Skype was successful due to its low-cost structure, easy user interface, and viral growth. It offered free video calls, chat, and file sharing between users globally. This large community of users provided unused processing power, lowering infrastructure costs. Skype disrupted telecom industries by allowing free or low-cost phone calls internationally. It faced competition from traditional phone providers, VoIP services, and other peer-to-peer communication apps. eBay acquired Skype in 2005 to expand e-commerce opportunities through new markets and payment integration with PayPal. Risks included potential service disruptions impacting eBay's market value.

1. Systems MGCR 620 E-Business: Skype and its Impact on the Telecom Industry November 9, 2008 Tomotaka Brink Fushimi [email_address] (260301050 ) Benjamin Carrion Schafer [email_address] (260339078) Tess Hong [email_address] (260332417) Ting Miao [email_address] (260314135) Tom Takahashi [email_address] (260313560)

2. Skype’s E-business Description VoIP & P2P calls: Computer to computer/Skype Phone Computer to landline/mobile phone Computer to PDA/Blackberry Free Software

3. Skype’s E-business Description Founded in 2002 Skype software launched in 2003 Acquired by eBay in 2005 7 countries, headquarters in Luxembourg 309 million user accounts (Q1 2008) 14 million concurrent users (October 2008) 15.9 billion called minutes (Q1 2008) Net sales USD 126 million (Q1 2008)

4. Skype’s E-business Description Cost Advantage Free Skype-to-Skype calls Low charge on Skype-to-other Multiple Services Conference Calls Instant Messaging File Transfer User Advantage Easy to use High sound quality Low equipment cost

5. Skype’s E-business Description 4 competitor categories Traditional landlines and mobile phone providers VoIP competing with lower call rates Internet Service Providers with similar online calling services P2P service providers developing similar tools and offering similar services

6. Rationale in Starting Business The global telecom business generates trillions of dollars in revenue!!

7. Rationale in Starting Business Skype’s Creators = KaZaa’s Creators Having the know-how P2P -> bypassing central servers -> higher voice quality

8. Rationale in Starting Business Using “unused processing capacity of its customers” means Skype can provide a telecom service without high capital expenditures This means low cost to consumer A call to Canada Skype: US$0.024/min AT&T: US$0.05/min ~ US$0.61/min

9. E-Business Analysis: Reasons for Success Cost advantage : lower cost structure Easy handling Viral spread being freely downloadable Large community working on compatible solutions for Skype Continuous innovation and expansion of services ( Skype out , Skype In , Video conf .) Agreement with Wal - Mart to sell Skype - certified hardware devices and prepaid cards Partnering with certain computer manufacturers to include Skype Scaling : additional infrastructure is not required

10. E-business Analysis: Synergies with EBay & PayPal EBay’s Chief Executive Margaret C. Whitman “We can create an unparalleled e-commerce engine.” [Businessweek 2005] Lead generation. In addition to paying eBay listing and completed-auction fees, sellers could also pay eBay a fee for getting an Internet call, or lead, via Skype U se Skype to expand eBay’s moves into new markets, such as new cars, travel, real estate, PayPal has already embedded its service into Skype payment flows, which can boost Skype's revenues and increase PayPal's payment volume Skype Send Money, which allows users to send/receive money using PayPal through the Skype client Communication via Skype allows buyers and sellers to benefit from being able to communicate directly with each other anytime

11. E-Business Analysis: Risks In August 2007, Skype experienced an interruption for two days The decline knocked $1 billion + off eBay’s market cap. eBay shares closed down 2.58%.

12. Summary: Why Skype was Successful

13. As a manager, what we learned…

14. Lesson one: Wide customer base create business opportunities (high economic profit)

15. Lesson Two: Create a clear business model with rapid, global expansion Skype business model: First entry advantage. Need for rapid growth. Use of the internet for fast, easy, cheap and global market penetration Offering high quality, cheap and value-added services

16. Lesson Three: New IT technology to circumvent higher entry barriers New Technology

17. Lesson Four: The Value of Simplicity in IT Easy Install Easy Use Single tool for: PC2PC calls Video conf. PC2Phone Phone2PC File sharing

18. Lesson Five: Sustainability in IT Necessity of customer support To hold registered users To attract new users Customer Satisfaction Voice Quality Easy to use Cheap Multiple services Technological obsolescence is a risk factor for Skype’s business.

19. Questions….