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Last Updated: Feb 18th, 2008 - 14:39:01 |
VoIP and the Skype Phenomenon
It is the progress of Skype that has largely driven the industry. 'Skype had brilliant PR because it could say it was free and everybody loves things that are free, whether it's completely true or not.
In April 2005, Skype passed the 100 million download mark, before being purchased by eBay in October. It is the clear leader in the home-user market.
Skype enjoys the largest share of North American VoIP traffic. Skype's N. American market share hovers around 46.2%, giving it "a clear lead" over rivals such as Vonage, AT&T's Callvantage and Yahoo's Dialpad.
If it succeeds in mopping up just a fraction of eventual global VoIP revenues, peer-to-peer (P2P) VoIP provider Skype could generate annual revenues of $ 130 million (E100 million), according to "back-of-the-envelope" research by Rodrigo Sepulveda, managing partner of Paris-based private-equity firm RISC Partners.
Few if any estimates of Skype's financial performance have appeared, yet interest is high because of the service's potential size and impact, particularly on the incumbent operators' revenues.
Skype is by no means the only business model for VoIP. Another is represented by carriers such as Vonage of the US, which are rolling out more infrastructure-based networks on a national basis. Their business model has more in common with conventional operators'.
Vonage has a smaller customer base than Skype (about 550,000 at mid-April) but generates much higher ARPU. Subscribers choose from an array of monthly tariff packages ranging from $ 15 to $ 50. The packages include unlimited calls in North America but overseas calls cost extra. Vonage does not disclose its financial results, but Halpern Capital, a US investment bank, estimates that the company's turnover was $ 33 million in 1Q05. On an annualised basis, this is equivalent to $ 132 million in revenue - the same as Skype's projected revenue.
BT Communicator, BT's rival to Skype, is being promoted with cheaper international rates and quality of service at the forefront of campaigns.
To snatch market share from Skype and Vonage, rivals will need to think on their toes and deliver a clear message. 'PR is the only medium that can explain VoIP properly,' says Lewis PR senior account executive Rachel Hodgson, who works on Equant's VoIP service. 'There's even confusion between Skype and (business market leader) Vonage. The benefits are difficult to get across when the audience doesn't understand what the service does.'
Education is vital. VoIP will be big business if it can communicate what the technology means for users. And that is good news for the PR industry. Of course, the situation would be helped if the technology had more of a catchy name.
Skype revenues could hit $ 130 million a year on the basis that there are 900 million global internet users (virtually all of whom will have a telephone), and assuming that each user spends around $ 20 a month on telephony. This creates a figure of $ 213.8 billion for total telephony revenue across all internet users. If only 10 per cent of these users become VoIP subscribers, the addressable market is $ 21.4 billion. Assuming then that Skype would take 20 per cent of the VoIP market, this would give it annual revenues of $ 4.28 billion, on the basis that Skype currently has a 20 per cent share of the 150 million broadband users in the world. This works, however, only if all subscribers are generating revenues for the company.
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