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Skype Xfire Presence

Skype is again in the news with $18.8 million in second round financing with Draper Fisher Jurvetson and European Index Ventures. Om Malik weighs in and asks where's the business model. Judith Meskill links too. To which we should look more closely at both the announcement and previous statements. I'd also add the DFJ is also in bed in Xfire an Instant Messaging system that can tell you which games your buddies are currently playing. Put that with Skype and port in some sound (want stereo 3-D) and "presence" is further redefined. It also provides a nice bridge for the "knowing" who's in what conferences at anyone time.

Skype is amazing. The Skype team boasts some of the world's great corporate innovators and is the hottest viral marketing phenomenon since Hotmail," said Tim Draper of Draper Fisher Jurvetson in a statement.

Hotmail was one of the first companies to offer free Internet-based e-mail, acquiring many millions of users before it was taken over by U.S.-based Microsoft (MSFT.O: Quote, Profile, Research) .
The fresh cash will be used to improve the telephone service and bring it to new countries, Skype co-founder Niklas Zennstrom said, adding that premium services would be available later this year.

Skype has prompted telecommunications and Internet companies like BT Group (BT.L: Quote, Profile, Research) and Yahoo (YHOO.O: Quote, Profile, Research) to follow suit with announcements of their own Internet calling services. Some add the option to dial normal phones from a PC at an extra charge. Reuters

What is the funding likely to enable?
  • If recent announcements are correct then we will see the capability for Skype to Phone (as in PSTN). There is a general assumption that Skype will have to charge for calls into the local phonel network or to a local cellphone. I believe their intent will be to make such calls free.
  • The recent PDA announcements mean Skype will soon run on 400mhz WiFi enabled PDA's. This will create a new race for both Cellphone companies and PDA manufactureres that involves mobility, location, and presence.
  • Skype's aquisition costs and scaling costs remain the most efficient. Additional investments in sound technology and the gaming environment would be interesting. (See backers link above)
  • Skype also requires a "handsfree" handset option that doesn't require expensive investments in bluetooth, and preferably integrates Skype with old fashion phones. Thus the phone rings regardless of whether it is a landline or Skype call.

    None of these really point to Skype's business model. Too many comments remain focused on the environment of a conductor selling train tickets rather than seeing that the web has arrived and is enabling you to pilot your own plane. With 285,000 users on line right now (each day is still increasing) it is a small fraction of the number they require to create a global telecoms business. However even Window's once had a few users. Similarly the fax had little value until it was pervasive everywhere. So we see Yahoo and BT scrambling, and yet they don't understand the play. Adding conferencing made Skype much morecompelling. Pipe music into the call! Pipe iTunes into it. Then we can listen to trial track and then buy. Add in the gaming functionality and it may just become a must have amongst youth.

  • Skype and the Enterprise. When the enterprise controls the supernode then it obtains additional security and it's members remain hidden unless a relationship is established. In the enterprise we want to know how many conferences are running and who is in them. We also want to be able to give them a name.
  • Skype and Multi-lines. Most of the social networking software gets into difficulty when managing presence. While in fact most of it already manage it poorly through multiple lines, home, business, mobile. etc or email , IM etc.. Shared lines (eg my family home) also are useful and not natural with the majority of IM and e-mail services out there. Enabling multi-lines on Skype that are optionally shared and also connect when necessary via VoIP to PSTN lines will be a powerful capability.
  • Skype and Always On. Whether it is in an office with an open line or at home watching TV Skype provides the opportunity for sharing the football game and enhancing the watching experience with a conference call. Someone suggest I try this the other day on a Window MediaXP edition PC. I don't have one... but can see how someone popping up on my screen while I'm watching TV may change the experience.

    While Skype continues to be portrayed as a phone company it is getting on with the business of building a communications system for connecting people. I recommend looking towards the business models that builds on the "presence" factor.

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    Listed below are links to weblogs that reference Skype Xfire Presence:

    » Skype Hype Take II from Om Malik on VoIP
    I had published a tiny piece yesterday on the potential lack of business model at Skype, which recently raised about $18.8 million from various venture capitalists. Stuart Henshall has an interesting response where he explains the business model and ex... [Read More]

    » Unbound Spiral on Skype from Alec Saunders .LOG
    Very good analysis of what Skype might do with the $19 million they just raised. [Read More]

    Comments (3)

    Jon Husband:

    Nice analysis.

    I like the SKYPE and TV idea, particularly with Sports. The Always On capability would allow games to be more interactive; consider the World Cup with your buddies in the UK, or Red Sox vs. the Yankees games.

    Skype must start a Skype to PSTN service. The quality of connections is getting so good, it is a shame that it is not available yet. However, I do favor the free model and can't see how they could maintain that if they connected to the public phone system.


    Great analysis -- but it still doesn't answer the business model question. It answers the question of how the service is going to evolve to become more pervasive and global. Skype is a great catalyst to have voice go to free, but the venture guys are going to want a return on their investment, which means revenue for Skype. Even if they get 50M users, those users want it to be free -- so introducing fees for connecting to the PSTN will be a shock to the system. Does the world really need another cheap reseller of long-distance minutes?

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