Skype grossly over hyped, even with the Verizon deal

March 1, 2010
By

Ok, short and sweet here.

The recent hype about Skype, and in particular surrounding the Verizon deal has been blown WAY out of proportion, IMHO. It’s time to set perspective here.

First, Skype was supposed to have killed off traditional telecom by now. Last I checked, that hasn’t happened (still a trillion dollar business).  In fact, Skype actually PAYS traditional telecoms a significant amount per month, thus helping them stay in business.

Second, Skype was supposed to revolutionize everything. Ok, they’ve done some cool stuff, especially if you like video.  And they introduced the world to HD Voice.  On the other hand, if you look at where Skype gets revenue, oh gee, it’s from traditional telecoms services – like phone calls, and phone numbers, and voicemail!  Where is the new and revolutionary business model? At the end of the day, Skype is not all that different than other Chat applications with Voice and video.

Third, lets not forget that Skype still is a black eye for E-bay and (now candidate for Governor of California) Meg Whitman. Meg paid (at least) $3 billion US in 2005, then wrote off $900 million. And of course now E-bay sold 65% of Skype to a PE group at a valuation of roughly $3 billion. That’s zero percent growth in valuation over 5 years. Not quite the wonderful story it’s perceived to be.  What’s more, not only did it not appreciate in value, but Skype added no strategic benefit for Ebay either – it was simply a distraction- a bad deal all around.

So before we go rewriting history, and (once again) claiming how Skype will tear down the telecoms world, maybe a little grounding in fact is in order.

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