Generation 21 -
THE EUROPEAN CHALLENGER OF THE "OLD"
TELCO BUSINESS MODEL
Skype, the VoIP leader, was just
awarded with the General Overall Winner Award of the
Tornado Insider 2004 TOP 100 hi-tec startups
Edited by Jorge
Nascimento Rodrigues, editor of Gurusonline.tv,
An interview with
Niklas Zennstrom, the Swedish CEO and co-founder of
Skype Technologies, by Jorge
Nascimento Rodrigues, editor of Gurusonline.tv,
and Peter Cohan, author and consultant, February 2005
The red "S" in the toolbar of your desktop
enables you to call your colleagues, partners, family
and friends everywhere in the world, just with a click
in a green phone icon. For free - if you call from computer
to computer -, or for a bargain if you call phones or
mobiles. The "S" is the logo for Skype Technologies,
a European startup just born in August 2003. With more
than 2 million online users simultaneously in mid February
all over the world, Skype is gaining momentum - the
Tornado Insider magazine awarded the startup with the
Overall Winner award of the 2004 Tornado 100 ranking
of European high-tech, biotech and cleantech startups
founded during or after 1998.
Skype was founded by two Nordic guys, two serial hi-tec
young entrepreneurs, Niklas Zennstrom and Janus Friis,
known for their first polemic creation - KaZaA, the
world's most downloaded Internet software for sharing
files (guess what? Yes, music and movies) with more
than 370 millions downloads. Niklas is a Swedish citizen
of 38 with a dual degree in business and computer science
from Uppsala University, near Stockholm, and Janus is
a Danish citizen of 28 that began his career at the
help desk of CyberCity, one of Denmark's first ISPs.
Skype like KaZaA is based on P2P - peer-to-peer - platform,
a new technology that take off after the 2000 Nasdaq
crash. The late young American pioneer Gene
Kan told Gurusonline in 2001 that P2P could be the
"next hot thing". Skype is challenging the
"old" telco business and also "eating"
the marketspace of different "messengers"
exploring VoIP - the voice over Internet protocol.
Skype is based in Luxembourg, but has offices in London,
UK, and Tallinn, Eesti (Estonia). The startup has no
more than 70 employees, half in London and half in Tallinn
and a few guys in Luxembourg.
If you have not yet "skyped", go to www.skype.com
and download the software.
As a serial entrepreneur, which company you founded
was more challenging? And which one gave your more pleasure?
All companies I have co-founded are challenging in
some way. I think Kazaa was more challenging than Skype
in that no one knew Janus Friis or I before we set it
up. With Skype, we already had a name and a known technology
to work with and, as a result, gaining momentum for
the company has been easier.
I remember interviewing the late Gene Kan in 2001
about his InfraSearch startup and he answered me that
the P2P will be the "next hot thing". Do you
think he was right?
Yes P2P technology has already had a major impact on
the world, as we know it. Skype's P2P architecture for
Internet telephony is more efficient than a traditional
telecom provider's network or other VoIP providers because
it doesn't need central servers or central resources
to scale. Our marginal cost is zero for each call and
the cost of adding new users to Skype is less than $0.01.
Voice will be another free Net service like email
Yes we believe so. Skype to Skype calls will remain
free. With Skype telephony is now a free software application
on the Internet.
What will be the long-term impact of VoIP on the
incumbent telcos and mobile companies?
Some large telecomms companies will resist VoIP until
they see numbers reach critical mass and then it may
be too late. But others are already embracing VoIP.
We have recently announced partnerships with Cable &
Wireless and Hutchison Global Communications Ltd (HGC)
in Hong Kong for example. We believe it's not the big
that beats the small; it's the fast that beats the slow.
In what services is based your business model? How
do you plan to make money for investors and sustain
the company? In premium services?
Skype's business model is closer to Yahoo than any
traditional telecomms providers like AT&T or new
VoIP providers like Vonage. Applying a software business
model to an operator problem, P2P Internet telephony
enables Skype to outperform traditional providers and
VoIP networks. Skype is the leading VoIP-category product
worldwide, with more than 27 million registered users,
and more than 130,000 new users joining per day. Skype
to Skype voice calling will remain free for our users.
SkypeOut, our first premium, pre-pay service has more
than 880,000 users around the world. We continue to
expand payment options and will unveil additional premium
offerings throughout 2005.
What's the strategy regarding the future: an IPO
in Nasdaq or in a European stock exchange? A third round
of financing? Get acquired by an incumbent multinational?
We'll continue to grow, as The Global Internet Telephony
Company in defining a new market and a new opportunity
using technology much like global Internet brands such
as Google, EBay or Amazon.
Which competitor is most threatening to Skype and
why? Which competitor is most vulnerable to Skype and
We don't look at what other companies are doing, our
core DNA is listening to our user base and innovating
according to their demands.
Aren't you afraid that Skype can have the same fate
No. Different industry,
In what kind of mobile platforms are Skype working
Skype is committed to extending communications mobility
and platform Choices. Skype currently offers products
for MAC, Windows, Pocket PC and Linux. Skype is available
for Wi-Fi enabled PDA handsets and for laptops, so users
can benefit from free voice calls wherever there is
a Wi-Fi hot spot anywhere around the world.
How secure his Skype service?
Skype calls are end-to-end encrypted for superior privacy.
Can you refer with whom do you intend to integrate
Skype into other applications?
Skype API (Application Program Interface) included
in the latest version of Skype for Windows, enables
hardware devices and software applications to seamlessly
integrate with Skype's award-winning Internet telephony
software. Non-commercial developers worldwide may freely
integrate the Skype API in compliance with the Skype
software End User License Agreement (EULA). Commercial,
affiliate and other Skype partnership opportunities
are handled on an individual basis.
Where you leave nowadays most of the time?
I spend more time in London with regular visits to
our offices in Luxembourg and Tallinn. I also travel
the world extensively to visit our partners or prospective
As you like to travel a lot, what part of the World
is more attractive for you?
I think all countries I visit have something that is
attractive. For example, I love Portugal and Spain for
the friendly people, great climate and good seafood.
Number of users and countries at this moment
Skype is the leading VoIP-category product worldwide,
with more than 27 million registered users in 210 countries
and territories worldwide (every country in the world).
Growth of new users per day?
More than 130,000 new users joining per day.
In which countries the penetration is higher?
These are our top five countries:
It's primarily because of high telecom costs and large
expat communities. Also in Poland communities share
broadband in housing estates.
Highest number of simultaneous users online?
More than 2 million in mid February
Press contacts: Daniel
eBay buys Skype (September 2005)
«It was an opportunity too good to miss.»
Skype spokesperson Daniel Twigg
Why Skype accepted the acquisition deal proposed
We had strategic discussions with a number of different
companies. In our conversations with eBay it became
apparent to both sides that together we had an amazing
opportunity to join together and do great things for
both businesses. It was an opportunity too good to miss.
We have a strong admiration for the focus and operational
excellence of eBay. We respect PayPal, who we regard
highly as a Skype payment provider and e-commerce enabler
worldwide. We already have a great working relationship
with Paypal they have over 72m account holders,
working more closely can radically accelerate the growth
of both our free and paid-for services. Our management
teams have a shared, long-term vision about an Internet-enabled
future, and together we can do great things. We have
a complementary culture, and deep understanding of communities
and viral network effects. eBay is one of the worlds
two largest Internet businesses, and the most powerful
technology brand in the world growing faster
in brand value than Apple, Samsung and Google. eBay
has market dominance in the US, accounting for 24% of
all US e-commerce.
What's the sinergy between the two businesses?
By combining Skype with eBay and PayPal, we can create
an unparalleled ecommerce and communications engine
for buyers and sellers around the world. Skype can accelerate
the velocity of trade on eBay and the volume of payments
through PayPal,while opening up new lines of business
and creating significant new monetization opportunities
for the company. In turn, eBay and PayPal can accelerate
the growth of Skype and make it the voice of the Internet.
Skype strategy will be changed?
By remaining independent, Skype will be able to continue
our sole focus on voice communications. We will all
work together to take advantage of the synergies we
see in this deal, and our founders and core management
team will stay on to continue to build Skype.
The founders' team will continue?
Yes, we created a deal which fully motivate me and
the entire senior team to be a long-term part of the
business. Niklas and Janus are focused on building Skype
as a successful company for the long-term, and that
includes continued, active involvement in its growth.
Skype will become a stand-alone business unit of eBay
Inc., with and we will report in to eBays CEO.
We will keep our brand name and continue our rapid innovation.
We dont anticipate any big changes in management
at Skype, and we still have the same business objectives.