VOIP Services, Competition

Tired of Being a Digital Peasant!

By Mark Evans in Telecom Regulation, VOIP Services, Competition 25 Comments

Skype
It wasn’t that long ago that Canada was considered to be on the leading-edge of the Web.

We had the highest penetration when it came to high-speed access, and the regulator – aka the CTRC – had decided not to regulate the Internet.

Today, Canada is falling behind and, in the process, we’re becoming digital peasants.

Perhaps the most frustrating is our inability to access cool new services. You want to listen to music using Pandara? Forget about it; not available in Canada. You want to watch TV using Hulu? Forget about it; not available.

The latest slap in face is the fact Canadians won’t be able to use Skype on their iPhones. So for all of you excited on Skype’s new foray into the mobile world, forget about it; not available.

Chaim Haas, a public relations representative acting on behalf of Skype, told the CBC that the application is available in every country in which the iPhone is on sale and in which Apple has an iTunes Store — with the exception of Canada.

Haas said this is because of patent-licence restrictions but would not elaborate except to specify that it is a patent issue related to Skype, not Apple.

Personally, I don’t care about patent issues. What I care about is using leading-edge and innovative services, and the lack of Skype is just another example of how Canada is becoming an online backwater.

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To Skype or Not to Skype?

By Mark Evans in VOIP Services, Competition 3 Comments

Skype
You’d think judging by this BusinessWeek article that Skype is a strategic albatross hanging around eBay’s neck.

Yes, Ebay overpaid for Skype. And it hasn’t panned out strategically if the goal was giving eBay sellers a new communications tool.

But Skype has seen tremendous growth with 335 million registered users and projected revenue this year of $500-million. Given Skype doesn’t market aggressive, its profit margins are probably pretty sweet.

The question facing eBay is what, if anything, does it do with Skype.

The first question is whether eBay needs to do anything at all. With eBay’s business struggling for growth, Skype gives it a high-growth business along with Paypal. So why sell Skype other than to heed the calls of investors who may not see it as a strategic fit?

The other part of the eBay-Skype is whether Skype can reach its full potential within the eBay empire. Can Skype innovate, market and generate more revenue from premium services as an eBay division as opposed to a standalone entity (e.g. an IPO) or as part of a telecom company (e.g. Verizon or AT&T)?

The reality is there should be no pressure for eBay to do anything with Skype until it gets the right opportunity. The key is giving Skype enough strategic latitude to thrive so that if eBay does want to unload it, the business could be more valuable.

Of course, it would be good if Skype had some management stability. But that says as much about eBay’s handling of Skype as anything else, which is probably why people are poking around at Skype’s future within eBay.

More: Om Malik did a one-on-one interview recently with Skype CEO Josh Silverman. When asked about Skype being on mobile devices, Silverman says “We hear you brother, We’re working on it”. When asked about Skype on the iPhone, Silverman shifts around in his seat and says “Stayed tuned”. Interesting.

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Skype: The Rodney Dangerfield of Telecom

By Mark Evans in M&A, VOIP Services, Competition 3 Comments

Rodney
The worst thing that ever happened to Skype was eBay’s decision to acquire it for $3.1-billion.

In an instant, Skype went from being cool and disruptive to a wildly over-priced acquisition that made little strategic sense for eBay. While eBay has struggled to figured out how Skype fits into the scheme of things (and taken a $1.4-billion writedown on the deal), Skype has evolved into a solid, growing business with revenue last year of $375-million, 276 million registered users, and 100 billion minutes of calls generated over the past five years.

Yet Skype receives little or no respect for being one of the few bright lights within the telecom industry, which makes it the resident Rodney Dangerfield, whose catch line was “I don’t get no respect”. You rarely see stories about Skype’s growth or how well it’s managed to do despite becoming an orphan within the eBay empire. Instead, the focus is always on how eBay paid too much, the writedown and how Skype makes no strategic sense for eBay.

The question facing eBay and its new president, John Donahue, is what to do with eBay (and StumbleUpon and Craigslist, for that matter). Do you sell Skype, and wash your hands of an acquisition that made little sense. Do you keep it, and try to grow the crap out of it?

TechCrunch, which loves nothing better than a juicy M&A rumour, is reporting Google could be in talks to buy or partner with Skype. It’s hard to tell whether there’s anything to the speculation given it seems to be based on the where there is smoke, there is fire approach.

The biggest issue for eBay is doing something with Skype that doesn’t make them look like strategic idiots again. If Donahue going to get off to a solid start as president, he needs to do something with Skype that looks smart, savvy and pragmatic.

Given Google’s interest in telecom (GrandCentral, GTalk, wireless spectrum etc.), Skype could make sense at the right price. Of course, it made sense for Google a few years ago when Tim Draper, one of Skype’s early investors, was running around Silicon Valley boldly suggesting Skype was worth $1-billion.

More: Silicon Valley Insider suggests Skype could be acquired for $3.1-billion to $4-billion, which would let eBay walk away with its head held high.

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Skype Should Do An IPO Soon

By Mark Evans in VOIP Services, Competition 1 Comment

Skype Logo-1
Okay, eBay blew it with the purchase of Skype by wildly over-paying. So what now?

After cleaning up its books, eBay should set Skype free by doing an IPO. It would probably be embarrassing to eBay but how much worse can it get?

If you step back, Skype appears to be a pretty solid business with about $400-million in revenue and 220 million registered users. How much is that worth? Let’s conservatively assume $2-billion based on eBay’s writedown and reduced earn-out ($530-million vs. $1.7-billion).

If Skype did an IPO, my sense is investors would be all over it.

1. Retail investors are crazy about high-profile brand names who sell services they can understand/use.

2. The VoIP market is growing, and will get bigger as high-speed Internet, Wi-Fi and Wi-Max become more popular.

3. Skype is a real business with sales and probably pretty high-margins that has not been monetized properly. eBay could have aggressively rolled out more premium services and even introduced advertising into the mix. If everyone excited about Facebook and its 35 million users, there should be buzz about Skype and its 220-million registered users.

4. There would be a long line-up of investment banks more than willing to enthusiastically sell Skype.

Prediction: An IPO would be a financial bonanza The offering price would be left far behind and the blogosphere would be full of Skype is amazing posts. Hey, we’re not talking Vonage,which has a business model that doesn’t work; we’re talking about Skype, baby! The only caveat is eBay may not be willing to let Skype go public because the offering’s success would be embarassing.

More: Kara Swisher makes some excellent points about how eBay failed to leverage Skype’s exploding popularity. Swisher also uses the eBay-Skype investment fiasco to take yet another run at Facebook and all the hype surrounding potential investors.

Swisher may be one of the few people happy to rain on Facebook’s parade these days but I can’t help but get the gnawing feeling that she’s on to something. For whatever reason, Facebook has lost its mojo – at least that’s my sense. Maybe it’s the outrageous potential valuation; maybe it’s Facebook starting to monetize itself; or maybe it’s Facebook Fatigue (FF)…but I’ve lost that lovin’ feeling and not feeling too sad about it.

eBay-Skype: I Hate to Say I Told You So….

By Mark Evans in VOIP Services, Competition 1 Comment

Suckers
I was one of those people who never got eBay’s decision to buy Skype. It didn’t make sense strategically despite eBay’s loud assertions it was a great fit. In fact, I opined – along with lots of other people such as Andy Abramson – that eBay got suckered.

Over the past two years, the eBay-Skype marriage never seemed to click. There were constant management changes and strategic inconsistencies while eBay struggled with its own growth issues such as problems trying to establish a foothold in China.

Finally, eBay has conceded defeat by taking a $1.4-billion write-off, saying goodbye to CEO Niklas Zennstrom, and, most significant, only paying out $530-million of a potential $1.7-billion earn-out. As Henry Blodget proclaims “Skype has Bombed”.

Looking back, the question that has to be asked by investors and eBay board is: what was senior management thinking? How could they have made such an expensive strategic mistake? Did CEO Meg Whitman get suckered by Google, which was also apparently interested in buying Skype? Probably.

If you ask me, the eBay-Skype deal was/is part of the weird Silcon Valley ecosystem where everyone’s buying and selling from each other. If you remember, Tim Draper, a leading Silicon Valley VC, was at a Silicon Valley conference around talking about how Skype was worth at least $1-billion. The next thing you know, eBay’s got the checkbook out with an offer that blows everyone away.

So now what? Unless eBay really wants to take a bath, it’s stuck with Skype. One option might be spinning off Skype into a quasi-autonomous business that it could IPO within a couple of years.

If you want to read some serious spin, check out Skype co-founder Janus Friis’ post on what’s happening. It’s funny and sad at the same time.

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