Tole Hart

A group of investors including Silver Lake, Canada Pension Plan Investment Board, Index Ventures and Andreessen Horowitz paid about $1.9 Billion for a 65% stake in Skype. eBay is keeping a 35% stake. So why pay for a company that has 480 million users, generated quarterly revenues in $170 million range, is profitable according to eBay, and carried 8.4 billion minutes of paid traffic in 2008?

Skype is good for primarily making international calling and in toll call areas around the world. But the minutes of paid traffic it gets is a drop in the bucket in terms of total worldwide paid traffic. Skype’s free PC to PC traffic estimated to be 8 to 10 times its paid traffic is still niche compared to worldwide voice traffic. This business will grow and be profitable but not enough to warrant the investment.

The investors are looking toward the future and the future is in smart phones or what a smart phone is namely a mini computer.  Voice as always worked best on a phone and especially a phone you can carry around and Skype for the most part has not been able to capitalize on this capability.  What the investors and eBay need now is the opportunity to work with more rouge carriers like “3” which adds Skype to their service offering or have carriers rollout 4G networks which will allows VoIP traffic due to lower latency.  The first opportunity is more immediate but harder to accomplish due to carriers revenue interests. The second opportunity will require patients but maybe worth waiting for as it can provide a voice service that people are willing to pay for and which is below what the carriers are charging for voice and there is an opportunity to offer messaging as well with a built in contact list.

For more thoughts on Mobile VoIP please link to:

http://www.gartner.com/DisplayDocument?doc_cd=166429