The Skype HypeWhat is Skype?FeaturesPricingSkype’s VisionVision: Disruptive innovationWhy Skype is SuccessfulWhy Skype is SuccessfulIt has what people want!Effect on the Telco IndustryImpacts outside USeBayNew Pricing StrategySkype in 2007Skype’s Mastermind: Niklas ZennstromWhat next?Work CitedThe The SkypeSkypeHypeHypeBy Arun RamamurthiEEP 142What is Skype? Global Internet Telephony Company™ based in Luxembourg  Founded in Sep 2002 by Niklas Zennstrom Provides a quick, easy, and cheap way for subscribers to make VoIP telephone calls VoIP is a way of allowing a computer with internet access to serve as a telephoneFeatures Skype video/audio chat SkypeOut – outgoing calls SkypeIn – incoming calls Skype Voicemail Skype SMS – send SMS Support for multiple languages Skype software, plug-ins, add-ons, extras can be installed on computers (PC/MAC), cellular phones, and PDAsPricing SkypeOut Free in US until end of 2006 Int’l calls cheaper than phone cards SkypeIn - $50/yr with free skype voicemail SkypeVoicemail –approx. $15/yr Skype SMS – 11 cents/message Skype to skype is ALWAYS FREESkype’s Vision “Our vision for Skype has always been to build the world’s largest communications business and revolutionize the ease with which people can communicate through the Internet” -Zennstrom, CEO of Skype Voice quality as good as traditional telephones  Just a LOT cheaperVision: Disruptive innovation Technological innovation, product, or service that overturns the existing dominant technology/industryDominant Technology SkypeAT&T telephone SoftwareLong telephone cablesVoIPYahoo/MSN messengerP2PWhy Skype is Successful Peer to peer communication Don’t have to go through a server P2P + VoIP = cheap/good voice quality Work almost seamlessly behind firewalls Was bundled with Kazaa User-friendly (easy to install/use) Privacy ensured Encrypted VoIP calls = immune to eavesdroppingWhy Skype is Successful Established global partnerships which broadened its technology network Advertising:  Skype's marketing expenses = ZERO 196 million registered users were persuaded to join Skype by word of mouth.  HOW??It has what people want! Similar to a telephone experience Familiar ringtone User avatar feature that allows users to upload a picture that defines their personality Skypecasts – allows Skype users to discuss shared interests in live, moderated forums Easy to search for people, meet people Did not overcharge their credit card every month like most telcos didEffect on the Telco Industry Forced Telcos to rethink their business model and start introducing VoIP services Price difference SkypeOut is $30/year in US Local calling plans are about $25/month Tough to gain new customers Entrant robs incumbent firms, steals profits Skype entered during economic recessionImpacts outside US Very popular in Europe High costs for international calls Alternative to cell phone roaming Heavily used in developing countries China bans SkypeOut service in order to preserve its fixed telephone line industry  Jordan bans Skype to increase the profits of the local incumbent Norway bans Skype – can’t make 911 callseBay Bought out Skype in Oct 2005 for $2.6 bn Why? Did not have instant messaging platform Skype making inroads in small businesses Wanted to be the hot internet technology company amidst google and yahoo "Communication is at the heart of community and e-commerce, making Skype a natural fit for eBay," – Meg Whitman, CEO of eBayNew Pricing Strategy SkypeOut service is not free anymore Market Adjustment Pricing relative to that of the local telco industries Revenue surge in 2007 due to increased pricing If everyone is on Skype to Skype, there is $0 in revenues! Neg. Economies of ScaleQ42006Q12007Revenues $66million$79 millionRegistered Users171.2million195.5millionSkype toSkypeminutes7.6 billion7.7billionSkypeOutMinutes1.5 billion1.5billionSkype in 2007 Prices rise about 50% Skype is a public company and has to be profitable on its own eBay is responsible for skype shareholders and pressures Skype to make profits Skype will focus on where they have high volume demandSkype’s Mastermind: Niklas Zennstrom Smart and shrewd Founder of Kazaa Bundled Skype with Kazaa Joost: new company HD TV on the web?  From Sweden Enjoys adventurous sportsWhat next? Competitors changing to compete with Skype VoipBuster: new internet telephony service with low call rates – free to many countries! Substitute and rival to Skype Vonage sued Verizon for VoIP patent infringment How much longer will VoIP be successful? Is skype hyped up? High user base does not lead to high revenues! We’ll see what happens in the future…Work Cited http://www.voip-news.com/interviews/skype-qa-oberg-022007/ http://hbswk.hbs.edu/item/3374.html http://skype.com/products/ http://www.lightreading.com/document.asp?doc_id=114996&site=cdn http://www.lightreading.com/document.asp?doc_id=122229 http://www.asteriskvoipnews.com/skype/why_skype_cant_make_a_profit.html http://www.auctionbytes.com/cab/abn/y06/m05/i04/s00 http://hbswk.hbs.edu/item/3374.html http://about.skype.com/executiveteam/niklaszennstrom/