Skype’s 9th Birthday: Whither Skype?

Nine years ago today, with the necessary pieces of the Internet infrastructure in place, Skype launched as a Windows software application supporting free Skype-to-Skype voice and instant messaging conversations between Windows PC’s.  Within a month there had been over 500,000 downloads. This slide from a Skype presentation in 2008 sums up the situation at its August 29, 2003 launch :

Summer2003.StageWasSet thumb Skype’s 9th Birthday: Whither Skype?

Today we find Skype on multiple hardware platforms, including mobile devices and TV sets; it’s even available on “traditional” phone sets such as the RTX Dualphone 4088 and FREETALK Office Phone 3000.  Video calling and collaboration have become widely adopted. With over 250 million active users it has become one of the most widely used social networking applications on the Internet. TV newscasts would be lost without Skype calls.

But where does it go from here?

Certainly the recent $8.5B Microsoft acquisition of Skype helps to set the direction. In an update provided to USA Today last week, Skype is at home with Microsoft, Skype Division President Tony Bates envisions:

Skype has always been much more than just a way of doing low-cost calling. We think we can change the way people communicate across multiple platforms — on your PC, the mobile phone, in your living room. And we set our goal to get to not just hundreds of millions but billions of users, and change it from an experience that wasn’t just an appointment to talk like we’re doing now but became an everyday sharing experience. [Author’s bold]

HappyBirthday.white thumb Skype’s 9th Birthday: Whither Skype?He goes on to discuss Skype’s play in mobile and video calling. October’s launch of Windows 8 presents opportunities for a new user interface. Windows Phone 8, Xbox and Office are three more opportunities for incorporating Skype sharing experiences within the Microsoft domain. Tony sums it up when he says, in the USA Today article, “And there is definitely a strong belief system, certainly at my level and Steve (Ballmer’s) level, that communications is a fundamental human need that crosses over into a lot of things.”

But looking at the broader picture, one needs to consider some of the other communications market options. While their primary revenue generator remains advertising, Google is working chat, voice and video conversations into its offerings – start a Hangouts call to others on Google+. CounterPath is providing the software infrastructure for enterprise communications, bringing softphones to current generation PBX systems, whether premise- or cloud- based. Incorporating social networking support they even offer the opportunity to turn tablets and mobile phones into end points for these systems, often replacing the traditional desktop phone set.

However, the most significant battle will be between these “over-the-top” offerings that simply require an Internet connection to support a conversation, with the carrier revenue for the conversation being submerged into data offerings, and the legacy carriers who are striving to maintain their “independent” voice communications and SMS messaging businesses. As articulated last fall in a report on the potential of “over-the-top” providers Knowledge Center states”

The migration to LTE networks represents major discontinuity for operators’ voice services. While over-the-top players continue to launch new services and integrate applications, the operator community is still in the early trial stage. Operators have yet to decide whether their efforts should be focused on ensuring service continuity or with creating a new paradigm for voice communications.

With the transition to LTE data networks and the demise of circuit switch-based infrastructure these operators are trying to introduce their own protocol, Voice over LTE or VoLTE, as their form of IP-based communications. Their lucrative SMS messaging business is being eroded by instant messaging services, such as Apple’s iMessage, the combination of Facebook chat and Skype IM1or Google Talk. Once again the only revenue to carriers would be submerged into their data offerings.

One other consideration is the spread of WiFi access points as an alternative to wireless and broadband carriers for an “over-the-top” Internet connection. The end result will largely be determined by user acceptance of the user interface, whether hardware or software. As I overheard at an industry event last week, the legacy phone interface is pretty simple and easy to learn; anything more complicated presents a challenge. The challenge is to provide the most frictionless path to launching and supporting a conversation in the context of what triggered a user’s desire to make a call:

  • How do I make a simple voice call?
  • How can I complement the call with, say, chat messaging?
  • Can I collaborate with friends or colleagues on a multi-party conversation?
  • How do I review and share a document with a colleague, customer or supplier?
  • What is the etiquette for launching a conversation?
  • How do I establish that a friend or colleague is available to accept a call?
  • How do I add a voice or video channel to my Internet game?
  • What hardware device does my friend or colleague use for receiving calls?
  • Can I escalate a conversation from chat to voice to video?
  • Can i complement a conversation with desktop and/or file/photo sharing?

Where does Skype play a role going forward?

Beyond its inherent calling features within Skype clients, Skype definitely provides the infrastructure for free chat, voice and video conversations. In one sense we have seen that through their relationship with Facebook. Besides its ongoing development and innovation on mobile devices, Skype will introduce opportunities for experience sharing into several Microsoft products. Skype is incrementally improving its mobile offerings every few months on multiple vendors’ devices. Its primary focus will remain on real time communications; the question is where does one want to launch and receive a “sharing experience” in the course of our ongoing social networking activities?

The challenge is to make it easy to launch and carry on a conversation from the user’s choice of hardware; the communication activity must be clear, reliable, sustainable and robust. However, much like we’ve gone from a 10 to 15 channel selection of black and white TV programming on a 13- to 20-inch rounded screen when Neil  Armstrong landed on the moon in 1969 to hundreds of color channels to select via cable or satellite and view on a 27- to 80-inch flat panel screen, there will be many options for launching conversations in the context of the user’s needs for a sharing experience.

If the appropriate user interfaces become available, one option that has the potential to disappear is to purchase voice and messaging offerings from a carrier. With the arrival of LTE at speeds approaching that of landline connections and the speed increases of cable and other landline Internet services “over-the-top” offerings have the potential to disintermediate the need for an Internet service provider to offer more than a high speed Internet connection (often euphemistically called “the pipe”). With its protocols and unique voice and video technology, Skype is demonstrating how this scenario can play out.

On the other hand users need to adopt socially to new opportunities and scenarios for communications as they become available. Michael Graves has questioned the acceptance of making and receiving calls via TV sets. As has been mentioned on posts about Skype for TVon this blog, TV sets have a different social role from that of calling from “personal” hardware, such as PC’s and smartphones.

…. the social issue revolving around the use of Skype for TV is that, unlike a “personal” computer used by an individual, a TV set is usually shared in a family room, living room or a business meeting room where consensus must build around what programming or application the set is being used to view.

Bottom line: Skype certainly has a head start with its current infrastructure, forthcoming Microsoft integration and mobile device opportunities. The entire real time communications industry is still passing through a revolution in both how and when we want to share experiences.

But Skype needs to continue to innovate and to support the evolution of multiple hardware platforms to remain a leading player. As these scenarios evolve, never lose sight of the fact that Microsoft needs to justify and recover its $8.5B investment in Skype within the next few years; this will definitely impact Skype’s future offerings and business models.

Update: Dan York makes several interesting points in his post Skype Celebrates 9 Years of Disrupting Telecom, But What Comes Next? covering issues such as the impact of this fall’s ITU conference, incorporating calling into the “fabric of the web”, the Microsoft effect and the social impact where he concludes

Skype’s challenge is to figure out how they fit into the social ecosystem. Do they attempt to become the real-time communications infrastructure for social networks? So that when you do want to move your interaction to a voice or video call you can do so over Skype? Do they try to open up their massive platform to be a social infrastructure? Do they join the rest of the players in trying to be “the place” where you read your social status updates?

Two more updates:

1 Recall that Skype for Windows and Skype for Mac allow a user to chat with Facebook friends; their Facebook friends could be on any device that supports Facebook chat, even the BlackBerry Playbook!

About Jim Courtney

Bringing over thirty years' experience in the sales, marketing and management of cutting edge technology businesses.

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