Wednesday, April 20, 2005

Skype This - Keeping It Real

As mentioned in my posting about Jeff's opening keynote, we're lucky have Niklas Zennstrom on hand to give us the latest state of the union on how Skype is evolving into a real business with real customers.

At VON Canada last year, Niklas told the world that Skype Out is coming, and since its launch last July, he now tells us they at 1.2 million Skype Out accounts, and handling 1.5 billion voice minutes monthly. Regardless of how many active, unique users there really are, there's no denying that Skype is on to something big here.

Niklas added they are adding 155,000 new users EVERY DAY. Sure, most of these will just do free calling, but for fun, let's put this in real world context. In the US, incumbents are now losing local access subs at a 4% annual rate, and that number will likely get bigger, not smaller. Well, in rough terms, that translates to losing about 10,000 subs a day. How big are all those RBOCs? What's Skype's market cap? What's wrong with this picture? I'll take Skype's story any day. And we're not even talking about the cool stuff, namely Skype In and Mobile OS.

To me, the bottom line is that Skype is showing some proof points about what matters most - transitioning users from free to paid. At this point, I don't this it really matters whether people are spending pennies or dollars with Skype. How much has Vonage spent to get a half a million subs? How much has Skype spent to get 1.2 million Skype Out users? This is a whole different business model, and we're only at the most basic level of revenue generation, and they're only touching the PSTN in a very small way.

Skype In is a whole other story, and to me, that's what will really make Skype a serious force for the telcos to consider. Currently, Skype In offers area codes in 8 countries - but not yet Canada. Later in the morning, Niklas held an extensive press conference, and my understanding is that nobody asked about Canada for Skype In. That strikes me as odd - that would have been one of my leading questions. Speaking with Niklas later about this, Canada is on the radar, but he wouldn't specify when Skype's G-8 will expand to include Canada. For now, we'll have to settle for US numbers, or exotic locales such as Poland or Hong Kong!

There's a lot of other good stuff going on with Skype, and Mark Evans has done a great job covering it - I urge you to see his recent postings.

Just wanted to add one other thing that really resonated with me. During his keynote, Niklas talked about how they've kept the business very honest - there's no marketing or hype or ads or viruses. Their growth has largely been viral, and he talked about keeping honest with their users. We talked more about this during a dinner meeting, and while this may seem quaint and idealistic, I think this is very much at the heart of what makes Skype so popular. It's very grass roots, but you don't get the pangs of guilt or feeling of being a bit of an outlaw as you might have with KaZaa. I don't feel the least bit guilty making free calls with Skype, and there is certainly that sense of being part of something that's good and cool.

And you know it's only going to get better. Niklas seems genuinely concerned about maintaining that trust, and not turning Skype into a commercial enterprise. Then it would be just like any other cheap voice service - and that's just not what Skype is about.

Footnote - Niklas was kind enough to indulge us with a photo. Below, in descending order is Niklas, myself, and my son Max - who is busy trying to get all his friends on Skype.

View image

No comments: