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Thursday, July 21, 2005

Skype - its great, but is it a partner for Google?

Skype has been hyped as the killer of the telecommunications companies. Their business model is free and crystal-clear Internet telephony, and let's put the emphasis here on free.

On their webpage they are tooting a total of 137,998,733 downloads (and by the time I finish this, it might have hit 138 millions).

They have paid services, but one only needs to pay, once you decide to call a fixed line or a mobile phone via Skype. Currently, there is a negligible 1.7 million users that use their paid service.

Since their fees are low, it is clear that they want to make money via big numbers on top of it - this is where the 138 million downloads come it, but I don't understand, why anyone would convert to paid service anyway - especially since there are competitors that offer free services. And free users are easy switchers - once they don't see the value, they might switch, especially since Skype works with a username and not a number (for which you have to pay!). It is easy to get the same username from other providers as well.

Okay, stop rambling.

Skype might be an acquisition target. Skype's CEO Niklas Zennstrom says that he hopes for a portal partner and why not Google. Google doesn't have an instant messaging client compared to a Microsoft or Yahoo, nor does it have a voIP service, making it a possible suitor of Skype, should the startup be interested in being sold, and should Google want to get into the instant messaging and voIP business.

There are different stories around Skype as well. Like the one that speculates if Skype goes into the video phone business. It apparently envisions attracting billions with the help of video phones even so the technology is not yet there.

So let's see how it goes, shall we? It is sure that Skype is an interesting business model - if sustainable is not clear, but it has great ambitions, and is in a space for which many companies have expressed interest. So sooner or later it will go away - probably and become a different animal altogether - but this is speculation.

(By Asia Business Consulting)