MBA Integrative Project
BUS599
Module 1
Strategic Review
Skype
FOR Dr. Harry Hascall
From: William E. Lopez-Valentin
Date: Jul 23, 2012
Trident University
Strategic Analysis of Skype
Introduction
This paper will present a strategic analysis of Skype. I will discuss Skype Mission, Vision, Values, Goals / Objectives and strategic business. Skype was founded in Luxembourg in 2003, by Niklas Zennstrom and Janus Friis, creators of Kazaa, software designed to share music and movies. Throughout its history, framed by investment offers and sales of the company, Skype remains a large and prized signature in the world of technology. In 2005, eBay the product auction site through internet bought Skype for 2.6 billion dollars. Before the end of that year, the company introduced one of its flagship services: video calling. In 2006, Skype reached 100 million users worldwide. In the same year, it released version 3.0 of its software for Windows and 2.0 for Mac.
From conception to acquisition
Since in the changing world of technology everything cannot be 'rosy', in 2008 Skype began to have conflicts with eBay. On the one hand, the service implemented to enhance communication between buyers and sellers in the online auction service; was not leaving the desired results. On the other hand, the old system developers sued eBay for licenses used had expired. In 2009, eBay ended up selling 70% of Skype for 2.7 billion dollars to the group Silver Lake Partners. In 2010, the company reported net loss of $6.9 million. However, it is clear that the value of Skype is not measured by their earnings, which do not grow in the same way that its popularity. With over 170 million users, Skype is the most widely used IP telephony and that's one reason not negligible for Microsoft, which gradually hoped to integrate this service to their platforms Outlook, Windows Live Messenger and Xbox.
During the spring of 2011, Microsoft invested 8.5 billion on Skype, in times when this giant eagerly seeks to increase its penetration on the web. Skype today is one of the tools that many users used to carry voice and video calls worldwide. Besides, the service was incorporated into the largest social network in the world, Facebook. Definitely the last few months have been very motivated for this company, and it seems that Skype has few years of being established as such. But the truth is that Skype has come a long way in history. The chronological events addressed earlier, shows all the way this company has had to go to establish itself as one of the most important and favorite users.
Skype’s objective is to please their customers by offering free international telephone conversations so they can make unlimited voice and high quality software using peer to peer technology. Skype's mission is to provide a simple communication tool, reliable and easy to use that actually works. Its vision is to develop communications solutions for users of Internet telephony services. Skype wants people to communicate with friends, family and colleagues with more flexibility and lower costs, and quality of sound never before imagined. Skype encourages the use of high quality connectivity. The proof is joint work with international telecommunications companies share the goal of providing the public with better ways to communicate. Skype is working hard towards expanding the supported platforms, including mobile handsets and devices. Although at this time, Skype does not seem the perfect match for Microsoft, things change if we look to the future. The purchase of Skype, combined with that of Nokia phones and paid mobile platforms, is possibly a long-term strategic move that makes sense.
Skype, and Users Preferred Mobile Applications
Regardless of the operating system of choice for users - Android, iPhone OS, Windows Phone, Symbian - or support using - Smartphone, tablet, PC or TV - Skype ranks as applications to facilitate communications between people around the world. In fact, Skype was the third most downloaded mobile application in 2011 (www.distimo.com), adding the main downloads app store, just behind the game Angry Birds and Facebook.
Skype is available in most operating systems, giving users the ability to communicate with a community of 254 million monthly users. In its quest to be the global communications provider of reference for the millions of people who daily share their experiences in a simple, fast and cheap way, Skype is devoting great efforts and resources in developing mobile applications and the consolidation of Skype as an application platform accessible from any device. A year after launching the application with the video call feature for Android OS devices, Skype has become the favorite application Android users with more than 76 million downloads in Google Play. Available in more than 1,300 terminals and in 16 languages, Skype for Android reinforces its position as the implementation of voice and video over IP (VoIP) a favorite of users, where 1 in 5 users have downloaded Skype Android devices in your device. But if Android is the platform where Skype is growing faster, Apple remains the primary. With a total of 85 million downloads of Skype for iPhone in the App Store, has become one of the five most popular applications on Apple's online store since it opened in 2008.
If we focus on the application for the iPhone, Skype is in first place in the ranking of most downloaded free applications (23 million downloads), which demonstrates the reliability and ease of use of the application. Skype has made a commitment to communication since its inception and has been responding to market needs with new applications and versions tailored to the needs of new user experiences. So, last April the final version of Skype for Windows Phone, that incorporates the simplicity of the Metro user interface and offers features most appreciated by users, and steadily improving application Skype for other operating systems.
”In recent years we have seen how it has gone from a world connected to the Internet through desktops to a world in constant movement with millions of people connected to the Internet through their mobile devices. In our view, the final push I have applications that have become the real engine of mobile Internet with the tablets and smartphones that have radically changed the habits of users around the world. And is the space where Skype gives users what they need to communicate and share whatever they want immediately," said Linda Summers, Product and Marketing Manager of Skype.
Skype’s success speaks for data such that 25% of international calls in the basic telephone network are carried out with Skype, which annually collects more than 115,000 million minutes of calls per quarter, of which 50% include video, or that the highest peaks coincide concurrently use up to 40 million users (www.laquess.com).
Skype’s Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
The following is a SWOT analysis, which summarizes the strengths, weaknesses, opportunities and threats of another major player in the current digital environment Skype.
Strengths
1. Global scale in a deregulated market: In just nine years, Skype has become the undisputed leader in VoIP, with an average for 2011 of over 100 million monthly active users and over 100 million minutes connected calls and videos (to understand the magnitude of this figure, this doubles the number of hits worldwide in the Telephony Group). Its user base is growing 41% annually; nearly 145 million users have registered their activity in the service during the last quarter, reaching rates of 28 million users a day during the first weeks of 2011. More impressive, if anything, is the fact that Skype has served about 25% of all traffic (in minutes) call long distance voice worldwide. Their share of the VoIP market is around 70%. 2. Easy to use and offer low-cost: The ease of use has been a key differentiator for the adoption of Skype services on both PC and mobile devices. Your offer of free calls and low cost supply and supplement their basic position as a local operator in a global market. Independence of network, platform and device: A key focus in the strategy of Skype is the ability to run their software on a wide variety of operating systems, communication platforms and devices, including phones and even televisions. 3. Benchmark in video: Skype has taken advantage of popularizing perfectly peripherals and video capture devices to become the leading player in the global market for video conferencing, with about a 50% share in 2009. According to Skype, 41% of call minutes served during the second half of 2010 was video, which is emerging as a key element in the strategy of monetization of the company in the future. 4. Brand Recognition: The ubiquity and quality of service have created a brand known and generally well renowned throughout the world that should enable Skype support its efforts to expand beyond its traditional position as a provider of free services.
Weaknesses
1. Doubts in the business model: Although the success of Skype in terms of adoption of its services is undeniable, monetization has been less successful, compared to the aforementioned 145 million active users in the last quarter of 2010, only 8.1 million users were using payment services. In addition, the growth rates of payment services, both in number of users and minutes used, is lower than the free services. For example, the minutes of pay held during the first half of 2010 by 6.8% of the total, compared to 9.2% during the first half of 2009.The monetization of services is a key to the future success of the company and unbalanced growth patterns in favor of free use segment raises doubts about the ability of Skype users migrate their free services to paid services. 2. Competitiveness key source of income: For more than three years the main source of income of the company has been servicing Skype-Out, a product based on the favorable rates on international calls. However, the proliferation of VoIP providers and the entry of new competitors offering similar prices or even cheaper has been revoked by Skype distinct advantage in this area. 3. Limited differentiation: Despite the good response to its services and presence in over 170 countries, the fact is that the value proposition of Skype does not include essentially differentiating elements of the supply of communications services providers, suppliers over-the- top and new competitors like Google (with its Google Voice service). Opportunities 1. Capitalize the video service: The video call charges quickly presence in the professional and social environment as it grows its availability in a larger number of devices and reduces the limitations of bandwidth. In January of this month Skype launches video calling service payment group and a few weeks after completing the acquisition of Qik, a provider of software and services for mobile terminals, an agreement expected to result in more premium video services for its users (www.skype.com). The greatest opportunity to monetize video services for Skype can reside in the segment of small and medium businesses, offering an affordable alternative to traditional solutions video conferencing. However, the company's current advantage in this field may be coming to an end as the technology of Skype does not own and competing offers (e.g., Microsoft Office Communicator) is increasing in numbers and performance. 2. Leverage in the corporate segment: As a relatively new provider of business services, Skype still has a high potential in this segment, which now accounts for 37% of their calls. The product catalog of Skype voice and video allow them to set up a financially attractive communication offer and collaboration services versus traditional environments, the company offer aims to boost through the launch of integrated proposals for enterprise environments, support services 24/7 and alliances with other ICT providers to facilitate their entry into the segment. 3. Strategic alliances: So far Skype has established strategic alliances with mobile operators (Verizon, KDDI and 3), device manufacturers (Nokia, Ericsson and Apple) and equipment manufacturers (Avaya, IBM and ShoreTel). New alliances in those categories, as well as telecommunications providers or system integrators allow the company to increase its customer base and revenue streams. 4. User experience: The integration of voice and video on social media and enterprise portals to enrich the user experience is a whole new market that Skype has already begun to explore its integration with Facebook.
Threats 1. Increasing competition and limited entry barriers: In all its markets Skype is facing increasing competition, with new actors and technological substitutes continually reformulating the competitive landscape: flat rates and mobile applications such as Fring or Viber are examples. On the horizon we can also see, the threat of companies like Google, Apple and fixed telephone operators/mobile with a global presence in its bid to integrate VoIP, making unnecessary a figure like Skype. 2. Pace of innovation: The communications market is changing very rapidly, so the ability to innovate and stay ahead of competition is critical. New market entrants like Google and Apple and incumbents like AT&T and Telephonic compete for global leadership. The competitive landscape can change dramatically through mergers and acquisition. Skype did in their day shift with its offer voice calls to the traditional players in the sector but in the same way a new player can emerge and blow up the core business of Skype. Is at least doubtful whether a small company like Skype, under pressure to monetize their offer, will perpetuate his eminently innovative approach and maintain its competitive edge in this ultra-competitive market.
Conclusion Never is good to jump to conclusions, and certainly I will not do it in the case of Microsoft and Skype. From the shareholder point of view is of tranquility that the large amount of cash that Microsoft has is being put to work, and within a period of 5 to 10 years we will see if the money is spent wisely. According to this analysis and its implications, Skype should: 1. Cement the relationship with its users by offering continuing one of the best experiences of using the market and use that relationship to monetize what they offer to consumers either directly or indirectly through partnerships that extend the functionality provided in settings such as Skype social networks or the gaming world. 2. Build a specific offer to the business segment in which elements such as security, reliability and service support are critical; and 3. Act quickly to setting up a map of strategic alliances in the sector. It may not be easy in the case of operators with the ability to develop their own VoIP products or manufacturers of devices with commitments to operators restricting such agreements.
REFERENCES
Skype acquired Qik, retrieved July 22, 2012 from: http://blogs.skype.com/es/2011/01/skype_adquiere_qik.html The Skype Story retrieved on July 22, 2012 from: http://www.laquees.com/2011/05/la-historia-de-skype/ Sarno, D.; (May 11, 2011); Microsoft to buy Skype for $8.5 billion; Los Angeles Times; retrieved from: http://articles.latimes.com/2011/may/11/business/la-fi-microsoft-skype-20110511
Primack, D., (May 10, 2011); Yes, Microsoft is buying Skype; Fortune/cnn.com; retrieved from: http://finance.fortune.cnn.com/2011/05/10/yes-microsoft-is-buying-skype/
http://report.distimo.com/featured-reports-annual-2011/ 