It was back in 2007 when my fellow bloggers and journalists told me that Skype was a dog, had no future, couldn’t make money and wasn’t going anywhere. I begged to differ – the way I saw it the company simply didn’t execute on its potential. I quickly jotted down 11 ideas the company should pursue and in my post I even offered myself to Meg Whitman as a consultant to help implement my ideas.
Fast forward a few years and Meg is gone, and the company was sold and is now implementing the ideas – slowly but surely but many have been implanted in the last week which is why this analysis makes sense to present today.
The 11 ideas are as follows and I will analyze them inline in italics:
1) Enhance the social network capabilities: Skype currently is in a good position to expand into social networking via Facebook like features. They have added some community services but not enough to be taken seriously as a real social network. Some analysts place Facebook’s value at $100 billion. This is obviously an area the company should be going after more seriously.
Wow – even today the value of Facebook is only $75B but I am sure they will hit this number soon. The point here is Skype is making the right moves – you can’t take Facebook on directly. Skype has tried with a recommendation service and other enhancements but working with Facebook is the smartest thing they could do. And their recent talks reported this morning on video collaboration shows they have gone in the right direction.
2) Show some ads: Let’s see if I understand the situation. You have over 5 million users on your service almost every moment of every day. You need to increase revenue. Your answer? Show no ads. If I were eBay I would be flashing product listings in front of Skype users as often as possible. If this doesn’t make sense, why not show Google ads like everyone else in the world? It is tough to see where this isn’t a $100 million/year revenue opportunity – this amount may seem high but think about how long people use Skype each day and consider you can flash new ads in front of users constantly. Moreover, probably $90 million would flow to the bottom line. eBay’s P/E ratio is currently about 40 so this amount of earnings could translate into about $3.6 billion in market capitalization. Not showing ads is something I can’t conceivably understand.
It took them four years but finally, Skype will be showing honest to goodness ads. And again, the news was released today. Corporate malpractice is the only appropriate term I have for eBay not using Skype to showcase its auctions. It’s mindboggling really.
3) Enter the enterprise VoIP market: Cbeyond has a market cap of over a billion dollars and provides hosted communications to just a few cities in the US. Zennstrom first told the world at Internet Telephony Conference & Expo that Skype was very popular in the business space. Why was this never monetized in a formal manner?
Skype has made lots of progress here and is making real money in the enterprise. It has a long way to go but at least it is farther along than it was in 2007.
4) Provide paid recording capabilities: With the regulatory environment forcing so many companies to record phone calls and so many Skype users in the world, you have to offer a recording service to help those companies who need to capture Skype IM and voice calls within their organizations. My revenue estimate? $25-$100 million/year.
I’m not sure if <$100M moves the needle for Skype so we may never see this one. Besides, there are other companies which are handling this via software so it is a bit more of a competitive market. Still, $10/month a user is likely a reasonable cost for this feature and if my estimates are low and 5 million users out of hundreds of millions decide to pay, that is a cool $600M in added revenue.
5) Skype trunking: This technology is one of the most intriguing around – allowing companies to communicate with branch offices, customers and home workers at a low cost. I feel going forward every company should take advantage of SIP trunking and Skype trunking. Skype knows this. So the question I feel compelled to ask is why would they do not work more closely with partners such as VoSKY and actually market Skype trunking products to customers in a more serious way. VoSKY is doing a good job but why is there not a multimillion dollar Skype ad budget behind VoSKY and others? Why leave the success of this massive market in the hands of partners when you can ensure the rapid success of this burgeoning new space yourself? The reason may be that Skype was built as a viral platform and they except this to be the only way to sell. Ditto for eBay. Guess what? Companies like Avaya, Cisco, Dialogic and Quintum sell telecom equipment and/or gateways and they have to market to customers. To be serious in the business space, Skype needs to start a serious partner program where they fund the marketing of companies which help their own paid services increase.
TMC is using Skype trunking now as a backup to its traditional IP communications so nice job on this one Skype.
6) Go after the PBX vendors: If I am a PBX vendor I would be looking for Skype interoperability as a differentiator. Still, I have yet to see an ad touting PBX vendor’s Skype Interop. Why?
More companies are interoperating with Skype today than at any time in the past – especially impressive is integration into phones from Grandstream and televisions from numerous vendors.
7) Charge for something beyond just connecting to the PSTN: Charge for conferencing, enhanced video, the ability to get new features first, for the ability to use the service without having to see ads, etc.
Last week, Skype did exactly this going head to head with WebEx and others via a partnership with Citrix and GoToMeeting.
8) Partner with media companies: Work with content providers and stream programming via the Skype client. Make money through subscriptions and ads.
If this is happening in a big way I haven’t noticed. But then again, do people want video streaming int heir voice and video app? I’m not 100% sure.
9) Take on the world’s biggest auction houses with Skype video enabled live auctions. If eBay can pull off selling cars, it can pull this off as well.
Now that eBay and Skype have parted ways, we won’t hold our collective breath.
10) Embrace Skype: I have a weird question. Companies all over the world are integrating their customer service departments with gateways allowing callers to use Skype to call in. Isn’t it odd that PayPal doesn’t accept Skype phone calls? If you want companies to integrate with Skype – which will obviously increase revenue – doesn’t it make sense to lead by example?
This is a head scratcher – I’m surprised this never got done.
11) Embrace enterprise video: Video is enjoying resurgence and Skype has a well-known brand name and has a pretty good video solution. What about offering a video plan for businesses which will be cheaper than existing solutions on the market but priced high enough to generate real revenue?
Well Cisco has recently rolled this out via their Umi product – I am not sure this will catch fire in fact, here are ten reasons I cited why it will fail in the consumer space but there is certainly increased high quality video adoption in the SMB space so there could be some money here for the taking.
In the past four years, Skype has done a good job keeping Google and others in check but the biggest threat going forward is certainly Apple FaceTime and Facebook. Apple really doesn’t need to partner with the internet telephony software company and I would be surprised if they don’t just recreate all the features of Skype and Facebook over time. This is probably why Facebook and Skype are looking to collaborate more closely.
For Skype – now that they will be showing ads on their clients they can start charging a nominal fee for a non-ad version. The above improvements although they took way too long to implement have come before the IPO meaning there could be much promise to investors who believe like I do that these moves will make a sustainable and lasting impact on revenue.