Skype bounty signals bubble


Skype, the free VoIP peer to peer service started by the founders of Kazaa raised $18.8 million in series B funding. The investors are Draper Fisher Juvertson and Index Ventures. DFJ was one of the most active dot com investors and helped fueled the bubble. Looks like they are doing it again. Despite whatever the press might say, and how much fans of Skype might rave about the company, I still don’t see a business model. Sure great Idea, not such great business. I mean if today Hotmail was a free standing company, it would be bleeding money. Skype will be no different.



You are very wrong about Hotmail. As a free-standing company they would be printing money.

Andrew Hansen

Perhaps an AOL type – cd give-away blitz in the works? If Skype is partnering with a “major European home phone manufacturer” as outlined

I could see a Skype CD version 1.0 included with everyone phone sold in every store – royalty revenue, 3 months enhanced voicemail service included with the phone purchase , free calls to your loved ones anywhere in the world etc…. the demand would be impossible to fill – talk about viral marketing..

Don Galt

The business model is simple: Sell peopel a premium program.

You can charge $20-$50 for software. Since skype doesn’t need to operate an infrastructure, they should be able to make good money.

I just can’t figure out why they would need $18M though, unless they plan to start a massive advertising blitz.


DonÃŒt forget about the mobile opportunities. Skype doesnÃŒt appear to have a PocketPC version, but they most likely will and as Wi-Fi becomes more pervasive we should see VoIP offerings flourish.


Mike Masnick

Ha! We both thought the exact same thing:

However, I’m going to point out that whether or not Skype has a business model is really only an issue for the folks at DFJ and others who put their money towards it. From the consumer side, we should end up with better VoIP offerings, as money flows into this space… That seems like a good thing.

Scott Rafer

Wow, Om, you’ve been a journalist too long. Excess cynicism seems to be clouding your thinking.

You answered your own question. If no profitable, independent business model becomes apparent for Skype, Draper will sell it off to someone who can make money with it — just like Draper did with Hotmail. Do you think that Microsoft regrets buying Hotmail? Absolutely not. It is the only way that they have been able to do any sort of decent customer acquisition for MSN.


Who knows what kind of business it will be, but I think you’re too pessimistic. Hotmail today would surely be profitable today even with 95% of users stuck on the “free” email plan and 5% paying for a premium plan.

Skype, with its P2P architecture, is even more cost effective than Hotmail. It will take only a tiny percentage of its users paying up for some premium services for it to become highly profitable.

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