Skype Update
It's difficult to get a handle on Skype despite its apparent success. The privately-owned company, which was started by the same folks who created Kazaa, is moving deeper into the public telephony network after signing deals yesterday with Cable & Wireless and B3G Telecom. Skype says it now has more than 400,000 subscribers who have pre-paid to connect from its free VOIP service to the public telephony network.
One can't argue with Skype's popularity given its software has been downloaded 44 million times and it has 18.8 million registered users. However, I continue to question Skype's business model. The basic idea is Skype aims to migrate some of the people using its free VOIP service to premium services such as inter-connects to the public network. Frankly, I do not believe Skype will be able get enough people to consume enough paid services to create a large business or justify the venture capital it has attracted.
This take is not an indictment on the quality of Skype's service, which works well, but Skype appears to be more about cool technology than a viable business. The biggest difference between Skype and other popular free services such as Google is a compelling business model. And with the dot-com boom a distant memory, Skype does not seem to be a hot M&A play either.
