Google Acquisition: Concrete news, or just plain ‘Skype’

Writing something on the current on-going rounds of transaction between eBay and Google regarding the acquisition of Skype is not any easy task by any means. Particularly as we bear witness to the amazing pace at which the online market is changing. But anyways, since it is the ‘in’ thing today, let me start off by saying something that Billy Crudup said to Tom cruise in Mission Impossible III after he discovered that Crudup was an ally of his enemy. “It’s complicated.”

Calling Skype as the undisputed king of the VoIP industry might not be an overstatement. Especially if you consider the fact that it has close to 280 million users and will continue to add-on to that huge list, thanks to its ever-popular brand-name. Google Talk, on the other hand, which is Google’s take on the VoIP platform, has just under one million users (according to comScore). While Skype posing a serious threat to Google could both be the biggest joke of the new world and also be a very valid point, the focus now shifts to eBay.

eBay had acquired Skype for $3.1 billion in September 2005. Almost two years after the deal was through, and shortly after signing off as Skype’s CEO to concentrate more on Joost.com along with Janus Friis, his co-founder for Skype, Niklas Zennstrom had made a statement at a tech conference held in Budapest that eBay had overpaid for Skype when it was acquired. While Joost can be described as an excellent software to watch video streaming with exceptional clarity, and starting off on a new venture is something that entrepreneurs usually have a habit of, the fact of the matter is that Skype, despite its rather healthy run-rate revenue of $400 million, is being sold, and that too at a written down price of approximately $2.28 billion.

It is without a doubt a well known fact that Google has all the monetary resources and commercial network while Skype has an extensive user-base that could be utilized by Google in a variety of ways. Say, for example, Google could send invites to Orkut, its immensely successful social networking website, to its newly acquired database, courtesy Skype. While this is all good going for Google, eBay is clearly in a soup after acquiring Skype. A project that can not be called as a failure by any means, but was not managed properly after its acquisition, sums up the story for Skype. Industry critics had raised doubts over eBay’s strategy while talks were going on by the leading retail chain to acquire a product that was clearly not its forte. While the deal is still being negotiated, only time will tell whether Google is able to bring Skype back to the position it had gained when it was first launched in August 2003.

A step by step guide on how to oversell your product: the Skype way

I believe that the title was catchy enough to make you finally land up here. So without further ado, let’s start off on the best guide on how to oversell your product, the Skype way. Marketing and sales people, pay heed. Such kind of advice is hardly floated free of cost.

Methodology
First, you develop an excellent, one of its kind product. One that has all the juice to attract the masses as well as the crème-de-la-crème. Then, gradually, you market it in a very effective manner, so that it has tens of millions of users hooked on to it. This might be the hard part, but the results that you can get out of it are worth the trouble. After your product is sufficiently popular, you begin talks with big organisations to catch their attention. Once this is done, you choose one of them and offer your product to them at such a high price that it would take years for them to recover the costs, and wait, here is the interesting part. You know your product is not worth that much. But with the help of an effective marketing team, you pull off the deal. And then, as an icing on the cake, you go out in public and blab out as to how you fooled one of the biggest players in the industry and lured them into overpaying you.

Live example
Those who are in touch with the IT industry might have guessed as to what I’m talking about. For those who still did not, thank you for taking the trouble to read till here. Here is the story; I am talking about eBay’s acquisition of Skype. When founder Niklas Zennstrom and Janus Friis launched Skype in August 2003, VoIP was a very small industry. The only other major player was net4phone, which eventually ended up suing Skype in 2006 for something that made no sense. If you read out the bottom line, Skype was sued for doing what net4phone could not. Getting people on to using the VoIP service, that is.

Anyway, Skype expanded in a very grand manner. Slow to start with, it eventually added on 60 million users within a span of two years. This caught the attention of eBay, and while Rupert Murdoch’s News Corp. was also in the look-out for acquiring Skype, eBay finally took the booty at a heavy price of $3.1 billion. Days after signing off as the CEO of Skype after the deal was through, Niklas Zennstrom, who alongwith Janus Friis went on to develop Joost.com, told a tech conference in Budapest that Ebay had overpaid for his company. While the words were slightly jumbled up, even an amateur could have understood what he meant. This whole episode eventually took a dramatic turn when Google started bidding for Skype quite recently, but at a price that has been written down by $900 million. While this might seem to be an extremely derogatory evaluation of a very popular brand, shockingly, eBay is still interested. Probably because of the fact that Skype did not turn out the way eBay had expected, or probably the way it was projected by the former company owners.

Epilogue
While one might appreciate the marketing skills of the Skype people, it was not a good deal at all for eBay. And to add insult to injury, we have Skype’s ex-CEO talking about how he is the only smart one and sold a lemon to eBay in front of the entire world. Considering all these aspects, Google might be biting off more than it can chew. While that is all for time to tell, Mr. Zennstrom has definitely raised a few doubts over the popular belief that one should not bite the hand that feeds it.

VoIP loses another Ad-VON-t-AGE

With a rising number of VoIP providers in the industry, using the law to cut your competitors down to size seems to be the order of the day. The latest in the list of major VoIP companies that were sued are Skype and Vonage.

While Skype’s litigation is still being resolved, Vonage is one brand that has received a severe beat-down on its reputation as a service provider. More recently, it settled a lawsuit against Nortel, allowing for cross licensing of their technology. While this did not call for payment by any organization, 2007 was a relatively bad year for Vonage. AT&T, Sprint and Verizon, three major competitors in the VoIP arena, filed lawsuits regarding patent-infringement against them, which resulted in an astounding figure of $239 million to be paid by the company. Adding to the damage is the recent news that Vonage had tried to lobby the federal government, also in 2007, and spent nearly $1.4 million in the process, according to a disclosure form by the Senate’s public record office which was posted online on Feb. 13th 2008 (as per Associated Press).

Vonage was one of the first providers of VoIP back in 2001 when it was started. Its user base grew to about 1 million till 2005, but constant customer complaints and four lawsuits brought the company down in 2007. According to Patrick Monaghan, a Yankee Group analyst, Vonage’s biggest challenge is going to be countering the rising debts, which would amount to $253 million in obligations that come due in December, 2008. While this is a very big loan to pay off, the bad news apparently is far from over for Vonage. Customer volumes are also rapidly declining. While about 300,000 subscribers were added on in the third quarter of 2007, 222,215 users were lost in the same time-span, resulting in an effective addition of only 77,785, according to Monaghan. Further, trying to cancel Vonage’s services is a tedious process and can cost as much as $40. Also, transferring a Vonage phone number to a normal land-line takes 10 days, and often doesn’t work for many users. Telephone companies have also brought sufficient competition to Vonage with their own offerings having unlimited long-distance plans. As they can add satellite TV, phone and DVR services to make their product seem the better one, Vonage is clearly walking on thin ice. Quality issues also persist with voice quality dipping when users play games online. Though Vonage has assured its customers that such problems would be resolved very soon, it is not going down well with the masses.

With the US market reaching a saturation point in terms of connectivity, the future for Vonage clearly lies in the international market. However, considering the present circumstances of the industry as a whole, clearly there is a need of either a serious facelift in the interfaces of the current VoIP providers, or maybe the time has come for new players to enter into the market and provide consumers with a better voice quality and connectivity features. Measures like these are very essential, if VoIP is to expand its avenues and further grow as the new means to communicate.

Google : All Skype-d up?

The market is abuzz with the news regarding Google’s supposed buy-out of Skype. Considering the fact that Skype in itself is the Google of PC-to-PC calling, it comes as little surprise that Google decided to buy it from eBay, which had earlier overestimated its market value and gone ahead to pay $2.6 billion (plus an additional $530 million for performance levels, which was negotiated and reduced from the initial figure of $1.7 billion) and acquired Skype in September, 2005. It had then gone on to add approximately 220 million users to Skype’s then existing customer-base of 60 million within two and a half years. Skype has till date provided its users with over 1 billion minutes of talktime inclusive of PC-to-PC and PC-to-Phone calling. The revenues earned by Skype for eBay are approximately $79 million in the first quarter and $90 million in the second quarter of 2007, fairly good going as far as cost recovery is concerned.

While this might seem all hunky-dory till now, here comes the crunch. It defies all logic to see why eBay is selling out one of its most potential-bearing products (apart from up4sale and CARad) to Google. While transacting with one of the major players in the market might seem as a healthy proposition, it’s the selling-out part that appears slightly out-of-the-way. There is also another area of concern regarding the fact that the value of Skype has been written down by $900 million, which is a big reduction considering what eBay had paid for it, to say nothing of inflation and cost-effectiveness since Skype was acquired.

The question now arises, why is eBay negotiating with Google to sell-out Skype? One of the main reasons that seems to be the prevalent one, is the fact that Skype has approximately 280 million users according to the latest statistics and Google talk has approximately 976,000 users and could seriously benefit from Skype’s database. The second reason could be a potential fusion of Google talk and the Skype software, which would do a lot of value-addition to both the brands.

The fact still remains that eBay’s sell-out of Skype might, and will raise, some serious questions. While Skype has not proven to be inefficient in any manner, it could be a matter of concern for all Skype users as to whether there is something seriously wrong in the hugely popular application regarding which it is being sold.

MySpace Joins Hands With Skype

I'm quiet fascinated by the way different social networking communities have quickly caught on with internet users from world wide. From Orkut to Facebook to MySpace, there seems to be endless communities online and more keep popping up. All of them are vying for the same target audience and so the competition is fast gearing up.

The latest news is that MySpace, an online social media networking community, has merged with Skype to provide its users with a different way to communicate.

Over 110 million registered users of MySpace will be able to easily call each other through the application embedded in their website through Skype. To make this service more appealing and attractive, users will also be able to add their photographs or animated pictures as MySpace 'avtars'.

Clients will neither have to download Skype nor will require a Skype account. They will be able to call other users through MySpace IM. This service is supposed to be launched in 20 countries by November.

This step by MySpace might help it in giving a competitive edge over its rival websites like facebook which have been fast climbing the popularity charts.

Seems like VoIP is out there to help one and all! ( For those who don't know, Skype uses VoIP call termination service to make free PC to PC and PC to Phone calls)