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The Future of Skype

The Future of Skype. Brian Hayes, Keila McCarty, Lesley Poberezny Strategic Management Bus 794 Prof. Tanvi Kothari. Strategic Vision. Mission & Vision To enable the world’s conversations

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The Future of Skype

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  1. The Future of Skype Brian Hayes, Keila McCarty, Lesley Poberezny Strategic Management Bus 794 Prof. Tanvi Kothari

  2. Strategic Vision • Mission & Vision • To enable the world’s conversations • Real-time communication platform for the Internet that is leading the communication transition from hardware to software. “The Skype service has been tremendously popular as a free service. But at some point, free doesn’t work anymore. It’s not a management problem. It’s a business model issue.” -Jordan Rohan, analyst, RBC Capital Markets

  3. Simple Timeline • 2003 – Skype Founded • 2005 – Skype acquired by eBay • 2009 – Skype sold to investment group, eBay retains 35% Main Competitors

  4. Past Strategies • Minimal Advertising, Maximum Buzz • A software company • Increase platform offerings and subscriptions • FREE, FREE, FREE

  5. SWOT • Strengths • First Mover • Low user acquisition costs • Firm foothold in Europe and Asia - more than 80% of revenue comes from outside the U.S. • U.S. VOIP market continues to grow

  6. SWOT • Weakness • 20 million online at any time but mostly using free services • No other “in” gathering customers to its services • Group video chatting not available • Does not advertise or incorporate advertising into their program

  7. SWOT • Opportunity • Design a successful model for earning revenue • Build on brand recognition to engender customer loyalty and boost revenues • Skype has only 1% market share in the growing U.S. market • Expand to new markets • Geographically • Commercial and non-commercial markets

  8. SWOT • Threats • Flattening growth as market becomes saturated • Governmental regulation of communications (FCC) • “Last mile” connecting Skype to consumers is owned by its competitors • Quality of and access to Skype services dependent on internet access and quality

  9. Strategic Issue #1 Current Revenue Model • 4 out of last 5 years lost money • Cumulatively almost $2 billion • Skype’s model cannibalizes own revenue

  10. Recommendation Develop a Sustainable Revenue Model • Define Product Offering • Advertise – Differentiation! • Increase online presence with partnerships • Increase subscription services • Maximize amount of time users spend online

  11. Skype Offerings

  12. Implementation Develop a Sustainable Revenue Model • Immediately perform extensive product/market review • Determine which has prospect for sustainable revenue • Through strategic alliance with partners will drive growth and revenue subscriptions • Will drive usage and proportional revenue

  13. Strategic Issue #2 Shrinking Revenue Growth • Limited Skype Relevance • Limited channels (partners) • Competitive offerings could potentially lock up profitable revenue streams

  14. Recommendation Social Networking • Increase Relevance • Facebook • LinkedIn • eHarmony

  15. Implementation Social Networking • Partner with the following social networking websites • Dating Sites (eHarmony, Match, etc.) LinkedIn and Facebook • This will increase Skype users from 540 million to 1 billion, profitability from $13 mil to $159 mil

  16. Implementation Selling Ads • Revenue/profitability is incremental to existing revenue structure • Additional $7 mil increase in net profit (from $159 mil to $166 mil)

  17. Recommendation Education • Increase Users • Increase Relevance • Schools • Catch them while they are young • Introduce them to other cultures • Enhance their learning experience

  18. Implementation Education • Partner with interactive whiteboards (e.g., Smart Board) at schools • Create the Skype Classroom at top teaching universities

  19. Strategic Issue #3 Net Neutrality • Proposed Legislation not allowing ISPs to control content or access • Comcast – prevented users from gaining access to file sharing websites

  20. Recommendation Net Neutrality • Do not engage large ISP-VOIPs directly in large business sales • Become more politically active • Target • International/Widespread Businesses • Small Businesses • Websites • Prepare for sale

  21. Implementation Net Neutrality • Advertise on net neutrality & potential consequences • Use popularity overseas to feed into American market • Offer free month to new small businesses applying for licenses • Rebrand to websites as a software service

  22. Overall Implementation Timeline • Year 1 • Define product offering/establish advertising schedule • Have a contingency plan for passage/non-passage of Net Neutrality bill • Begin partnership strategy • Social Networking, Education • Year 2 • Review of Year 1 initiatives (NN, advertising) • Survey/Questionnaire (with regard to education) • Establish rate schedule (selling) • Year 3 • Review of Year 2 • Prepare for public offering or buyout

  23. Questions?

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