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« How to refuse profitable business, part X: Truly Bad Telecoms Marketing | Main | The Long Now »

April 29, 2006

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Jackie Danicki

Tomi, what do you think of this post from Techdirt, entitled "How Many Users Does Skype Really Have" (http://techdirt.com/articles/20060428/0818215.shtml)?

Tomi T Ahonen

Hi Jackie!!

Nice to see you here again.

Very good comment and implied question about Skype.

The Techdirt article is critical of the reported number as being very unclear, saying "Without a clear representation of how many active users the service has and how many of them are actually paying customers, it's pretty difficult to discern how the business is really doing." The article suggests that there is a lot of hype around Skype and that this vagueness in the press release does not help clarify things.

I agree with that. Skype has admitted in the past that it is a small proportion of their total registered customer base who use the paid parts of the service (a couple of percent in fact, a very small percentage) but these do pay to use the service, so this is also a money-generating service. Some have estimated Skype earned in the range of 50 million dollars last year. A tiny TINY fraction of what fixed landline telecoms players earn in a 550 BILLION dollar industry (of which Skype now can access 8% of their customers, and should therefore have something close to 8% of those revenues. 8% of 550 Billion would be 44 BILLION dollars - one THOUSAND times more - which would also put Skype into the bottom of the Fortune 100. But obviously Skype is producing 1/1000th of that revenue.

So Skype is effectively providing a service at arguably one one-thousandth of the cost of the existing service (and yes, I know I am playing fast and loose with these numbers, but this puts it into scale)

Good point to make. BUT - remember the cannibalizing effects we have already seen on the internet. When suddenly people discovered internet e-mail in the mid 1990s - and slashed mass mailing costs into a similar total crash. From first class and second class postage rates, to almost free mailings via e-mail. So this is a significant business impact - for the existing fixed landline businesses !!

Skype has a business model to make modest amounts of money out of voice calls on the internet, through Skype-out and Skype-in, etc. But fixed landline telecoms operators have no way to respond to this. BT in the UK has only some 19 million landlines, they have no way of now trying to catch up to a VoIP community of Skype with 100 million users, as the whole of Britain has only 60 million people. Skype has effectively won the contest to scale.

Tomi Ahonen :-)

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