to a source that could be said to disagree with me. This article from Lightreading references a voice over Internet traffic analysis conducted by the firm Sandvine to claim that Skype accounts for nearly half (46.2 percent) of the voice over Internet minutes used in North America.

Sandvine claim to have concluded this by monitoring traffic on cable and DSL broadband networks. I’m not sure that’s necessarily the best methodology, because I would be concerned that PC to PC calls would likely be counted twice– once at each end of the call, while PC to phone calls (such as SkypeOut or Gizmo’s Call Out function) and voice over Internet phone to traditional phone calls (such as those offered by Vonage or AT&T CallVantage) would only have those minutes counted once. Somebody could argue that its appropriate to count the minutes on both end of a PC to PC voice over Internet call as VoIP minutes, but if so PC-to-PC clients are always going to have a 2-for-1 advantage. I would argue back that VoIP to PSTN callers should be given odds if this is to be a fairly-measured horse race if we count those PC-to-PC calls at both ends.

If I had more time I would be doing a LOT more analysis on the figures Sandvine are quoting as well. I don’t take them at face value, and I’m curious to know how their final determinants of total VoIP minutes consumed in North America compare to other estimates of same. Also, I’m always a little wary of the vaguer “North America” over the names of specific nations included. I’ve seen too many analysis firms use fuzzy regional designators to be satisfied with that. I will concede that Sandvine probably are more specific in their actual report, but not all firms are specific and many play games like this to avoid direct comparisons of their work to other firms. Even the relatively straight-forward sounding “North America” is rife with considerations about whether or not Mexico, Central America or the Caribbean islands are included.

Do I even need to make the point that minutes are one thing but dollars are something else altogether, or has this late 1990s retro fad taken such hold in business that we once again believe that revenue doesnt matter anymore?

Categories: CI · Technology
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More on eBay and Skype

8 September 2005 · Leave a Comment

Over the course of the day more details about the rumored Skype acquisition has been reported. According to MarketWatch there have been mentions of a purchase price of up to $5 billion with more credible rumors place the price somewhere between $2 – $3 billion. Even $2 billion is striking me as being pretty expensive, but maybe there’s a business model there that I’m just not seeing.

The same MarketWatch piece references over 50 million Skype customers (a press release from Skype issued a few days ago says that they have 553 million customers). Clearly this number does not reflect the number of downloads, because according to this blog entry which references an AP article Skype crossed the 100 million download threshold in April 2005. Seeing significant details on actual usage by Skype customers is hard to come by.

Skype are attributed as having an expectation of $50 to $60 million in revenues this year. Since Skype is a private company there are some key details, such as profits, missing from these details. Most of this is going to be from fees for add-on services such as SkypeOut calling to standard telephones and the SkypeIn feature that allows users to receive Skype calls using regular phones.

There’s some more data in this piece from Forbes, which states that Skype has over 2 million SkypeOut customers. At a minimum EUR 10 (approx. $12.40) per SkypeOut account (at least at the start) there is a minimum of $24.8 million in revenue since the launch of SkypeOut in July 2004. Considering the big brand competitors such as AOL, Yahoo and Google coming on board with VoIP calling, it remains to be seen how Skype are going to increase the penetration of SkypeOut among their installed user base or otherwise get customers to commit to significantly higher usage of Skype to drive average revenue per user up to deliver on their revenue targets. There may be other opportunities for revenue with Skype Voice Services for call centers and content providers, but it’s hard to see where Skype sees huge revenues here, either. Some of the breakdown for Skype and partner TellMe’s take on the total revenue for Skype access to content looks pretty daunting, and content providers might shy away.

The Forbes article title best reflects why I am most skeptical about the high valuation of Skype: Skype Proves Anyone Can Sell Phone Service. This is very true, and with AOL, Google, Yahoo and other big brands entering this space, things are going to get extremely crowded.

One thing I don’t expect users will tolerate in this space as well as they’ve tolerated in traditional instant messaging is the lack of cross-platform operability. I don’t expect users to tolerate the notion that they can only speak to their friends and family on the same platform. If services such these are ever expected to replace traditional phone lines (a concept which I know is highly debatable) interoperability is a must. By comparison, imagine that a Cingular customer would ONLY be able to call other Cingular customers, and that user would be out of luck to call a Verizon Wireless or T-Mobile customer. Even more strangely, imaging if you could only call other people using Nokia phones. Right now, if youre a Skype user, you can only use the software to talk to other Skype users unless you pay for SkypeOut minutes to talk to someone via a standard telephone number. So, if youre using SkypeOut to dial out, and your buddy is using whatever AOLs equivalent of SkypeIn will be (where they have a number people can call on a regular phone to talk to them via their voice over Internet software), youll BOTH be paying for the call regardless of where in the world you both are locatedand voice over Internet is supposed to be the end of per-minute charges. OR one of you switches voice clients, which serves to alienate you from your other friends with an installed base of said client. OR you run multiple software clients, which is just lame, lame, lame.

This entry is all over the place today, I will admit. My own being all over the place reflects everything that’s been going on with Skype this past week or so (or maybe its just the cold meds). Suffice it to say that I think the rumors, if true, reflect a far over-valuation of Skype. I should hope eBay come to their senses.

Disclaimer: I am one of Skypes 53 million customers but not a very thrilled or even a paying one. Ive only used it a few times with friends in the UK, and just wasnt really all that impressed with anything above and beyond being able to talk for free. Ive come to enjoy the Gizmo Project voice over Internet software from SIPphone much more for some reason, and there seems to be a greater commitment to interoperability with the folks at SIPphone. Thats just what voice over Internet needs if its going to succeed.

Categories: CI · Technology
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eBay Buying Skype?

8 September 2005 · Leave a Comment

I’m up very early this morning as my cold from the past week continues to cause me frustration. I decided to take an opportunity to check e-mail and whatnot before I try to get an hour or two more sleep before going into the office, when what should pop into my e-mail in-box but an alert from the Wall Street Journal that eBay are in talks to acquire Instant Message/VoIP software company Skype. I thought this was worthy of a quick blog entry.

The article points out that the talks are in a very sensitive phase and could potentially fall apart, so nothing is set in stone. Either way, the fact that eBay is involved in these talks at all is a very interesting development. This seems like a strategy right out of right field and only tangentially related to eBays core competency– and only then if you use a lot of imagination and perhaps drink a lot of hard liquor. The Journal points out that eBays core revenue is reaching a likely plateau, so maybe this is a good strategy for diversification.

One thing I do hope eBay doesnt do, for their own stake, is overpay for Skype. Theres been a lot of hype about the market capitalization of Skype and likely suitors, one such rumour indicating that News Corp. was considering offering $2 billion for Skype. Granted Skype has a large base of downloads and has made impressive inroads into an already very crowded market for instant message software, but some studies have indicated that usage for the service on a per user basis has gone down significantly as the user population has grown. Perhaps Skype has yet to reach a tipping point in terms of penetration, but Im of the opinion that its potential as a platform for ad-based revenue (which is where I would see eBay going should it acquire Skype) is somewhat limited unless eBay could find a way to make Skype sticky for those people who download it.

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