The Skype Hype. By Arun Ramamurthi EEP 142
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1 The Skype Hype By Arun Ramamurthi EEP 142
2 What 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 telephone
3 Features Skype video/audio chat SkypeOut outgoing calls SkypeIn incoming calls Skype Voic 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 PDAs
4 Pricing SkypeOut Free in US until end of 2006 Int l calls cheaper than phone cards SkypeIn - $50/yr with free skype voic SkypeVoic approx. $15/yr Skype SMS 11 cents/message Skype to skype is ALWAYS FREE
5 Skype 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 cheaper
6 Vision: Disruptive innovation Technological innovation, product, or service that overturns the existing dominant technology/industry Dominant Technology AT&T telephone Long telephone cables Yahoo/MSN messenger Skype Software VoIP P2P
7 Why 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 eavesdropping
8 Why 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??
9 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 did
10 Effect 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 recession
11 Impacts 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 calls
12 ebay 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 ebay
13 New 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 Scale Q Revenues $66 million Registered Users Skype to Skype minutes SkypeOut Minutes million 7.6 billion 1.5 billion Q $79 million million 7.7 billion 1.5 billion
14 Skype 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 demand
15 Skype 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 sports
16 What 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
17 Work Cited
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