Maybe Skype Is Shopping Itself

22 Comments

The rumored sale of Skype to Rupert Murdoch’s News Corp for $3 billion is like an open sore – every day someone pricks the wound, and the bleeding starts. Cringely, Reuters, Always On, The Independent and even Bambi Francisco have something to say about this rumor, which may or maynot be true. Maybe the VCs looking to hit one out of the ballpark are spinning. I have refrained from commenting on this for obvious reasons – since everyone is screaming about it, why not quietly make some inquires. So I did. And here is what I have found.

Skype has hired Morgan Stanley as an adviser who can screen the “buyers.” While that’s the case, my Yahoo sources tell me that Skype approached them, and they balked at the asking price. What was the asking price? No one will even as much as hint to confirm this, but Skype wanted a billion dollars. Beyond that, everything else, I take with a pinch of salt.

So what does that really tell me? Two things. First, Skype is open to the right offer. Secondly, the asking price of $3 billion is tad too over optimistic. There must also be realization that in not so distant future, the wireless and wireline operators are going to clamp down on Skype, and create quality of service issues for the service. More on that later.

22 Comments

Epiphany

Know a guy at Apple who says there were contacted by the fine folks at Skype. Not sure, but he thought they passed and giggled at the price tag. “This is 2005, not 1995…”

Rumor is they are in town (sValley) and talking to anyone with a check book.

Sad.

Jake

I am the monkey who stated that Google’s business is advertising. Forgive me for quoting sentence one of the “How we generate revenue” section of the management discussion in Google’s most recent Form 10-Q:

“We derive most of our revenues from fees we receive from our advertisers.”

You may live in an ideal world where broadband access appears for free from the heavens and corporations exist for the sole purpose of creating pleasing things. Congratulations.

Free voice is very compelling. Skype is a wonderful product. But the shareholders of Skype expect a (perhaps monumental) return on their hard dollar investments. And the shareholders of Google would expect a return on their investment. Google has many choices to make: where to throw $1B is a big choice and one that Google’s shareholders would expect to yield dividends.

If Google were to throw $1B at Skype, the expectation is that they would have to monetize that fickle audience. Google’s primary method of monetization today is advertising.

Harvitpal

Yay, some one with a head on their shoulders! Well done NITIN AHUJA. Yes none of the current incumbents can beat the P2P model with all the VoIP equipment they can buy form the likes of Cisco, Nortel Avaya etc. They have no infrustructure! How can you beat a model like that! Yes people will open up ports to share their bandwith for the use of Skype. Why? Cause they are no longer paying for calls and hey bandwith is becoming cheaper by the day.
Skype is going to kill the voice revenue across the globe. We use Skype at work and are saving thousands of dollars. A matter of time until everyone figures that out. Yes I think Google will come out with an IM/VoIP service. Not to make money from, but to provide an additional feature to their current set of features and free voice is very compeling. No Google’s core business is not advertising for the monkey who suggested that before. Google is an organistation that built a serach engine but by no means are they going to restrict their business to search. They are obviously growing organiscally around search and making money from it. But if you learn more about what Google is about, you will figure out that they are basically a commercialised research body. Like a univeristy that has the freedom to make money with the research they do and also provide it to the community in large to make our lives better.
I think skype rocks. Go down load it from skype.com, NOW!

Teller

“They” are not smocking crack in Estonia. Only Skype engineering is in Tallinn, Estonia.

Jake

The Google-must-buy-Skype meme comes up over and over.

Discounting whether or not Google is evil or wonderful, Google’s business is advertising. When I see articles proclaiming that Google must buy an IM client or Google must buy Skype, I have to wonder where are the IM and Skype users (I know – one and the same) that want to have advertising crammed down their throats on their Skype client. Sheesh.

NITIN AHUJA

The telcos can never beat the P2P model that Skype uses, they are regulated and mostly operate within local markets. Plus the QoS issue is more generic to the VoIP platform as such and does not just apply to Skype. I think with some hand holding (Google type), and considering their span (worldwide), I think they can go places.

Jake

I don’t think muni or co-op ISPs will end up being that different from any other infrastructure provider.

If you own and operate the infrastructure, you get to make decisions about how it is used and how it is monetized. Public networks may actually have more problems in getting this right because they deal with more voices. When a cableco is evil, you can usually figure it out because of the obvious motive. Munis and Coops end up with numerous motives and opinions. Just think about how your local public schools operate.

Shortly after the town of Muttsville builds out a muni network with high ideals and tax dollars, Cisco will whisper in the ears of the IT guys operating the network that it would be very high minded to offer telephony on that network. After all, wouldn’t it be great if the free networking put in the public schools for the children included a phone in every classroom. Plus, the IT guys would add another few letters to their Cisco certifications, the IT department would add a couple more headcount, and what a grand project that will be.

Soon the town council will be given the proposal and they will agree that it will be of great benefit to all to start the Muttsville Telephone Cooperative on the muni network. And it’s great that the mayor’s own son-in-law knows enough about eye-pee to join the IT department and participate.

Time marches on. The take rate for telephony is luke warm and suddenly the added use-tax for telephony isn’t covering the added expense. “No problem” sayeth Cisco sales dude “We’ve seen this before in Cattsville.” You need a thing called packet shaping and policy management on your network. With packet shaping and policy management, you can really really really make sure that Muttsville Telephone Cooperative offers the best kind of service.

And the other Skypes and Vonages of the world offer the worst. Before you know it, for the greater good of the children of Muttsville and the benefit of the Muttsville Telephone Cooperative, Skype is mucked with.

People, groups, councils, organizations, governments, corporations – they all make decisions on policy. Since the technology exists to readily squash various applications on a network, you can be assured that policies will be created to do so. The only things that change, with some subtlety perhaps, are the motivations.

Wes Felter

WiWhatever is just technology. To get to the Internet, you need a service provider. As long as the ISPs are trying to vertically integrate, they’ll fear Skype. The hope is in muni or co-op ISPs who don’t feel the need to “own the customer”.

Rick

How will Wi-Max/Wi-Fi play a part, in other words are these a way around the service providers mucking with the Skype service?

Om Malik

problem or not, victor, this is a fact. i think the service providers are worried about this and are trying to stop it as quickly as possible. listen, they will roll out their own twist of VoIp or whatever, and that’s when they start doing some crazy things with their networks. more of a business decision that anything else!

Victor Blake

“Wireless and wireline operators are going to clamp down on Skype.” Does anyone else other than me find this to be a problem. It sounds a lot like the RBOC deciding whether the phone can be used for voice, modem, or fax calls. We all know what happened there when they tried to block those —

Personally — I don’t like the idea that the service provider can choose which traffic to block or slow down (outside of denial of service attacks which they are well within their rights to monitor and prevent).

I think there are enough quality concerns that operators of for fee voice services can focus on differentiating their product without outright blocking the free competitors.

Jake

Fear is what drives those prices. Fear of getting it wrong – of being left behind – of missing the right opportunity. Remember, Morgan Stanley stands to benefit no matter what happens – it’s just a question of how many p*ssing ice sculptures they buy at their party.

The real question for Skype is what next and where’s the money. They’ve already given away the directory, the IM, the encryption, the security, the skype-skype voice. Selling Voicemail is a joke with the API exposed to allow third party voicemail to plug in.

With minutes devalued, to turn around and say the business is hop-on and hop-off is probably also a joke.

Video seems like it is/will be a client side feature. Cheap to free with no recurring revenue.

So what have you got: an audience to push advertising to? Sponsored content?

Skype feels a lot like ICQ did when AOL bought them.

Chauka

WTF? What type of CRACK are they smoking in Estonia? This is an example of young people who have ZERO perspective ’cause they never lived through the dot com microcosm of the late 1990s (were they in diapers then?). All it takes is an Open Source project with momentum and with an OPEN API to blow away Skype. Anyway, Skype ain’t that great yet cause I’ve been trying it out with different people around the world and it has its moments when it sucks. Morgan Stanley can smoke some of that stuff too ’cause their top guys can’t hold their job anyway (whose hiring? whose firing? rings familiar of CSFB-DLJ).

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