Case 14 – Skype & Peer-to-Peer VoIP Technology: Too Good to be True?
Background of Case:
· October 2005 – E-bay purchased VoIP provider Skype for $ 2.6 billion
o Skype – Inventor of Kaaza (File sharing mechanism) – Inventors – Niklas Zennstrom & Janus Friis
· April 2008 – E-bay writes off $ 1.4 billion of its original purchase of Skype.
o Reason – (President, John Donahoe) – Not able to find strong synergies between skype & their systems
o As per John, Skype is their lowest earner ($ 126 million - 2008), though it is the most aggressive earner at 61% year to year growth (with more than 309 million users)
o No mention of Skype in 2008 annual report though company showed tremendous increase in revenue for Paypal (33%), & overall for E-bay
Should E-Bay sell or grow Skype
· Advantages of Skype
o Usability - One can speak to any other broadband user in any country of the world for
o Functionality - Skype is freely available to download & easy to install (Other VoIP are ISP specific)
o One can use webcams while talking
o Completely decentralized network / easy to expand – Provides direct connection between users instead of routing it via a central server. Hence, network can easily expand to very large sizes without adding much to infrastructure costs
o Calls on other networks:
§ Skype out – Outgoing calls to traditional phones all over the world ($ 0.02 / minute)
§ Skype In – For receiving calls, user needs to purchase Skypeln number (Fees: $12/quarter; $ 36/year). Advantage: Person living in foreign can get a local number & can receive the calls from the area at local rate
o Compatibility of Skype & E-bay
§ Real time negotiation - Buyer-seller real time deal negotiation via Skype, especially in case if an auction is about to end
§ Lead generation business - Potential buyer can call sellers while they are online looking at advertisements on Skype
· Disadvantages of Skype
o Calls are only free between skype users on the network
o The quality of sound is poor compared to landline or mobile
o With the use of webcam, the sound quality deteriorates
o There are frequent background noises & service is subject to dropout
o Uneven charging – Low cost, but charge for full minute at the start of the call
o Skype is a closed source
§ Standalone VoIP - It is difficult for other service providers to provide any add-ons or cross-functionality.
§ There is no way to judge how secure skype network is if source code can’t be read / checked
§ Skype can find the way through a firewall to pass through (P2P technology) leaving a gap in secure networks & providing opportunity for hackers
o Issue of Bandwidth / Formation of a Super-node - Making entire available bandwidth for Skype leaving little bandwidth for other important tasks
o Unsolicited phone calls from any user on skype network by making one’s profile available
o Legal & copyright issues relating to VoIP & P2P file sharing are always a cause of concern for the owners
About VoIP Technology
· Advantages of VoIP Technology
o Ability to use one network to carry both voice & data information, which is easier & cheaper
o Calls can be routed through VoIP phone anywhere as long as an internet connection is available
o Ability to combine other internet services with VoIP. Example – E-mail, file exchanges, video conferencing can be done while chatting through VoIP
· Disadvantages of VoIP
o With VoIP, the power is coming from the user’s cable or DSL modem ie electricity at that particular home / office
o Reliability – Unstable connections leading to loss of packets of information in transfer process. Hence, loss of voice / information especially in high internet traffic / congestion
o Emergency calling – Without a direct line & set address of the user, it is very hard for calls to be routed to a local call center
Current Developments
As of 2010, Skype is available in 27 languages & has 550 million users worldwide
Issue between Joltid (owned by co-founders of Skype) & Skype over software source code, which Joiltid licenses to Skype. E-bay worried that skype might lose the case & will then be forced to shut down (as development of alternate source code is not possible)
Kaaza & Skype have built their communication layer & P2P file sharing, on technology called Global Index owned by Joltid (Joltid global index software)
E-bay sells skype in 2010 via IPO
· Total value of Skype business = $ 2.75 billion
· Joltid Software – 14%
· E-bay (retains) – 30%, will receive $ 1.9 billion
· Silver lake, Andreessen Horowitz & Canada investment plan investment board - 56%
No comments:
Post a Comment