Competing against Skype 101: Pricing
Do you think Skype is a threat to incumbent telcos?
This is the first in a series outlining tactics telcos have at their disposal to answer the question "If you think Skype is a threat to your telecom profits, how can you compete?"
Starve Skype.
A pricing attack.
Skype co-founder Niklas Zennström was quoted as saying Skype would drive down the price-per-minute of phone calls to zero by 2010. Sounds like a threat to me.
Local and long distance phone companies could slash per-minute, unlimited, and international rates below Skype's In/Out costs. If done quickly, Skype and its cousins may not have enough non-minute cash flow to cover operations.
Skype's sales run rate was around $50 million per quarter at the beginning of the year, apparently covering cash flow. Skype's non-minute cash flow comes from Skype Certified licensing, affiliate product sales, voice mail, SMS messages, and "customization" sales.
Skype has a few potential new revenue sources:
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Skype Find yellow page advertising. Skype Find is all potential now, mostly empty, not useful or fun. Skype must make it more attractive to use Find than to Google. Advertising sells attention, and Find must earn some.
- Skype Prime fees and commissions. Delivering services online is the biggest opportunity. Prime could evolve to be as big as eBay. Right now it's a service nobody but a risk-averse financial controller could love.
Starving Skype would mean putting yourself on a diet too. Would a selective diet be worth killing off Skype's value as a "minute-stealer"? Worth forcing all the other "value" phone companies to add new kinds of value, moving up the value stream?
tags: skype strategy skypejournal pricing tactics
Comments
I had the joy of cutting my local phone service last month after we converted to cable internet. I would say it's already working.
Posted by: Rick | June 14, 2007 11:18 AM
Skype is providing an alternative communication media. Think about it, After you add up the cost of a PC, phone gear to make the call, & time to set up. Is it really a cheaper communication alternative? Not for everyone! Now, If you already have the right computer & software, are somewhat PC savy, and not adverse to tying up your computer during a phone call, then it could have it's advantages.
Makes a great chat room
Posted by: Steve | August 28, 2007 10:30 AM