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Prepared by,
Ng Eng Chong
HT093129M
Skype Case Discussion Questions:
(i) The ability of mobile VoIP technology to replace legacy cellular voice technologies for all calling:
• The ability to differentiate itself from its emerging competitors in the mobile VOIP market:
About $605.8 million in mobile voice-over-IP revenues were generated in 2008 in North America, Europe, Asia Pacific and Latin
America, while estimating that number will rise to $29.57 billion by 2015. The high profitability of VOIP mobile market has
drawn large, cash-intensive competitors such as Yahoo, Google, well-finance Jajah and Lycos.
For now, as Skype has the largest user base in VOIP, and its competitors have not enough voice base installed particularly
outside of US, Skype stands the opportunity to be market leader in mobile VOIP by utilizing its existing users base in PC by
providing free software to smartphones and tablets users.
Skype is also differentiating itself by providing reliable communication services to businesses and enterprises, licensing its
technology to hardware makers and integrate its Skype software solutions in other consumer electronics such as TV,
car dashboards and public terminals.
With the differentiation strategy in place, Skype vision in “any” mode, “any” platform, “any” where and in “any” products
will separate it from its competitors.
(Q3) Firstly, the wireless technology by the traditional providers provides high quality in long distance call. VOIP calls are
generally lower in quality and its business model by providing free calls from PC-to-PC and from PC to landlines and mobile
phones in long distance has been perceived not as profitable as the current lucrative wireless circuit switching business by
existing wireless carriers. VOIP was initially considered as toys due to its poor performance. However, by giving VOIP as free,
Skype is able to attract a large number of users. Some of the users are willing to pay for premium services such as calling
landlines and mobile phones. As the Internet technology improves and exceeds user acceptance level of the quality of long
distance call, more users switched from the traditional carriers to VOIP technology and eventually the VOIP technology users
exceeds the users of wireless technology. Therefore VOIP is a disruptive technology to the traditional wireless technology.
Time
(Q4)
Adoption-and-Diffusion Process.
Generally the success of Skype depends on the number of users who adopt it. Its free PC to PC communication has
attracted more than 280 millions registered users in 2009 and the number is growing rapidly due to word-of-mouth and
peer effect. Today, Skype continue to add 350,000 of new registered accounts. Such a large number of users serves as
the ideal beachhead for Skype.
Skype is able to monetize the free users by providing the following services:
(i) Paid Subscriptions (unlimited calling), Premium services such as SkypeOut (pay-as-you-go), Online Numbers,
Voicemail, and SMS
(ii) Sell the free users to advertisers
(iii) Hardware licensing from the complementary product created to cater for the users such as Skype phone
(Q6) Internet
Broadband
VOIP software
Landlines
Computing device Network
Microphone Such as PC, Switches Mobile
Laptop, Mobile
Speaker
Phones, TV box, Phones
VOIP handsets
P2P
Connection
The following figures show the working elements of Skype’s VOIP
Technology. The chasm of VOIP technology is the gulf in between the
visionaries and pragmatists users. Pragmatist users require ease
of use, reliability and standardization of the VOIP technology.
As Internet broadband speed increased significantly, as more people becoming
VOIP software
Internet savvy, as computer is becoming a regular commodity, and as VOIP is
getting easier to be installed in any computing system, VOIP
Computing device
is crossing the chasm to the PC users. However the next phase seems
Such as PC,
to be in the mobile devices such as smartphones which is a booming market.
Laptop, Mobile
As VOIP is preparing to crossing the chasm to mass majority in mobile phones
Phones, TV box,
market, it has a large implications on Skype in terms of increasing users adoption
VOIP handsets
of its services. Skype needs to redesign its product to cater for users in
smartphones and rethink its strategy to monetize its users.
(Q7)
Skype’s VOIP technology is different from the standard VOIP clients as its technology operates on peer-to-peer model
rather than usual client-server model. This has led to the following pros and cons:
Pros:
Able to cater for unlimited users and number of calls at any time:
The peer-to-peer technology prevents data traffic from crowding a particular voice server hence causing
poor connection. It allows unlimited number of calls without needing to worry about server capability.
The speed of network increases with increasing number of users as each nodes added into the network
increases the processing power and bandwidth of the system.
Cons:
These are the characteristics of a successful business which implements advertising-based business model:
(1) The business has a large number of active audiences who will happen to browse the advertisement.
(2) The business is able to deliver the advertisement at low cost.
(3) There is efficient interactivity between the audiences and the advertisement such that it’s easier for the
audience to find out more about advertisement.
(4) The business has analytics information regarding its audiences such that the advertisement can be focused on the right
consumers.
Yes, Skype has the common characteristics of a business to implement the advertising-based business model. It has a
large number of audiences, mainly the free users who are using the Skype system. To successfully implements the
advertising strategy, it can add advertisement or moving letters at the bottom of its user interface so as not to interrupt or
cause disturbance to the users. The advertisements can be clickable so that it can bring the users to the content of the
advertisement.
(Q9)
(i) A new business model to focus on the advertising rather then user fees.
Pros: Skype is able to derive advertising income which could be more profitable than charging for fees as the free users
grow rapidly.
Cons: Skype’s active users might be small compared to the registered account.
Pros: By making Skype easier to access from mobile phones, more users will use the system and spur growth in
revenue for its premium services.
Cons: Wireless carriers might not allow VOIP in their network as it will reduce wireless carriers revenue stream.
As more users use Skype in mobile, the users will opt for free services like Skype-to-Skype which will slash its revenue
making business in selling minutes to calls to landlines and different mobile network.
Pros: Customers might be loyal and stay on subscribing to Skype as they see a great value in Skype products.
Cons: Most users like things to be free on Internet. They will switch to use other VOIP system which gives them free
services such as Instant Messenger by Yahoo and Google.
Pros: Increase revenue streams by charging businesses for using secure solutions at minimal costs.
Cons: Companies are skittish about the vulnerabilities the Skype system will expose them to.
(v) Pre-install Skype software into mobile phone. Skype collaborated with hardware manufacturers to pre-install Skype in
their handsets.
Pros: More people will get to know Skype and use its system. Skype can monetize on the users in advertising and
premium services which a portion of users will be willing to pay.
Cons: Paid services might suffer and handset makers might not be interested to embed Skype due to potential security
issues.
(vi) Increase means of payment besides using PayPal such as pre-paid cards sold at convenience stores to cater for
consumers without access to Internet banking.
(v) Promote customized Skype solutions for niche market such as for education to enhance communication between
lecturer and student in large lecture hall.
Pros: Able to attract mass users to adopt Skype and it builds up the Skype branding in VOIP services. Able to build
the communication link without high spending in the communication infrastructure. Skype can also promote an
efficient sharing of information/files with peers in school.
Cons: All students need to have mobile phones with installed Skype. Not all students will have the right devices
hence disallowing them to participate. Piracy and copyright issues with file sharing among students.
(vi) License out Skype VOIP technology where other companies can customize the core engine for their applications.
(c ) Recommendation:
Skype can go for multi-sided business model to increase its revenue stream besides its main revenue making paid call
services with
(i) Innovative advertising by yellow pages where businesses listed their companies and contacts and users can contact
this businesses using Skype.
(ii) Increase revenue stream in paid services by exploring innovative up-front payment for different types of users.
(iii) Promote innovative Skype services to the public in niche market such as customized solution for education to build
mind share among the young generations.
(Q10)
No. Skype does not integrate well into Ebay’s business as it has imagined.
Ebay envisioned Skype as a ideal solution for businesses such as car sellers in which the nature of business
requires real time effective communication to close the deal. However, most of E-Bay majority
businesses participating in Ebay are small and medium sized. These businesses normally operates in low cost
environment, and they do not have many employees. Integrating Skype into Ebay causes the small businesses
short of manpower to serve the users. So Skype is not attractive to the Ebay merchants and most of them are not
willing to adopt the technology. Therefore Skype is not giving similar return as Ebay could have imagined with
their acquisition of Pay-Pal.