Musings of an Internet Marketing Consultant
Musings of an Internet Marketing Consultant

Friday, July 29, 2005

A Skype Investment Primer

When commenting on the next financing transaction for Skype as a company to be sold, it is quite helpful if the facts in the story are straight. Today, Robert X. Cringely, in his weekly PBS-sponsored column, attempted to talk about Skype almost being sold. However, as I read the column, there arose statements that, in the end, lessened the probability that I could have any degree of confidence in his metasearch for a buyer.

1. The first statement that caused me concern in the original posting was the assertion that Skype is a company "based in Switzerland". This has subsequently been corrected to its country of registration: Luxembourg; however, Skype has its business operations headquarters in London and does development in Talinn, Estonia. There is also a loose twofold connection with Sweden: Niklas Zenstromm, the founders is Swedish, and one of their recently-hired developers works out of his home in Sweden. So there was not even the potential to have confused Switzerland with Sweden.

2. He talks about Skype being "broadly flogged by an investment bank." But the current financier of record is a well-known and highly reputable Sand Hill Road Venture Capital firm, Draper Fisher, Jurvetson. And since DFJ has a significant interest in Skype, why would they turn the "flogging" over to an investment bank. Eventually DFJ would be interested in an investment bank as a potential player (buyer) in a subsequent financing round for Skype. The page referenced above implies that Tim Draper also has a personal investment but last week Tim was in Estonia with Niklas (doing a video presentation to the AlwaysOn conference) and, according to the DFJ website, also visited the Ukraine. Not totally consistent with being "near" a sale of Skype (unless he simply said "no" from Estonia).

3. Then there is the statement, when discussing the potential for an IPO, "there aren't that many Swiss companies going public on the NASDAQ these days". With a California-based VC partner, the country of registration is irrelevant to the market for a sale of the company. (NewsCorp has its origins in Australia, n'est-ce pas?).

4. 20 million regular users??: Check out Skype Statistics. Number of users online ranges between 1 and 3 million with the largest number between 10 a.m. and 2 p.m. EDT (Europe winding down the business day while North America gears up...). There are about 45 million registered subscribers but where does he get 20 million "regular" users? What is a "regular" user? I might put in between 5 minutes and one hour per day; does that make me a "regular" user? Does a "regular" user have to subscribe to one of SkypeIn, SkypeOut and VoiceMail? or to all three? Eh? (145 million downloads is irrelevant: I download every time there is a new version out but I am sure many millions are way "out-of-date" on the version installed.

Finally there is a metasearch carried out in this article to determine who would buy Skype. This is very premature. A couple of months ago, Niklas quickly squelched rumors that Skype was in negotiations with Yahoo; never heard any more about that one.

A clue to understanding Skype and its business model is given by the recent launch of a Developer program and the simultaneous availability of an API toolkit to allow third party developers to incorporate into other products and services. Yesterday appeared an excellent discussion of this program, its positioning and how third party companies could make money via this program on Skype Journal.

Fundamental to understanding the business model is not to look at pure "conversation" revenue for revenues but rather to look at getting into both internal and third party applications that drive SkypeOut and SkypeIn minutes to Skype. The third party developer program, when adopted by integration into other products and services will drive this revenue. At the same time, new Skype Add-Ons, such as the recently launched Skype Toolbar for Outlook, will also drive SkypeOut minutes. On my recent trip to California I exclusively used the Skype for Outlook Toolbar to launch Skype Out sessions with contacts in the U.S., Canada, Sweden and Taiwan. All Skype revenue; no revenue to the traditional telcos (or even the hotels that provided the high speed Internet service).

Thus, the potential buyer should be one who is interested in Skype as an applications platform, generating service revenues shared by Skype and its developer partners. At the same time, to maximize the potential revenue, the buyer would be independent of any of the current teclos, whether landline or wireless. One wants the largest possible customer base -- only achieved by having some degree of neutrality relative to the actual connection provider. Probably if Cringely had really done his homework -- following Skype Journal as well as other blogs on the VoIP space and understanding the role of the Skype development platform -- he could have had a credible article.

(Disclosure: I was a beta tester of Skype Toolbar for Outlook.)

Wonderful,project, as always the web is the world leader of our time,total hard costs invested about $500,000.00 to $1,000,000.00 to fully float the ship, and now a very acceptable thought, it could and probably will
sell out the Skype/out/in/everything skype, for a number around 2 to 3 billion.
God said "in the last days Knowledge would spread around the world" .
The person who invented the www
oops I forget his name ,sorry.and the E mail service, has brought everyone onto High street, and High street, is controlled by the web.
Today, the project is all possible, web basement to Sunset Blvd. Still happening and we are only beginning to take over all world trade,Banking,information, communications,movies,intertainment,etc.
There is much room for more web evolution. John israel Robinson
If you are alone, call this number 800-211-9293. Connect with Real Singles from your local area instantly for only $0.99/min with a $4.99 connection fee. A true Match is only one phone call away 800-211-9293. Meet people with common interests and desires now. Check it out. 800-211-9293
Post a Comment