Feeds

Techscape: Skype beyond the hype

Whitman's future just got dimmer

Boost IT visibility and business value

And just like eBay, I tried Skype a while ago at the suggestion of a friend who swore by it. It was cool for about two weeks, and then it lost its panache very quickly, like a new health club membership. It definitely didn’t deliver on its value proposition to me which I was told was “free phone calls forever.” Was it f*%$.

Another disillusioned former customer now feeling defrauded? (Except I didn’t pay anything—however, I still felt cheated out of my time.)

Looking at Vonage, I like their future much better. While the press and sector in general has criticized it for their high cost of customer acquisition, they get a better calibre of customer (which I think is very important and generally under-rated in the Skype world of getting anyone to sign up and download the software regardless of their ability or desire to fork over cash) who pays more money over the long term and then becomes solidly profitable. Vonage has the distribution into the Enterprise sector too, which Skype can only sigh at in wonderment and continue searching for a revenue model and ways to conspire shaking money out of their customers.

Plus, Vonage has the benefit of being founded by Jeffrey Citron, a guy who unlike Zennstrom and Friis has already created a market-leading, disruptive business in Datek and sold it for a walloping $1.3bn to a happy buyer, Ameritrade which promptly built it into the fourth largest US online brokerage brand. (Here again my editor and I lock horns. But I am sure about this. Vonage will win this race. Skype with its phenomenal attraction to the peer-to-peer consumers cannot and will not survive in the Enterprise sector. This key market will define the victors as it has so many times before and then my editor will sound much less certain and much more sheepish.)

On the Skype side of the transaction, it’s about time Zennstrom and Friis made some dough on their great paradigm-shifting P2P creations. When I spoke to Zennstrom a couple of years ago, he was on-the-run from the record industry speaking from undisclosed locations and acting like a hunted man. It was ridiculous, “give me a break,” I thought. Then in early 2004 the Fortune cover story on these two characters broke, “Catch Us If You Can” it blared providing all the media attention to these two techies that they could have ever wished for.

During this period and before, it was clear Zennstrom was desperate to get filthy rich like many of his propeller-head compatriots had before him and that he was troubled by not having done so. Having come up impecunious after the VC millions invested in the Kazaa phenomenon and missed their fat chance, these two were not going to be denied this time around to the money trough.

Nor were their VC’s.

Some may applaud the Skype VC’s “cleverness,” but I see a greed /integrity issue here.

In my conversations with strutting Skype VCs a few years ago, they admitted the lack of a serious revenue model and when pressed promised that they had one in the works. Just in the works? Well actually they promised, there is one already devised and ready to roll-out. So how does it work then? They refused to elaborate.

In the ensuing two years, I’ve failed to see any genuine - much less successful - revenue models for Skype to make bona fide cash flow a reality; so much for candor. $60m in revenues an absurdly low sum and pretty paltry when your price tag is upwards of $2.3bn. Now this becomes eBay’s big, expensive problem.

Not too long ago, the VC line in the media represented the equivalent of “we’re not selling Skype for any amount.” Wouldn’t it be nice if you could trust what one of these people said? Am I hopelessly romantic and naïve in thinking their word should be their bond? Obviously these statements were just a negotiation tactic to drive the price up with the drooling eBay - the next possible buyer of one of this VC’s portfolio companies had better beware; the barracudas are circling, negotiating deceitfully and nothing they say can be trusted.

And will eBay be a satisfied customer of these VC’s and the Zennstrom / Friis itinerant gang? Will they in the long run come to think they got fair value for money?

Sadly not.

Using blade systems to cut costs and sharpen efficiencies

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
Seeking LTE expert to insert small cells into BT customers' places
Is this the first step to a FON-a-like 4G network?
Yorkshire cops fail to grasp principle behind BT Fon Wi-Fi network
'Prevent people that are passing by to hook up to your network', pleads plod
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.