Picked up the three Toronto newspapers Monday morning; each had the front page headline about the executive changes at Research in Motion that were made public late Sunday night, (I was caught up watching the 49’ers – Giants NFC Conference overtime final that ran rather late and had taken time off from the Internet.)

It’s been some time since I wrote a post about RIM and Blackberry. In fact, the last one was about the announcement of the appointment of long-time acquaintance Alec Saunders as Vice President, Developer Relations. Alec has certainly made an impression with developers as shown on Twitter; the comment on the right showed up yesterday morning.

Yes, I caught up with Alec at CES where I was not only able to check out the Playbook OS 2.0 but also got to have a look at the Porsche equipped with QNX firmware and three Playbooks. But more importantly was how attending CES – not at the booth but in discussions as I walked around the show – reinforced my conclusions after watching RIM’s quarterly report last fall, when they announced delays of the launch of the new OS 2.0 for Playbook. At the same time I was reading the Steve Jobs bio and how he made sure that product showed up on time. I also have had a chance to check out the current Playbook – great hardware but lacking in applications that make it a “must have” to carry around. And there’s my own experience over the years not only observing technology business restructurings but also participating at a senior management level in a NASDAQ-listed company restructuring with all the associated performance pressures. The technology may change but the business management issues don’t. The bottom line was that RIM had significant internal operations problems showing up publicly as an inability to execute. It only got further reinforced by the December announcement of delays in the launch of a QNX-based Blackberry.

Here’s my viewpoint:

1. As became really obvious after announcing the delays not only of OS 2.0 for Playbook but also Blackberry phones , the number one priority for RIM is to fix the internal processes for managing execution to deadlines. Reading the Steve Jobs bio at the time of this announcement (and having had my own experience working under a “driven” CEO) brought this point home. Steve simply would not let a deadline be changed; he may have been a bit off the deep end and erratic at times but he ensured that Apple had the execution leadership and team required to meet deadlines.  The first benchmark for the “new” RIM will be the launch of OS 2.0 for Playbook in February; certainly the demos at CES looked promising. And the recent price reduction on Playbook simply became a way to seed 800,000 units in preparation for the upgrade (aside from getting this hardware off the inventory line of RIM’s balance sheet). Those 800,000 users are now positioned to provide their own feedback.
2. The second benchmark was reinforced by the new CEO’s comment made in 2005 while at Siemens about the future of smartphones: “The end user is not concerned with the technology behind the service, they’re concerned with the applications they can get.”  About the same time over six years ago Alec Saunders wrote his “Voice 2.0 Manifesto” where he emphasized that “applications are the value creators”. And I have to say that my experience with the Playbook 1.0 was underwhelming. While it possesses great hardware and there have been some interesting applications, it lacks not only the number of applications but, even more importantly, some critical applications. So my second benchmark relates to application development:
   1. We need to see some critical common applications, starting with Skype which badly needs a mobile platform that supports true multitasking and battery management. Dropbox and Kindle for the Playbook are two others that should easily be able to take full advantage of QNX’s inherent multitasking and multiprocessor functionality. Yes, you can access some of these, such as Dropbox, via a web browser but it’s not the simplest user experience. Skype would make it possible to converse with any of their over 200 million active users on any platform. In today’s communications and social networking world Skype is critical to any communications platform.
   2. We need to see an evolving base of third party applications. As Alec pointed out in his presentation at RIM’s North America developer conference last fall, RIM’s developer program for Blackberry phones has been actually the second most successful smartphone in terms of revenue generated for developers. Other developer conferences in Singapore last fall and Amsterdam next month are indicators of developer enthusiasm; certainly attendance at Singapore demonstrated significant attention in the southeast Asia market – and the Amsterdam developer conference is sold out. But there are several issues that need to be addressed to facilitate developer interest including legal ones (make the agreement short and simple) and having a sufficient tool set in a decent time frame that encourages developers to participate in new product launches. (Alec did acknowledge some of these issues at his presentation last fall.)
   3. BlackBerry App World needs significant improvements. Yes new versions have been coming out but… Having to reboot the device when installing certain new programs or upgrades does not cut the mustard. It must also be able to handle multiple upgrades on a single action. iOS certainly sets the benchmark here in terms of the user experience.
3. Thirdly  there is the expectation that there is some “Messianic” Steve Jobs out there who can solve RIM’s problems as CEO. It ain’t goin’ to happen; there was only one Steve Jobs. Recently we have seen examples at, say, Yahoo and HP, where bringing in “experienced” CEO’s has been a failure. Appointing someone with internal experience also brings along an exposure to RIM’s processes and personnel that allows more rapid implementation of internally required changes (such as execution). Tony Bates at Skype has also demonstrated that it helps to bring along a combination of both technology expertise and running high tech business operations to make things happen; again his focus has been on execution. A priority on appointing the right Chief Marketing Officer will hopefully bring in significant outside experience beyond simply marketing to a key vacuum currently existing at RIM. At the same time, let’s hope the board can recruit a couple of significant “technology company” directors from, say, Silicon Valley to contribute to the experience spectrum and strategic executive networking.
4. Then there’s one other key role for a CEO: Establishing and rebuilding key business relationships is one additional benchmark for measuring the new CEO’s success. One responsibility for any CEO is to build and maintain credibility, especially when it comes to dealing with key business partners, not only major software vendors, carriers and suppliers but also with business customers – all at a CxO level.  While they certainly built a major player in the wireless industry, with all the recent turmoil it became apparent that Mike and Jim had burned themselves out. As shown at Microsoft with Bill Gates becoming Chief Software Architect (in the years prior to his retirement), it is necessary to keep on board the founding visionary in a consultative role for at least a couple of years. Mike Lazaradis can continue to bring technology experience and vision that can benefit the company as long as he remains a reference resource and not an impact on operations.
5. Finally on the issue of break-up. It’s not an option; a breakup would destroy the company. As mentioned when the Playbook was first launched, RIM has a significant portfolio of wireless and handheld device assets. It also has services such as its network operations centres that ensure both security and minimum wireless spectrum overhead. But history shows that one needs to control the entire ecosystem to have a successful product line – need I mention Apple? On the other hand RIM’s technology, especially with QNX and its user base, opens doors for unique applications (as shown with the Porsche demonstration). It’s the integrated options available that can create the true value. The challenge here is to find the “killer” apps or set of apps that can uniquely distinguish Playbook and BlackBerry as real time communications devices and not simply a content delivery device. Thorsten explains it quite well in this video:

http://www.youtube.com/watch?v=6cQyZKukGQ8

Bottom LIne: RIM is turning out to be an interesting business case study. Here’s a company that has over $20B in annual sales, $1.5B in cash, 75,000,000 users, no debt and so far has remained profitable. It has a major patent portfolio and unparalled wireless expertise in areas such as security and efficient data delivery. Without QNX we would not even be having this discussion and RIM would really be struggling – their old OS had outgrown its viability. In  some ways RIM is in a position most “startups” would be envious to be in.

Yet there’s the declining market share in its major market where it can only offer its current product line for another six to nine months; however, it’s still a major market leader in many other markets (U.K., Indonesia, etc.) Yet, by its new CEO’s admission it’s still got “traces of a startup”. RIM is certainly in a reboot stage but … can it re-establish itself with the combination of new market positioning, internal restructuring and a culture change to more disciplined operations? The real focus needs to be on fixing the internal operations as much as on external marketing. Unfortunately this was only buried in one CEO video from RIM whereas the media and analysts wanted to feed on sound bites about “no need to change the overall strategy”.

The only way to really measure performance of a new CEO is to set benchmarks. Presented here are five major ones that must be addressed in the next six to nine months if RIM is to succeed. As mentioned in this interview with a local Kitchener-Waterloo radio station, Thorsten needs time to demonstrate he can provide the team leadership required to pull this off.

Here’s a Financial Post story about a change that’s been in play for the past few months: Ottawa taking centre stage in RIM’s future.

(The Tweet above appeared as i was writing this paragraph. “Porter terminal” is the downtown Toronto airport; Bay St. is the Canadian equivalent of Wall Street.)

Full disclosure: My first interest is in seeing over 8,000 Canadian jobs (not to overlook all those in other countries) preserved but while meeting a market need. But this video also demonstrates the impact of RIM on the Kitchener-Waterloo community.

I have an iPad (and had an iPhone until it was lost recently – yes, I’ll replace it), a BlackBerry Torch 9800 and a Playbook. Having them all is necessary to fully understand the dynamics of the market. (I’ve had some exposure to Android devices and many acquaintances with them.) Apple’s record quarterly performance results announced yesterday certainly reinforce the need for RIM to find a unique market niche; even Tim Cook at Apple recognized that the Amazon Fire is first and foremost an e-reader and not a tablet competitor to iPad.

While in the past I have held RIM shares (since 1998) at the moment my holding is minimal.  I have never worked at RIM nor had RIM as a client. I have frequently visited Waterloo and its university for over thirty years and have attended most of their annual meetings during that time.

My only other bias probably arises from the fact that I also hold advanced degrees in Physics and Business; the combination of a physicist and experienced technology business person can be brutal when it comes to seeking success. You learn to pay attention to details, delegate, set goals and yet understand where opportunities can arise. (And I once worked for 18 months in Germany as a physicist in a business environment.)

Related articles

• Interview with Alec Saunders, VP of Developer Relations and Ecosystem Development (blogs.blackberry.com)
• QNX: RIM’s last hope? (business.financialpost.com)
• RIM CEO: QNX to Be BlackBerry’s Foundation for a Decade (phonescoop.com)
• CES 2012: RIM Pins Hopes on PlayBook 2 Software (forbes.com)

Yesterday Phil Wolff at Skype Journal brought our attention to an “infographic” from the financial due diligence-minded Credit Score Blog for Focus.com. It attempts to provide a history of Skype both from the technology and financial performance perspectives. But, in addition to Phil’s Quibbles, I have found some others.

Click on the graphic to see a larger image.

Research and Design by Credit Score Blog for Focus.com

Accounts and Users – there’s a difference!

Skype now has registered somewhere beyond 700 million accounts, increasing by over 500,000 every day. But, as has been pointed out often over the past few years, this number in meaningless since over 75% of the accounts have not been used for quite some time for at least three months. Users die, they try out Skype and give it up, a business will register new business accounts for employees who resign or are otherwise terminated. The list of reasons for not using an account can go on forever. (Unlike direct mail lists that can lose 20% of their accuracy every six months, users who move geographically can continue to use their Skype accounts provided they have an Internet connection.)

Starting with the IPO filing last year, Skype finally started to give out a more realistic number – the number of users who actually made at least one call or participated in at least one chat session in the previous calendar quarter. Whereas there were about 125 million in the April – June quarter of 2010, this number has risen to over 170 million for the January to March quarter 2011. In other words this is the number of active users.

So while Skype had registered over 100 million accounts in 2006, they did not reach the level of 100 million users until late 2009 or early 2010. It’s those active users whom become interesting to Microsoft as they work with their Skype team to develop plans for Skype’s (and Microsoft’s) growth.

Skype’s history with Video Calling – Sorting Out High Quality Video and HD Video

Yes, Skype introduced video calling in early 2006; it first came of out beta with Skype for Windows 3.1 in early 2007 delivering 320 x 240 images @15frames-per-second . However, in November 2007, Skype showed it got serious about taking the lead in video calling with the introduction of High Quality Video which required a new line of Logitech webcams, new video codecs from On2 (since acquired by Google) and a new version of Skype for Windows (3.6) that could deliver VGA resolution (640 x 480) at 30 frames-per-second and over a 384 kbps upload speed Internet connection.

With its superior quality that delivered in-your-face real time video, Skype video took off to the point where today video calling represents about 40 per cent of all Skype calls.

In 2010, with the launch of Skype for Windows 4.2, Skype announced support for 720p HD video calling; at the time it only supported webcams from two vendors: the FREETALK Everyman HD and Facevsion N1 webcams. HD video was off to a rocky start; it required at least 1.2 Mbps upload speed on the Internet connection (above the upload speed of most broadband connections) and there were call reliability and stability issues. With a firmware upgrade in December (FREETALK, Facevsion) and the release of Skype 5.0 for Windows, HD video calling has become a much more reliable service. Recently Logitech released a line of webcams that support HD Video calling. Over the past few weeks I have received HD video calls from Logitech webcams where callers had only a 1 Mbps upload speed.

With respect to the Infographic:

• Skype released High Quality Video in late 2007; they did not release HD Video until 2010.
• A major milestone for Skype video calls was the introduction of video calling on iPhones at the end of 2010.
• Finally, in early 2011, Skype took Group Video Calling out of beta, increased its capacity to ten participants and offered it as one component of its revenue generating Skype Premium service.

Microsoft Anywhere Graphic – What Happened to Outlook and Office?

The infographic attempts to illustrate all the potential Microsoft products that could benefit from embedding Skype technology and services. But what happened to Office and, especially, Outlook? At the press conference there was, to say the least, a strong emphasis placed on how Skype could be integrated with Outlook for both consumer and business use.

For Windows users, Outlook has become the core resource for managing users’ contacts; many products’ address books and scheduling features rely on the user’s Outlook Contacts and Calendars as the primary source of contact and calendar information. Outlook is critical for synchronizing a mobile phone address book, keeping the user’s schedule current and integrating Outlook information into third party collaboration services as well as many other Microsoft and third party offerings.

Full disclosure: the author’s first association with Skype involved beta testing of the Skype Email Toolbar, an Outlook plugin that allows you to make Skype calls directly from Outlook. However, the Skype for Windows client now incorporates an optional feature for importing Outlook contacts into a user’s Skype contacts, so this plugin has become a secondary offering.

I’ll place my bets on Outlook being the first or second Microsoft product to find Skype embedded into it.

Skype and Its Competition

That competition bar misses a couple of key aspects of Skype:

• Internationalization: Google Voice really only works  if you live in the U.S.; after all these years it still has no offerings for the rest of us around the world. Personally I have set up a Google Voice account during a recent visit to the U.S. but it’s of no use to me when at home in Canada.
• Technology: Over time Skype has developed some very unique technology that delivers a unique conversation experience; for example,
  • the SILK codec provides crystal clear voice on Skype-to-Skype calls, even when calling from/to iPhones and Android phones.
  • Video: Skype is unique in providing 640 x 480 video calling @ 30 fps via a simple user interface. Since its introduction in late 2007, there has been no competitive service with such a large network of users that can deliver this quality of real time video calls. And now HD video capability is starting to penetrate the user base.
  • Network connection: Skype has introduced features that monitor and adjust to the conditions of a call’s network connection such as to minimize the chance of call failure.

Bottom Line: While the infographic is a good attempt at outlining both Skype’s financial background and user experiences, it is missing some key elements that have the potential to contribute significantly to Microsoft’s ability to benefit from a $8.5 billion acquisition.

The key risk lies in how effectively Microsoft’s various product teams can work with the Skype teams to develop world changing communications-enhanced offerings. It’s a challenge to Microsoft’s ability to support real innovation. This represents the best opportunity for demonstrating Alec Saunders Voice 2.0 Manifesto where talk is the baseline, the meter is “off” and communications-enhanced applications are the value creators.

Related articles

• Microsoft Acquires Skype – The “Amber Mac Test” (voiceontheweb.biz)
• Microsoft Acquires Skype – A Most Interesting Marriage (voiceontheweb.biz)
• Microsoft Acquires Skype – Steve Ballmer Does Skype Europe (voiceontheweb.biz)
• Microsoft Acquires Skype – An Investor’s Perspective (voiceontheweb.biz)
• Skype’s Rollercoaster History [INFOGRAPHIC] (mashable.com)

When I made those initial Skype for iPhone calls last weekend, not only did I gain a quick appreciation of the voice quality but I also realized that the forthcoming multi-tasking feature of iPhone OS4 could offer new possibilities. Yes, multi-tasking would facilitate Skype’s Instant Messaging in an “always-on” mode but there could also be an even richer experience for business users.  Having attended eComm 2010 a couple of months ago, I recalled that Ringio, who introduced their offering at that event, may have that business-savvy application.

Basically think of Ringio as providing a “lite” customer relationship manager for businesses relying heavily on mobile communications. When you either call a contact or receive a call from a “known” contact, Ringio can bring up contextual information that provides background information that may assist both your conversation and team productivity. In fact, they recently demonstrated this concept with their announcement of Ringio Mobile PBX for Android. Fellow Voyces.com blogger Larry Lisser positions Ringio in All hail the Mobile PBX. Ringio calls it like it is:

To be clear, Ringio’s not expecting you to have desk phone. The focus of their innovation is to drive context into phone conversations, leveraging the information we already store about a given inbound caller (ie. when they called last, who they spoke to, what they bought last, when they were last served, and so on). Ringio is one amongst many moving quickly to bring far more context, than simply Caller ID, to a phone call.

With its aggregation of background notes, conversation outcomes, voice mail messages, online presence status and call logs, Ringio appears to bring elements of enterprise level computer-telephone integration to the small business entrepreneur. While only launched six weeks ago, according to a recent interview with Ringio CEO Sam Aparicio, they are already gaining traction with consultants as well as small business sales and tech support teams. Joining Google Market Place, with integration into Google Contacts and GMail, certainly assists in building awareness.

Sam went on to explain that Ringio can bring a unique form of team building and collaboration for a small business. When job descriptions and responsibilities can have a lot of gray areas as the business builds its revenues and customer base and any team member could be answering the phones, with Ringio any member answering a contact’s call can readily be aware of previous conversations with other team members.

While they have delivered an application for Android, Ringio needs to consider offering not only an iPhone application, potentially supporting Skype for iPhone (and iPad?), but also a BlackBerry Super App to support the largest North American business smartphone vendor today.

Here’s the other challenge for these applications – whether it’s the iPhone, BlackBerry or one of many Android offerings, holding the phone up to the ear of course makes it impossible to see this information during a voice conversation. Aside from using the speakerphone mode, would this be an ideal application for having a full headset (mic plus speakers) for the various smartphones?

Bottom line: Ringio should provide a good gage on how readily the Voice 2.0 Manifesto, with its focus on “applications as the value creators”, will be implemented into the mobile smartphone market space. Where generating awareness can be a larger challenge than delivering the appropriate technology, users in the broad small business market space need to see user interfaces and to have user experiences that encourage adoption. Calling a product a mobile PBX and actually delivering with a broadly accepted solution is the execution challenge for Ringio.

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• Skype for iPhone 2.0 Released: 3G Skype-to-Skype Calling to Require a Fee (voiceontheweb.biz)
• Skype for iPhone 2.0: The Commentary and The Reality (voiceontheweb.biz)
• Voice and Chat over iPad: Skype and Truphone Fill the Gap (voiceontheweb.biz)
• FREETALK Connect: Liberating Small Business from the Telco Oligopoly (voiceontheweb.biz)
• Skype on 3G mobile impresses (saunderslog.com)
• Skype iPhone app hits five million downloads (v3.co.uk)

Since its release late Saturday, Skype for iPhone 2.0, with its support of calling over 3G carriers and superwideband audio using Skype’s SILK codec, has set the blogosphere awash with two genres of commentary: those who seem to think the end of free Skype calling is approaching as an Armageddon and those who recognize the launch of Skype for iPhone 2.0 as not only setting a new benchmark for mobile voice calling, especially for call quality, but also having a significant impact on the overall smartphone market.

Re the “small fee” (now set to start at the beginning of 2011), I simply say this is one more sign that Skype is a business with investors who are looking for a return. Nobody can argue about its value-add, both in terms of providing international mobile calling convenience but also by delivering a significantly enhanced user experience through establishing a new benchmark for mobile call quality. This outcome definitely justifies a “small fee”, provided it is not obsessive. Alec Saunders, author of the Voice 2.0 Manifesto, positions this issue appropriately in “Skype’s “small fee” is noise, guys”:

Sometimes you have to really shake your head at the quality of the commentary on the internet.  Fact: Skype has finally released a version of Skype for iPhone that supports calling over 3G networks.  Never mind the fly in the ointment that all the commentary is  stuck on – the fact that Skype wants to charge a “small fee” for you to use it on a 3G network.  Frankly, that’s noise.  People will pay for the ability to make a high quality Skype call on 3G, and not pay their carriers long distance termination charges in foreign markets.  So long as the fee is reasonable, nobody is going to object.

Alec goes on to make several points about what the launch of Skype for iPhone 2.0 really means; his post is well worth the read. (Full disclosure: as Canadians who participate in the Canada Pension Plan, Alec and I each have a $17.50 investment in Skype.)

As for the new benchmark for mobile phone call quality, there are several impacts. But first, if you have not heard it already, click here to hear Skype for iPhone 2.0’s “near CD-quality” call first hand between myself and Dean Elwood in the U.K.

Andy Abramson comments on how deeply Skype developers may have gone into the iPhone hardware to achieve this result in “Skype on 3G-Something Borrowed, Something New”; he concludes with:

How good? Well put it this way..why would anyone with an iPhone want to call over old AT&T after their first Skype over 3G call. Oh, and yes, it makes Skype on Verizon sound like, well, a plain old telephone call…..Ma Bell, you’re back sounding like you’re old self. The way the boys in the labs have always dreamed and said you could.

Over at Voyces.com, in “Skype for iPhone over 3G: An Industry Benchmark Game Changer for Skype”, I have commented on the broader impact of Skype for iPhone’s support of SiLK. Simply put, it has the potential to place Skype as a key mobile communications software infrastructure supplier across the entire mobile phone industry. Not simply because of the technology itself but rather as a result of demonstrating high quality voice calls accessible to Skype’s several million users through a single application for the iPhone resulting in several million end user experience – the “Skype network effect”.

With the support of SILK in a smartphone application that runs over both 3G and WiFi, calling costs become almost secondary to an exceptional end user experience with voice quality on mobile devices.

SILK has now become not only a benchmark but also a key communications infrastructure element. End users will pay for a quality experience, especially when it impacts business productivity. Both wireless carriers and smartphone vendors need to rush to ensure they have incorporated Skype’s SILK technology into their offerings. Otherwise the iPhone (iPad and iPod Touch) have one more key feature that sets them apart from the remainder of the smartphone users.

Dean Elwood sums up this “Skype network effect” best when he talks about the Skype “on-net” calling:

The proposition for Skype’s shareholders is the fact that you have to be on the Skype network in order to get the “near CD-quality”. Because you don’t get hi-def when you call a regular landline or mobile, only another Skype-enabled device. So if you want to make free calls to your friends, they all need to get on the Skype net.

and concludes with…….

It’s the mass-market adoption of Skype that makes it work. You need to be on their network, along with other contacts you call regularly, to make it work for you. So in the absence of interconnect, which Skype do not do, your a. n. other mobile VoIP carrier of the future has to start from the ground up.

Bottom line: Dean backs up his observations by telling me that he will be making most of his voice calls using Skype for iPhone when away from his office. It would be most interesting to see not only if this drives more users to using Skype as opposed to the carriers’ voice channels but also the fallout for the transition of communications from a very hardware-oriented infrastructure to a complete software infrastructure operating totally “in the cloud”.

Next: the questions that remain to be answered going forward.

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• Skype Pushes iPhone 3G Voice Fees Until 2011 (iphonesavior.com)
• Skype 2.0 for iPhone: Is it worth subscribing for 3G VoIP calls? (reviews.cnet.com)
• Skype on the iPhone Goes 3G … Finally (gadgetwise.blogs.nytimes.com)
• Skype on 3G mobile impresses (saunderslog.com)
• Skype on Mobile over 3G: A Skype Video Calling First Experience (voiceontheweb.biz)
• Voice and Chat over iPad: Skype and Truphone Fill the Gap (voiceontheweb.biz)
• Skype for Mobile – Now Focusing a True Skype User Experience (voiceontheweb.biz)
• Skype’s SILK Codec: Working Towards Adoption as a Standard (voiceontheweb.biz)

I first met iotum CEO Alec Saunders as a competitor in the Canadian PC software market back in 1994. I was Canadian Country Manager for Quarterdeck whose QEMM-386 memory manager had been the tops-selling utility for DOS-based PC’s; Alec was Microsoft’s Canada’s Product Manager for DOS where they were introducing some memory management techniques into DOS 5 and DOS 6. (All to deal with the violation of the Bill Gates’-attributed memory maximum statement “640K is more memory than anyone will ever need.”)

But Quarterdeck’s development team kept coming up with ingenious ways to move drivers and other small utility programs outside the “640K” limit. QEMM-386 allowed users to, say, connect to networks while running multiple programs in this memory constrained environment using Quarterdeck’s DESQview. With the introduction of DOS 5 in 1991 and DOS 6 in 1993, QEMM-386 sales actually increased as awareness of memory management as a resource issue increased. Of course the introduction of Window 95 in August 1995 killed the need for a memory management utility altogether. But the point here is that Alec and I participated in a competitive environment that was actually mutually beneficial to us both; thus defining “co-opetition”.

We both moved on – Alec to Microsoft headquarters to become the original Internet Explorer Product Manager, myself to Los Angeles to work with a restructuring team at Quarterdeck. We would meet at conventions (usually Comdex) and occasionally exchange emails and phone calls for whatever business reasons. Alec returned to Ottawa in 2001 to take up product management and marketing positions with a couple of startups.

In April, 2004 I received a phone call from Howard Thaw, another acquaintance from my days involved with distribution of PC hardware and software in Canada, asking me to have a coffee with him during one of my trips to Ottawa on another project. He presented me with documents supporting his and Alec’s proposal to start up a new venture involving “applications that take advantage of the opportunities opened up by the emerging IP-based communications space”. The philosophy behind this goal is summed up in Alec’s Voice 2.0 Manifesto, pointing out that the value-add going forward in the communications space will be the applications.

After several iterations and developing some unique software, as well as winning a DEMO God award in 2006 iotum launched in the fall 2o07, initially as a Facebook application, Free Conference Call, a multi-party conference calling service which evolved over time into supporting the complete conference call process; the outcome then relaunched as CalliFlower in June, 2008. Through all this time I have also been privy to many of the financing trials and tribulations Alec and Howard have encountered as a startup.

Fast forward to the fall of 2008. iotum had decided there was an business opportunity in making an iPhone application for participants in CalliFlower conference calls.

Update, April 22, 2009: The posts previously linked here related to an issue that has subsequently been resolved satisfactorily with the developer who was the subject of the posts; the posts have been removed. However, I leave the remaining content in this post as it does make a point about how any outsourced service or outside contractor needs to be viewed as a team member even though they don’t have full “employee” status.

However, Alec sums up the situation very succinctly in the third post:

The lesson to be learned here is pretty simple.  When you bring a contractor into your organization you’re adding that person, albeit temporarily, to your team.  You expect to be able to work with them, through good and bad. To do that demands a certain generosity of spirit from all members of the team.

All across America, businesses are waking up to the reality that in this economic environment, team work is the key to getting through this crisis.  Whether it’s GM and their unions, the banks and their mortgagees, or the tech start-ups in Silicon Valley, businesses are learning that accommodation, flexibility, and sacrifice, not egos, are the formula for success.

When [a contract developer] failed on his first deliverable as part of our team, we simply worked through it with him.  But when we asked him to return the favour, he refused.   That’s why, in my opinion, he [was] not [at the time] much of a team player.

And that’s the reason I couldn’t [at the time] recommend [developer name] to my friend.

We had a similar experience at Quarterdeck when developing a Voice Over IP application called WebTalk in 1995. We needed additional resources beyond our internal development team, including a developer company to develop the codecs. Part way through the project, they tried an “extortionist” play. They quickly learned that, if you take on a development contract, it’s not about just delivering code; it’s also about demonstrating that you have the business smarts to realize that, even when you’re not an employee, you – as a contracted developer – better be prepared to play as a member of the team contracting your development expertise. And, as a team member, you work through the problems, including the financial issues, with from the perspective of being a team member.

There are many opportunities arising for developers in today’s communications markets, not only in the smartphone app store space (Apple, BlackBerry,etc.) but also with other platforms such as Skype and WordPress. If you’re a contract developer with this expertise, ensure you are comfortable, not only with the thrill of technical development but also the ride of working with startups who may be otherwise resource challenged, including financially – especially in today’s economic environment. You never know when your co-operation may result in having been a participant in that breakthrough “brass ring” opportunity.

In my thirteen years of running a consulting business, my clients have occasionally been challenged financially. Yet, in all circumstances, they brought their issues to me, we worked out a payment or compensation plan and I eventually was paid. (Some careers died in the process where a management change was involved.) But without that flexibility, I would never have received in one case, about two years later, funds that I needed to help my oldest son complete his medical degree at Stanford.

In today’s environment, rife with both opportunities yet significant economic challenges and barriers, it’s about building relationships for the long term, not burning bridges for short term gain.

Following a link from Dan York’s update to his post outlining technical details of Skype for SIP, I found a link to this post from IfByPhone’s Irv Shapiro: Why Skype for Asterisk is more important than Skype for SIP.

First, Irv has done perhaps the best articulation yet differentiating Skype for Asterisk from Skype for SIP:

Skype for Asterisk, which is still in closed beta, is a true Asterisk channel driver. This allows Asterisk based solutions to make, receive and transfer Skype calls. A significant capability of the SFA solution is its support for terminating a call to a Skype user name, for example a PC based user of the Skype client.

Skype for SIP is a very different animal. This service provides VOIP trunk support for existing SIP based PBX systems, which may include Asterisk. Unlike SFA where calls may be placed to any Skype user, SFS calls may only be terminated to PSTN end points.

Irv goes on to provide his view on how this plays in the Voice/Telco 2.0 marketplace. Then he provides an example of where he sees the benefit of SFA for hosted services:

From our perspective as a cloud telephony company, providing hosted telephone applications, SFA is much more interesting. While either service would allow us to provide IVR services to Skype users, the SFA Asterisk channel driver architecture allows us to terminate calls into call centers with no PSTN transport. Each call center Agent would just utilize a headset connected to a computer running the traditional Skype application. Customers calls would be able to originate from either a PSTN device or a Skype client, then route through the Ifbyphone IVR infrastructure and terminate to a call center via Skype’s computer to computer transport. This has the potential to change the cost structure associated with supporting call centers. A Skype based call center would not require a PBX or for even any centralized telephony components. The call center agents could be virtually located anywhere in the world on high quality Internet connections.

Keep in mind that calls terminated on Skype, as demonstrated on the 3 Skypehone service, have no associated termination charges. Long time Skype-based call center provider OnState has already demonstrated this business model; their hosted OnState Call Center service eliminates the need for a call center PBX. While a (prospective) customer can call in via several modes (Skype Online number, DID numbers, 800 numbers, Skype or click-to-call from a website), all the calls are terminated on Skype via their agent client.

Andy Abramson at VoIP Watch has, in a reverse manner, demonstrated this cost advantage also in his post, All Google Voice Needs Is a Little More SIP and Skype’s Game Changes, where he points out that, if Skype for SIP did terminate calls on a Skype client (i.e. – supported SIP—>Skype), then one could terminate Google Voice calls at a Skype client. But, as I have commented on that post and included in Skype for SIP: Sorting Through the Issues, Skype for SIP supports three types of connections and “SIP—>Skype” is not one of them.

Irv demonstrates that Skype for Asterisk has some interesting potential; it’s simply going to require more creative innovation that goes beyond simply making call connections through a SIP interface. It’s a matter of invoking Alec Saunders Voice 2.0 Manifesto which points out that the value lies in the applications.

Yesterday eBay held an analyst event at its San Jose headquarters location with a keynote by eBay CEO John Donahoe followed by presentations by various eBay executives and Skype President Josh Silverman.

Josh’s presentation broke a lot of new ground for Skype addressing issues such as:

• How does Skype generate revenue?
• What drives Skype’s cost model?
• How will a software company change real time communications in ways that legacy telcos cannot?
• How is Skype structured to address its various market opportunities?

In a long-term financial outlook issued by eBay in conjunction with this event, they state:

Skype is expected to more than double its revenue to over $1.0 billion in 2011. With more than 400 million registered users currently, Skype’s metrics continue to accelerate as the company further establishes leadership in free and paid Internet-based voice and video communications, with growth opportunities in core consumer, mobile, businesses and platform. Skype’s leadership position has strengthened over the past year, driven by a new management team and the launch of many innovative products.

The overriding aspect of Josh’s presentation was repeated emphasis that, fundamentally, Skype is a software company. As verified by many of the presentations at eComm 2009 last week, Josh stated that there is a communications paradigm shift going on where hardwired networks and devices are gradually being replaced by software-based networks and flexible devices. Skype’s “opportunity is to become the world’s leading communications software company.” Josh’s analogy: It was not the railways that invented air travel; in a similar manner, software will drive the future of real time communications innovation and efficiencies going forward, not the existing telcos. To reinforce his point, Skype will not simply be on familiar telephony devices, it will show up in intelligent TV sets, car dashboards and intelligent public access terminals such as bank ATM’s all tied to a common network.

Josh continued: Communications is no longer just about voice; it’s now multi-modal: mood messages, chat, voice calling, multi-party calling, video calling (did I also hear him mention multi-party video calling?) and online screen sharing. Where and how we communicate is expanding: laptop, mobile phone, flat panel TV’s – “any connected computing device with the addition of software becomes a communication device”.

He went on: With hardware and network access becoming a commodity, the opportunity for margin is to capture it at the application layer. Software companies will drive the innovation in the industry, drive the demand for new hardware and better access. (Did he effectively read from the Voice 2.0 Manifesto?) Solutions must be device and network agnostic.

How big is the market? The $300B EBITDA of the $1.4T communication industry revenue is almost equal to the total revenue of global ecommerce and Search.

How did Skype build its business last year? Inherent reliability; it “just works”. While so much of Skype’s operating environment stands outside Skype’s control, yet Skype must try to provide the ability, through its software, to readily adapt to these conditions, especially at the user end point.

How does Skype make money?

• From user services:
  • What’s free (at no cost to Skype)? Skype-to-Skype calling, video calling, Chat/IM, Multi-Party calling, File Transfer
  • What’s Paid? Subscriptions (unlimited calling), SkypeOut (pay-as-you-go), Online Numbers, Voicemail, SMS
• From a partner perspective, licensing opportunities. The Skype-Nokia and Skype-MySpace relationships are two examples. Hardware royalties are another source. Carrier relationships, such as the 3 Skypephone example discussed below, are a third source for what are effectively licensing revenues.
• The third leg of revenue generation comprises some advertising opportunities that have arisen.

Yet Skype has inherent fundamentals that have made it profitable for the past six quarters:

• negligible customer acquisition costs (mostly word-of-mouth; compare with Vonage whose customer acquisition costs are in excess of $250)
• negligible capital expenditures and network maintenance costs (being peer-to-peer it’s Skype’s users who invest in capital items, such as PC’s, routers and Skype hardware, and in network maintenance through their Internet subscriptions)
• pre-funded accounts which result in negative working capital where subscriptions and Skype credits are paid up front but the revenue is recognized on a pro-rated quarterly basis (Have you ever noticed there’s no “phone bill” sent for payment once a month? – Skype has no collection costs)
• strong free cash flow conversion ($1.00 of EBITDA for Skype is almost $1.00 of free cash flow)

The results: Skype’s profitability has grown to the point where they achieve 20% “segment margin” an amount that Skype contributes to eBay’s overall profitability (segment margin makes no allowance for allocation of eBay corporate costs).

Additional data provided:

• Skype continues to add over 350,000 new account registrations per day
• account registrations are distributed geographically as shown on the map to the right; he labelled North America as a “developing” market with rapid growth
• A year ago Skype celebrated support of over 100B cumulative calling minutes since its launch; in 2009 Skype expects to do this same number within the year
• Over 8% of the world’s international calling minutes are on Skype
• from December 2007 to December 2008, video calls increased from 27% to 34% of calls
• due to its peer-to-peer architecture only Skype can deliver a video experience for free, and at performance levels unequalled elsewhere.
• while active users rose 39% in Q4 2008, engagement, defined as ‘calling minutes per active user’, rose by 72%
• while calls under 2 minutes duration dropped from 41% to 33% comparing October 2007 to October 2008, calls in excess of 10 minutes rose from 37% of calls to 47%. Josh attributed this to higher reliability and call quality.
• small changes make a huge difference:
  • increasing penetration of paid products by 1% brings in $60MM of additional revenue
  • to be a billion dollar business, Skype needs its existing paying users to make just one more call per day
• Skype’s marketing approach was to drive awareness through embedding Skype into the “popular culture”, where it has been used on Oprah, Who Wants to Be a Millionaire?, CNN and other news reports.

Going forward Josh talked about three markets where Skype has barely scratched the surface: core consumer (size: $240B), mobile (size: $603B), and business (size: $203B).

For the consumer market, Skype has four approaches:

• continue driving new users (by building “communities” or leveraging social networks)
• better promote its paid products (make it obvious, upon registration, where paid products can be found – not buried three levels deep in the “My Account” tab)
• increase revenue per paying user (encourage adoption of revenue services based on calling patterns; continued focus )
• monetize free users via advertising (but be smart about it, do it tastefully and carefully all the while protecting the core business)

[Author’s note: Execution on the last will be interesting, given some experience with “free” voice services that have attempted to “blatantly” introduce advertising into calls themselves.]

Josh went on to discuss mobile, but that’s the subject of a separate post. However, take a look at the Skypephone on 3 success story:

• Over 500,000 units have been sold; this generates a monthly revenue stream to Skype
• 3’s margin on Skypephone is 20% higher than their average margin across all handsets
• 79% of Skypephone customers are new 3 customers

As for Skype’s business offering:

• 35% of users use Skype primarily, or often, for business
• adoption into business often grows out of individual employees using  Skype to call friends and family when on the road, start using Skype for multi-party calls, do video calls with customers and vendors
• leads to a call to Skype from IT managers who are getting pressure from their colleagues’ experiences (and, by the way, you can charge for it)
• needs to expand from being a product to being a solution that fits with other PBX and software solutions they are already working with
• create the infrastructure required to provide service and support services (revenue opportunity)
• build out a channel that reaches out to businesses that are familiar with dealing with VAR’s

Going forward:

• Act 1: (completed) one platform (PC’s), one revenue stream (SkypeOut), one market segment (long distance calling), one primary service (voice), one primary market (mature Internet markets – Europe and Asia) and one target user (consumers)
• Act 2: (now to 2011) is about “Many” – many platforms (PC, mobile, TV, web), diversified revenue streams (subscriptions, licensing, advertising), including business subscriptions; many conversation modes (voice, video, chat, collaboration tools), many regions and many target markets
• Act3: (2012 and beyond) “Any” – any mode, any platform, anywhere, multiple market segments, established products, regional ubiquity and mature target markets.

Josh’s forecast for 2011:

• More than double revenue in excess of $1B annually
• Maintain segment margins of 18% to 20%
• More diversified revenue streams: telecom, service and licensing fees, advertising)

His summary:

• Accelerating growth, outstanding fundamentals
• Attacking an enormous opportunity and positioned to win
• Business is getting stronger

Bottom line: For the first time a CxO level Skype executive has put out an extended set of benchmarks and guidelines against which their activities can be measured by all; the challenge now lies in the execution. And analysts finally get a more detailed view into this “mysterious” and oft-questioned Skype acquisition by eBay in 2005.

The audio recording and complete sides can be found for 30 days: click here and then select “Analyst Coverage” in the left sidebar. (viewer registration and Windows Media Player or Real Audio Player required). Or go directly to this link. Josh’s portion starts at 2:37:15 into the recording.

Related articles by Zemanta

• Nokia to preload Skype onto handsets beginning in Q3 (mobilecrunch.com)
• eBay: Good in Parts (readwriteweb.com)
• Is Skype for sale? (news.cnet.com)

Last day to register today for Regular Pricing; Late pricing applies for registrations after Feb.17, 2009. Enter “one touch” for a 20% discount.

Two weeks ago eComm 2009 organizer Lee Dryburgh observed that:

With the heavy backdrop of economic doom and gloom everywhere I’d been finding it ever more strange that virtually every company I was dealing with in relation to the 2009 conference, was reporting accelerating business let alone [as opposed to] flat or declining business.

Via a Skype multi-party call he held a virtual panel discussion involving:

• Jonathan Christensen (Skype)
• Irv Shaprio (IfByPhone)
• Rodrigue Ullens (Voxbone)
• Graham Brierton (Voicesage)on this topic.

When asked about today’s economy he repeatedly found eComm 2009’s sponsors saying “Oh no, we’re actually doing better, due to the downturn”. So he asked each of the panelists what their offering was doing such as to accelerate their business.

Graham Brierton (VoiceSage):

For example, we had a company that the key thing they wanted to do was bring in their debts cheaper and quicker, instead of reminding people to pay their bills.  Part of the paying the bill process was transferring them back into a call center to actually collect the money.  What we noticed when we analyzed the data was they were getting a hell of a lot of people that were wanting to pay between 3:55 p.m. and 4:05 p.m.  We still don’t know the reason why there is a peak at that point, but there is a peak at that point.

One of the issues that these guys had was that they couldn’t actually take all of those calls because they had a shift change at 4:00 p.m.  They were unaware that because they had a shift change there were a lot of people that wanted to engage in a process with them but they weren’t allowing it because of their internal business processes.  They actually changed that.  That came as a direct result of simply looking at the data generated from the interactions that their customers were having with us, and us trying to collect money from them.

Irv Shapiro (IfByPhone):

Batteries Plus is a franchise-based business in the United States and Canada that has hundreds of retail stores that sell only batteries.  If you need a battery for anything, you go into Batteries Plus or you go to their website and you can purchase a battery.

In many, many cases, people need a battery right away so they want to go to a store.  Batteries Plus was finding that they were fielding hundreds and hundreds of phone calls to stores asking for routine information such as “What are your hours of operation; which is the closest store to my address…?”  We automated that process for them.

In fact, they automated it themselves by going to our website, provisioning a toll-free number, putting in a IVR on the front end that asked a couple of very simple questions to determine whether the customer was looking for information about batteries.  In that case, the call was transferred to a central call center corporate.  Were they looking for the closest location, in which a geo-coded application automatically provided them with the closest location and driving information.  If they were looking for store hours of operation, same geo-code process except in this case we retrieved the hours of operation.

They found a dramatic increase in the productivity of their in-store personnel because now those personnel could concentrate on spending time with customers in the store.  The side effect of that is they sell more batteries.

Rod Ullens (Voxbone), who reported business growing at 15% per month:

At some point, they [cloud based services such as VoiceSage and IfByPhone] need to reach the PSTN.  Most of them actually need a telephone number to be activated.  The bigger they get, the bigger we get.  That’s already one reason.  It’s not necessarily because of us, but because of our customers that have services that are interesting, and we grow with them.

If you look at the way numbers were used in the past, where you had a telephone number that was just linked to a physical location, that’s all you can do with it.  The cost to dial such a number is pretty expensive.  What we’ve done is to just completely take away the geographical link.  Now a number is just a software-based identifier that people can use to call you on.  It’s very flexible.  You can just build up a service.

First of all, that service can be completely Internet based.  You can just use telephone numbers from Voxbone to make it reachable from traditional phone networks, from mobile phones and so on.  Basically, you can be a company and have a virtual presence in a lot of countries.  From day one, you can start a service provider, in forty-five countries.  I think that’s one major reason why we’ve grown, especially now.

Jonathan Christensen (GM Audio and Video Platforms, Skype), in response to Lee’s question: “What do you think is driving these minutes?  Is it businesses using Skype, for a change, in order to save money, for example?”

We’re seeing two things.  One is just consumer migration to value; people want to avoid long distance, but we also see in the consumer space a network effect around your friends being there, the quality being great, it being convenient and easy.  We have a large constituency of people where it is the convenience, free, and easy factor.

On the business side, Gartner, for example, recently said they kind of backed off their position that Skype is dangerous, evil, and will introduce Trojans into your network, and so on.  We hear; we have a bunch of case studies and we hear more and more from corporate IT, these commandments to their workforce saying, “When you’re travelling, when you’re making long distance calls, when you’re going to be faced with insane roaming charges, please try to use Skype.  It works, it’s easy, you can download it, it’s free”.  We are seeing acceleration in that sector, as well.

These are snippets from the discussion; Lee has transcribed the entire session in a eComm 2009 blog post.

Note that while all the participants in this call will be presenting, Jonathan Christensen will be delivering a keynote presentation: “Codec Evolution and Industry Proposal” along with a Skype announcement.

Bottom line: if you’re looking for value in communications services that drive business decisions, if you want to be a player in the emerging communications space, eComm 2009 provides the best opportunity to get a three day education in how the Voice 2.0 world will evolve. It’s an opportunity to network with the thinkers and business leaders who will be providing services for that market space. That’s why I’ve convinced a friend who is a 34-year veteran in the Canadian telecomm market to come; he wants his new consultancy to have relevance going forward.

Register here; enter “one touch” to get a 20% discount. Speakers. Schedule.

Related articles by Zemanta

• SILK: Skype’s New Audio Codec Sets New Performance Standards for Voice Conversations (voiceontheweb.com)
• Unexpected iNum Adds To DID (stuffem.wordpress.com)

Over the past eighteen months CalliFlower has evolved into a complete audio conference call service. While they still offer a basic free service, in January they launched a premium service that provides document sharing, local calling numbers in North America, Europe and Australia as well as a feature that allows administrators to set up, but not necessarily participate in, a conference call. The most important feature is “no per minute charges”; you get “unlimited calling with an unlimited number of participants”.

Last week, over at Web Worker Daily, I wrote a post “Search Transforms CalliFlower Sessions from Events to Social Media Elements” where CalliFlower had announced that they had made all public CalliFlower sessions searchable such that they become part of an ongoing social networking conversation. My conclusion:

If you are into social networking by engaging your customers through blogs, Twitter and/or Facebook, check out CalliFlower as one additional element for carrying on your ongoing public customer conversations.

Yesterday the CalliFlower team woke up to learn that their CalliFlower for iPhone had been added to the Apple App Store overnight. (Yes, apparently “it just happens”; Apple uploads new or upgraded applications with no notice.) The iPhone application provides access to all of CalliFlower’s features with the exception of document sharing (which requires Adobe Flash – an issue for all smartphones). Set up a call, see your upcoming calls, see who’s on the call, participate in the chat wall and, of course, call in from your iPhone – they’re all there providing a unique mobile smartphone conference call experience. iotum CEO Alec Saunders provides more details in his post “CalliFlower on iPhone releases“  where he states:

And Calliflower on iPhone – well, let me just say that you’re going to love it.  We’ve remained faithful to the Calliflower experience on the web, while taking full advantage of the iPhone experience giving you the hands down BEST mobile conferencing experience ever.  Here’s a few examples of what I mean.

Check out my Web Worker Daily post and Alec’s full description of CalliFlower for iPhone. Also note that CATA makes Calliflower available to 28,500 members. If you have not signed up for the service, give it a try. Or install on your iPhone via iTunes here.

Full disclosure: the author is a user of the service for a non-blogging related project with great success. I call in to CalliFlower calls via SkypeOut.

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Two weeks ago I wrote about eComm 2009 and the announcement of Skype’s participation as a Platinum sponsor. Yesterday registration for eComm 2009 opened with a Super Early Bird Special pricing of $1,190.00 available to those who register prior to December 22, 2008 – a $600 discount from the Regular price that will apply after January 20, 2009..

But, as a Skype Journal reader, you can save even more. If you enter the promotional code “skypejournal”, you’ll get a 20% discount, taking that Super Early Bird price down to $952.

The speaker list is almost complete and Lee has announced a recently revised schedule.

Also note that eComm has arranged special conference group rates at the San Francisco Airport Marriott, available until February 8, 2009; note that, as has been my own experience at Marriott hotels for several years, all rooms have high speed Internet access included in the room rate.

An excellent deal for anyone who is interested in learning about developments in the rapidly evolving Emerging Communications space where Alec Saunders Voice 2.0 Manifesto is now turning into reality.

Tags: eComm2009, Lee Dryburgh, Voice 2.0 Manifesto

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When fellow blogger Dan York joined Voxeo Corporation last October, very few of us in the IP-based communications blogging space had heard of this rapidly growing service provider. Over the next few months, sometimes with Dan’s assistance, Voxeo has become a familiar name identified with a self-financed startup, a profitable business and a very large enterprise customer base focused on supporting voice applications through third party development activity. Revenue generation comes solely from their “cloud” hosting and VoIP/SIP communications server software business. Last week, in following up on a couple of press releases, I had the opportunity to interview Voxeo’s CEO, Jonathan Taylor, and to learn much more about their success story.

Fundamentally Voxeo provides hosting environments for telephony applications, whether hosted on their in-house server “cloud” or on a customer’s premise-based servers. Developers write applications to their Prophecy platform creating XML files and SIP connections that are understood by the Prophecy-enabled servers. The Prophecy 9 client used by developers to create and manage these applications is now available for Mac OS X and Linux in addition to their legacy availability for Windows. Originally Voxeo only offered a hosted service but two years ago, in response to customer demand, they also provided the capability to support customers’ premise-based servers. Key elements of their program that have led to their success (and profitability) include:

• No charge for downloading, and use of, their software
• A focus on ease of development and deployment
• Charging customers only when a service is launched and providing business value
• Option to use either Voxeo’s hosting “cloud” or customers’ premise-based servers (usually based on the overall business case for supporting the application)
• Licensing based on a “per port” or “per minute” business model, as appropriate
• Providing Prophecy as a suite of components for SIP implementations
• A platform based entirely on open standards
• Including solutions for supporting conferencing, voice mail, call recording, speech recognition and auto-attendant requirements
• A strong channel and developer focus recognizing the role of third party professional developers as their key to implementing their enterprise customers’ services
• Lowering their customer support requirements through innovation in their software.

Two recent press releases covered:

• Launch of Prophecy 9, providing support for OS X and Linux clients to their platform as well as a new management console that not only reduces the complexity of development and associated deployment costs but also provides increased scalability.
• Acquisition of Beijing, China-based Micromethod, not only complementing Voxeo’s Prophecy suite of modules with their SIP-focused products but also providing a base for expanding Voxeo into serving the Asia-Pacific markets..

When I asked Jonathan about representative applications beyond the flexible yet effective IVR applications they can support, the list of several thousand applications includes:

• Intelligent call routing (using their call control features)
• Voice mashups providing access to, say, email or Google Calendar
• Anonymous calling services
• Facilitating calling services for children’s websites such as Nickelodeon.

Jonathan summed up their application support as providing a “services innovation platform” that operates “at the edge”, bypassing any carrier dependence beyond acting as a pipeline for their services. A final key feature is their provision of a highly accurate billing infrastructure, critical to their ability to support both their own invoicing and receivables management as well as their customers’.

Last Wednesday Voxeo issued a third press release discussing some of their business success with revenue growth of 99.7% (no rounding allowed – who would believe 100%, they say), 18 successive profitable quarters and a very high customer retention rate. Not being a public company they do not need to release any detailed financials. But building and supporting a community of 31,000 developers probably says it all.

In conclusion, Voxeo’s business represents a practical, successful and profitable implementation of Alec Saunders Voice 2.0 Manifesto, emphasizing that the value-add for voice conversations going forward lies in the applications.

Note 1: Tomorrow morning (August 26) Voxeo CEO Jonathan Taylor will be the guest for Alec Saunders’ daily Squawkbox conference call. Dan York provides more details on how to participate. If you miss the call, you can hear the recording posted on SaundersLog.com.

Note: Voxeo’s hosted “cloud” also supports connectivity to Skype for inbound calls.

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A little sanity moving into the blogosphere? Local blogging colleague Mark Evans¹, in a post earlier today, “The Wonderful World of Web 2.0 Whining”, comments on the demands for seven nines reliability and unlimited support from “free” services:

It’s bad enough no one wants to pay for anything, but the expectations placed on free services to deliver 99.99999% reliability are astounding. Come on, what do you expect for nothing?

Still, kvetching about popular services such as Twitter, Skype or Facebook when they have technical hiccups has become a popular game. When it happens, everyone wants to get into the action by complaining, criticizing, attacking and pontificating. The best one recently was Webware’s Rafe Needleman suggesting Twitter should close until its technical issues are resolved.

Ha!

For some more rational thought on the warped sense of free these days, check out broadstuff, who succinctly pointed out that:

“There is this weird idea in the air that if something is free to a user it is free to produce, and thus must still reach all those other norms we take for granted in paid-for services, like reliability, privacy etc.”

“Free” can be a great inducement to try out a service. Skype-to-Skype calling can remain free because there is little capital or operating cost associated with providing the underlying peer-to-peer service with several million positive user experiences. (You and I pay the capital cost when we buy the “peering” hardware between which Skype makes calls.) Skype is a marketer’s dream for sustainably building a user base while keeping the recruitment cost per user close to zero. Having built up this base, it becomes a target market for premium services such as SkypeIn, SkypeOut and partner offerings such as Pamela and Skylook.

Yes, we know Skype support is often via user forums and slow to respond; but then what can one expect for a “free” service. Skype can use their forums as feedback for determining which features are required to reduce support requirements while building more positive user experiences. New features such as providing CallerID for US/Canada users can drive adoption and usage.Of course they are missing a revenue opportunity by not providing a support service such as Red Hat does for Linux and Digium does for Asterisk.

Truphone, a great mobile VoIP service on Nokia N- and E-series mobile phones when in an accessible WiFi zone, finally started charging last week for calls to/from the PSTN while Truphone-to-Truphone calls remain free². Mobivox is finding they need to cover their costs, even for Mobivox-to-Mobivox calls; this tells me the infrastructure behind Mobivox Girl is an ongoing operating expense due to a different underlying architecture.

The Voice 2.0 Manifesto predicted that “voice will be free; the meter is off”. But we are now starting to see some of the lower bounds of what voice will truly cost, even if minimal, in a Voice 2.0 world.

¹Mark is known to be a heavy Skype user in his business activities.
²Truphone also launched Truphone Anywhere a couple of weeks ago allowing users to call Truphone users for the cost of accessing a “local” GSM wireless PoP.

Tags: Skype, Mark Evans, Twitter, Facebook, Truphone, Mobivox, Voice 2.0 Manifesto

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This is the fourth post in a series summarizing the current state of Skype’s ecosystem and providing a perspective on the assets in place for a new CEO to run with.

Getting to the Present

Alec Saunders’ Voice 2.0 Manifesto talks about Applications as the value creators in a Voice 2.0 world. Once again Skype differentiates itself through a two-year-old Skype Developer Partner program as evidenced by Skype’s Extras Gallery. But getting to this point was not easy; in fact:

• Developer Partners had to be true entrepreneurs who kept their vision of a value-generating application above all the obstacles encountered in not only developing their offering but also in initially marketing it. Close communication with many players at Skype was a key to resolving many issues.
• Skype needed to develop experience with all the subtleties of a developer program from building a roadmap and a viable API set to communicating where Skype would play and where they would let their Partners play in the overall market space.
• Skype’s API set has evolved over time to the point where only over the past summer, as evidenced through the Skype Mashup competition, it provides a more complete set of developer tools, including many, such as Call Transfer, that have been clamored for by developers. (But Skype is by no means finished yet with delivering API’s.)
• Skype has also developed a publishing platform, Publishing Studio, that lets developers focus on their application while providing the infrastructure to bring the application to market and generate transactions associated with the application
• To provide standards for quality assurance, Skype is in the process of certifying its partners’ software applications.

The Voice 2.0 Challenge

The Voice 2.0 Manifesto talks about three flavors of applications:

• Voice applications such as conferencing, enhanced voice mail, audio hosting.
• Voice enabled IT applications: collaboration tools, Salesforce.com, Outlook integration, call centers — all designed to assist the knowledge worker
• The voice web: mashup of voice and the Internet. Here the combination of voice and web services offers the greatest opportunities. From the Voice 2.0 Manifesto: “Examples include: spoken word real estate descriptions from the MLS coupled with mapping, voice enabled matchmaker services, customer service coupled with inventory / ordering / availability. The mix of text, web, voice, and programmatic access to data is a heady brew.”

To date we have seen several offerings in the first two categories with initial steps taken, such as with PamFax, into the last category. However, this category’s true potential will only be realized when web services API’s are incorporated into the Skype API set. (The first one is on their recently released roadmap.) One other challenge for the SDP is to extend this program from Windows to the Mac platform.

Skype Publisher Studio

In the course of judging for the Skype Mashup Competition and checking out some newer Skype Extras, it became apparent why the Skype Publishing Studio is a valuable asset and differentiator, not only for Skype but also for, especially, the Skype Developer Partners:

• provides complete install/uninstall infrastructure
• includes Digital Rights Management that allows the publisher to determine the licensing terms for the software including free trials and offerings; tolled, monthly or annual subscriptions, etc.
• connects to a transaction processor that provides mechanisms for payments via Skype Credtis, which, in turn, can be purchased via PayPal or a credit card.

Basically the Publisher Studio relieves Extras publishers of the need to worry about overhead that would be common to them all and allowing them to focus all their resources on the actual value-creating application. Along with the Publishing Stuido, the Skype Developer program is requiring adherence to standards for usability, robustness and overall quality assurance through the Skype Software Certification program.

PamFax, worldwide winner of the recent Skype Mashup competition, demonstrates the full power of the Publishing Studio through its use of all features, including transaction handling. My quote to the Share Skype blog post about PamFax’s award:

“As I judge I found many excellent entries that demonstrate the value of various aspects of the Skype ecosystem. However, the winners have gone beyond the normal “just add Skype” and taken a broader advantage of the entire Skype ecosystem to turn their Skype Extra into a full business opportunity. For instance, PamFax demonstrates that the Skype Extra program not only provides API’s into Skype but also provides a flexible set of licensing terms and a unique means to quickly collect revenues via the Skype Extras transaction engine.”

Essential Reading: Phil’s post yesterday (Russell Shaw also thought so): Why Skype and Vonage Must Live:

Skype is still evolving how to work in the hundreds of network and compute environments in hundreds of millions of situations. Those situations are challenging and evolving on their own. How you cross firewalls, scale p2p, and adapt streams for mobile conditions aren’t ready to be locked down.

Bottom line: Along with Skype’s provision of a complete suite of real time conversation tools, the Skype Developer Partner program is the other big differentiator from other “VoIP” services. This program:

• positions Skype outside the traditional “legacy telephony replacement” space
• opens up significant sustainable revenue generation opportunities for both Skype and its Developer Partners
• brings reduced communications costs and increased productivity to its business users

And somebody must like these Extras: over 21 million downloads. Another success story: WebDialogs (publisher of Unyte) recently became a division of IBM’s Lotus SameTime Group.

Reference posts:

• Unyte’s Tale: Pioneering and Persevering as a Skype SDP
• On Being a Skype Software Business Solution Partner
• A Banner Day for Skype Development Program
• Desktop Collaboration: The Skype Ecosystem Expands
• Skype Partners Answer Jeff’s Challenge for Innovation in Voice Services
• The Dawn of the Mashup World: – Part I: Challenges, Why and Expectations

Business Solutions Extras:

• Voice Recording and Archiving Applications: Pamela, Skylook
• Voice Services: Evoca, HighSpeed Conferencing.com.
• Call Center: OnState ACD for Skype
• Collaboration: Convenos, Unyte Yugma Skype
• Animation: Crazy Talk
• Miscellaneous Utilities: MyToGo, PamFax

For Skype Journal posts on these Partners, enter the Partner’s name into Skype Journal’s Search box and you will get a list of all posts related to that Partner. The complete set of Skype Extras, including games, entertainment and personalization Extras, can be found here or by going to Tools | Do More | Get Extras on the Skype for Windows client.

Other posts in this Skype Primer Series

• A Backgrounder
• Enabling Real Time Communications
• Skype Hardware – If and When Available

Tags: Skype, Voice 2.0 Manifesto, Skype API, Skype Extras, Skype Developer Partner Program, Skype Publishing Studio, Pamela, Skylook, Evoca, HighSpeedConferencing.com, OnState ACD for Skype, Convenos, Unyte, Yugma, Crazy Talk, MyToGo, PamFax, Phil Wolff, Russell Shaw

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Just over a month ago a two-day Skype outage caused great consternation with predictions of gloom and doom for Skype. Early yesterday here in California (around 1600GMT) I noticed almost 9.7 million users online — back to about the same number as peak loads immediately prior to the outage. Somebody out there is continuing to use it; for someone Skype is offering value-add.

Meanwhile Andy Abramson over at VoIP Watch wants Yahoo executives to admit “Yahoo isn’t talking.” And whither AOL’s AIM Phone Line? Om reports on Vonage: How Low Can You Go? And Matt Asay, over at CNet, writes: Swapping Vonage for Skype: One man’s search for VoIP that actually works where he starts out with:

Yes, you read the headline right. I have long been a critic of Skype, suggesting that eBay was foolish to buy the VoIP toy and generally ridiculing it as a serious business tool.

Today I’m eating crow, and it tastes great. Why? Because Vonage has been complete rubbish for me, whereas Skype is increasingly approaching perfection. I dropped my traditional phone service for Vonage. I’m now about to drop my traditionally awful Vonage for Skype.

Read Matt’s full story about how deterioration of service levels is driving away Vonage customers. (Hat tip to Andy for pointing out this story.) This morning Alec Saunders writes Walks like a telco, talks like a telco…. must be a telco where he discusses why many VoIP companies are dying when they simple try to offer lower cost versions of traditional legacy telco services. And he concludes with (my bold emphasis):

To get to free phone calls requires a fundamental change in architecture which Vonage et al have not embraced. It requires pushing the core calling functionality to the edge of the network, which implies turning off the “minute meter”. Voice, in this scenario, is nothing more than an undifferentiated stream of bits, charged at the bandwidth rate of the network operator. The profits must be made from the services surrounding the call – before and after – not during.

The SIP standard anticipates this model by allowing for both peer-to-peer calling models, and calling models which pass through a centralized proxy. While no VoIP “operator” has ever embraced the peer SIP model, Skype has delivered peer calling on their proprietary protocol. Skype understands that the money isn’t in transporting the bits, but rather [is] in all of the ancillary pieces that can be offered around that bit transport — ring tones, voice mail, phone numbers, and protocol licensing to third parties who wish to attach equipment to the Skype peer network. Similarly, by embedding conference calling in Facebook, at iotum we’re trying to create a better experience before and after the call, rather than during simply focusing on the cost of the call (although free is pretty compelling, I would argue…)

That’s the fundamental difference between the success of Skype and the failure of Vonage and SunRocket. Skype doesn’t look like a telco. Vonage, however, walks like a telco and talks like a telco…. without a telco’s deep pockets.

Not only does Skype offer an unequaled range of real time conversations services — chat, presence, video, 10-party conference calls, voice mail, SMS messaging, call transfer and file transfer; but we are also now witnessing the emergence of Skype’s Developer Partner program fully demonstrate the value of having service-oriented, ancillary offerings. Offerings that embed Skype into (business) processes such as call centers, collaboration tools, audio hosting tools, faxing, conversation archiving and CRM tools. To recall my post Skype Partners Answer Jeff’s Call for Innovation in Voice Services:

In the Skype ecosystem we can see the recipe for a foundation for innovative IP-based services.

• Start with a full real time conversation platform that combines voice, presence and text messaging.
• Start with a real time conversation platform that is enhanced with video, call transfer, call forwarding, voice messaging and file transfer.
• Start with an IP-based ecosystem that has a set of API’s to facilitate application development and mashups
• Start with a platform for which hardware has been developed to take advantage of many features of the platform.
• Start with a platform that can be accessed via not only Windows, Mac and Linux PC’s but also USB phones, PC-free phone sets, mobile phones, Blackberries (here and here) and the Nokia N800 Internet tablets.

The post goes on to list some of these Partner-generated services. And as Skype’s Partner program holds its various Developer events this month, we are seeing the beginnings of the evolution of Alec’s Voice 2.0 Manifesto. Over the past two years as Skype’s Partner services have evolved we have witnessed a withering of voice services at Yahoo, AOL and others. We have not see others recruit over 200 million account registrations (or disclose how many users are online in real time). Yet the Skype ecosystem is emerging from its cocoon, ready to fly as a major contributor to low cost worldwide real time communications services.

And the telcos don’t have the strategic horsepower to compete with Skype; their most valid strategy for competing with Skype is to partner with Skype for the services and just ship the bits.

Now if we could just figure out what’s going to evolve for Skype from the Google-eBay agreement announced just over a year ago that included this statement: “The companies will also explore interoperability between Skype and Google Talk via open standards to enable text chat and online presence.”

Tags: Skype, Yahoo, AOL AIM Phone Line, Alec Saunders, GigaOm, CNET, Matt Asay, Andy Abramson, VoIP Watch, Voice 2.0 Manifesto, Google, eBay, Skype Developer Partners

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Skype revenue up, profitable for 2nd consecutive quarter, but usage down?

eBay’s quarterly earnings conference this afternoon revealed little about Skype; we got the usual numbers:

In the more detailed presentation by CFO Bob Swan, he provided two additional numbers:

• Skype-to-Skype Minutes: 7.1 million, down from 7.7 million in Q1
• SkypeOut Minutes: 1.3 million, flat from Q1

and stated that Skype’s activation numbers were not where they would like them to be. In her earlier summary presentation, eBay CEO Meg Whitman mentioned the WalMart retail partnership, three objectives for Skype:

• build the user base
• expand the Skype ecosystem
• improved call quality,

and closed with the single remark Skype “needs more user activity” as an issue to be addressed in Q3. During the Q&A with questions from analysts, who are supposed to be tracking the company’s activities, there were NO questions about Skype. Maybe being 5% of the overall eBay revenue, yet profitable, is the formula to not attract their attention.

Over the past 24 hours I (i) attended my 10th Research in Motion Annual Meeting in Waterloo (makers of the Blackberry) where I came away with a very detailed understanding of RIM’s business activity and where they are going and (ii) this afternoon listened to the eBay earnings conference where I came away with little additional understanding of eBay’s Skype business. So here’s my take:

The positives:

• sustained revenues and a second consecutive quarter of profitability
  • update: impact of new pricing (see link below)
• US user registrations grew 20% to 25% compared to 12% overall growth
  • based on the assumption above tying revenue to user registrations
  • is this a direct result of the WalMart retail effort?

The concerns:

• user voice activity is in decline
• US revenues remain in the 15% to 16% range
• total user accounts becomes more of a meaningless number. In my experience with direct marketing, you know that customer databases became stale over time.

Om questions “how is the revenue growing when everything is either trending down or flattening”? Update: Alec Saunders reminds us that Skype introduced a couple of pricing changes which had minimal impact for those of us who primarily use Skype’s Unlimited North American calling plan but have do help to explain both increased revenues and lwoer usage.

While eBay provides the bare minimum of information required under SEC regulations, many companies will provide additional information that does not compromise their overall competitive position. Based not only what I heard from RIM but also what is provided by other telecom carriers here is what I would like to hear in their quarterly earnings report:

• actual number of active accounts at the end of the quarter
  • accounts that actually placed at least one call during the quarter
• % breakdown of revenue by communications services, hardware royalties, partner software services and other
• Skype margins and the three usual cost lines: Sales & Marketing, R&D, G&A

eBay has to be an analyst’s nightmare, given there are three basic businesses: marketplaces, financial services and telecom services, each of which have different financial models and financing requirements. At least these numbers for each of eBay’s units would provide better shareholder and analyst guidance in valuing the company. AT&T does it (requires Excel); RIM does it: 76% devices, 16% service, 5% software, 3% other.

And when I asked at the RIM meeting why they had shipped 2.4 million units but only had 1.2 million activations, it came out that the difference can largely be attributed to users buying upgrades. So effectively it comes out that there is huge loyalty amongst Blackberry users, so much so that new features and services are driving a significant portion of their hardware revenue. In my mini-analysis above, it come out that Skype’s US user growth is substantial (even if the actual numbers are off by as much as 10% to 15%). What other information could we learn about Skype without giving away the business from having these types of numbers?

I’ll leave it to another post for my suggestions as to how to increase user activity; but suffice it to say I had three Skype partner experiences today to suggest that they look hard at the Skype Developer Partner program as a key element for driving new user registrations. Oh, and read the Voice 2.0 Manifesto. SunRocket didn’t; Vonage hasn’t. Skype’s Developer Partner program now has the Voice 2.0 seedlings to be positioned for success.

Tags: eBay, Skype, Voice 2.0 Manifesto, SunRocket, Vonage

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The Skype Developer Program is all about delivering software applications where real time conversation (aka voice and IM) is a key element for providing a mission critical business resource. For instance, OnState brings call center experience, Skylook provides a key tool for customer relationship management; Pamela supports podcasting and other voice recording applications, Unyte allows call participants to share presentations and documents in real time across dispersed geographical barriers. Alec Saunders articulated the role of software as the key to telecommunications value-add in his Voice 2.0 Manifesto eighteen months ago.

So when a legacy telco talks about learning software tricks, we know the message is getting through. Om Malik has written an excellent piece “Telco dogs need to learn software tricks” reporting how software is becoming a key to BT’s success in the 21st century:

… BT was one telco that completely understood that it was facing uncertain times, and had no choice but to reinvent itself to survive.

The senior BT management understood that while broadband was a start point for its reinvention, it had to boldly go where no telecom had gone before, if they wanted to survive. They had to behave and think like an Internet-based software company.

But to focus on a comment: in his summary paragraph:

Instead of spending $6 billion on IPTV projects, AT&T could say buy a Salesforce.com (have some money left over for satellite-based triple play) and ensure a few hundred thousand folks paying $60-odd dollars a month for the CRM as a service.

I seem to recall Skype got a bit of jump on a Salesforce.com relationship last week with its announcement of the embedding of the Skype client within the Salesforce UI.

AOL has a long history of innovation. Initially launched as a proprietary pre-Internet personal communications platform building up to several million users via dialup connections, AOL has evolved its integration into the Internet to the point where it recently broke down its “closed garden” business model and opened up the majority of its content and services to anyone visiting their site. It has certainly gone down a bumpy road with its history of balancing the conflicting needs of innovation against the needs of an operation bureaucracy looking for a profitable business model. At one point it was the poster child for the Bubble 1.0 bust as the business world tried to work out business models to provide a profitable combination of both infrastructure services and (syndicated) content. Breaking down the walled garden is but one example of the direction it is going under new leadership.

Last week there were several posts (Aswath, GigaOm) about the closure of AOL’s TotalTalk, where AOL effectively recognized there is little to gain by playing in the pure legacy telephone replacement game and has decided to abandon it. Earlier this week there were several posts (Jon Arnold, Andy Abramson, Mark Evans) discussing Vonage’s latest quarterly results; the common theme is that Vonage is spending such enormous sums on customer recruitment that there is little hope of profitability in the foreseeable future. Cablecos and legacy telcos offering DSL services have a leg up as they already have a customer base to whom they can market. But Andy at VoIP Watch sums it up best when talking about the demise of AOL Total Talk in his Requiem for the Future of VoIP:

Rather than look at it as a failure, my take on this is AOL really has seen the future sooner than others. Much like the BT announcement earlier this week about their softclient, and like their other online portal player competitors including Yahoo, Google and MSN, AOL’s Voice Team has seen the future of telephony and is moving in that direction with AIM PhoneLine, and the burgeoning ecosystem that already has started to bubble earlier this month at the VoIP Developer’s Conference, and will likely have a big boost at VON in Boston next month.

But unlike Yahoo and MSN who have so many internal battles to fight, AOL as part of Time Warner has leadership that is smart enough to not fight a marketer (Time Warner Cable) who wants to sell a phone 1.0 replacement, and instead is focusing on Phone 2.0 and where it can be.

Today AOL issued a press release outlining their execution on the Voice 2.0 Manifesto through building an ecosystem around their AIM Triton IM client and its AIM PhoneLine service called the Open AIM PhoneLine initiative. AOL will introduce three API’s this fall that will give developers and hardware partners the ability to:

• Personalize the AIM Phoneline service by adding ringback tones and unique ring tones for frequent callers.
• Enable a wide variety of USB devices such as speakerphones and phone adapters that will allow standard cordless phones to initiate and receive calls with the AIM Phoneline service.
• Build new call management functionality into the AIM Phoneline service such as context and relevance-based call handling that could treat each call on the basis of rules that use Caller ID, online presence, calendar activities and more.

AIM PhoneLine provides free inbound numbers and, for a $9.95 per month charge, provides calling out both within North America and internationally on their Unlimited Plan. This is all tied into AIM’s Triton client to provide presence and chat functionality. Using the Open AIM PhoneLine API’s, AOL will be providing demonstrations next week of:

• MyNuMo, an online content community demonstrating ringtones that allow personalization by caller, and
• MVox Technologies, demonstrating their versatile speakerphone technology linked into AIM PhoneLine
• Iotum’s Voice 2.0 call management service using the iotum Relevance Engine

By combining the AOL PhoneLine API’s with iotum’s Relevance Engine, inbound AOL PhoneLine calls can be directed to voice mail or AIM’s Triton client or, if the user has the Unlimited Plan, to the user’s wireless phone. Potential applications include using the service as a second line to home-based businesses to triage incoming calls such that the existing customer base gets priority attention.

This is a break through for iotum in that

1. it becomes their first platform that makes their Relevance Engine available to a broad consumer audience, namely, AIM’s 43 million registered users.
2. they can focus on their core expertise and incorporate it into AOL’s platform that manages the infrastructure issues such as providing phone numbers, call termination and switching.
3. For iotum, it is the first agreement where users can simply extend their current setup to incorporate and experience their Relevance Engine. There is no need to purchase additional equipment, subscribe to an additional service and/or write interfacing software (such as with their PhoneGnome or Asterisk implementations).
4. AOL will promote its partners’ applications and devices at an on online store that users can access by simply clicking the “Shop” link off of the AIM Phoneline dashboard.

In an interview with Alec Saunders, iotum’s CEO and author of the Voice 2.0 Manifesto, he made the following points:

• AOL wants to create a community of innovation by opening up appropriate API’s to developers. For instance, opening up API”s to PhoneLine’s switching infrastructure allows iotum to handle call transfers. This is a feature that Skype has said will only be available in Q1 of 2007.
• Development of call transfer functionality requires not simply creation of an appropriate API but iterative co-operation between the platform vendor (AOL in this case) and the technology team at the partner (iotum) to develop an API specification such that the logistics of call transfer functionality operate in a user friendly manner while meeting the general business process rules for handling call transfer.. In this case iotum worked over the past few months with an AOL developer team in Halifax, Nova Scotia to come up with the relevant API. How this happened will be the subject of a separate post.
• The demonstrations at Fall VON next week are the launch of a startup phase with the final service becoming available by year end.
• While details of a launch marketing plan still need to be worked out, users will be able to subscribe to the service via AOL’s store front; the business model involves revenue sharing with AOL as the conduit responsible for recruiting customers..
• The AOL PhoneLine team has been “a superb partner to work with; they have been responsive; they provide promotional opportunities and they’ve delivered”.

At Fall VON next week I will be looking for examples of execution on the Voice 2.0 Manifesto as it provides the route to sustainable and growing profitability for Telco 2.0. The demonstration of iotum running on AOL Phone Line is certainly one stop I will be making and reporting on.

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The highlight of today’s sessions at Voice over the Net Canada was a presentation by Stefan Oberg, General Manager, Skype for Desktop and Skype Hardware. Stefan’s theme built on Alec Saunders’ Voice 2.0 Manifesto by talking about how Skype is working to be “better than a phone”.

After reviewing the history of text messaging from the telegraph to telex to fax to email, Stefan then contended that the current phone is to voice as the “telex” stage was to text messaging, leaving many opportunities open to build new services and features. He went on to repeat how currently phone services are in a pricing game requiring complex marketing messages to differentiate.

He went on to state that Skype’s vision is “to be the voice communications channel of choice wherever one is: on the PC, on the Web, on mobile devices and in third party applications” … “whenever I need to talk”. But when does one need to talk?

• Start with people who know each other
• Expand to people with common interests
• More formally when I want to buy something
• When I want to travel but need a translator to make travel arrangements

Stefan then went on to define “how we (Skype) can be better?”

• High quality, hi-fi stereo audio
• World phone book – is there an opportunity to pool PSTN numbers?
• Presence – especially for communicating across time zones
• Privacy – users can build their own “Do Not Call” list
• Speed dialing
• Mood messages – self-publishing
• Archiving – storing voice mails, chat sessions and call records
• Text – combining voice and text
• o Multi-party chat: instant, brief, efficient, persistent
  • Becoming an alternative to email
  • Privacy: no spam
  • Unlimited attachments
• Conference calling: currently 5 or 10 users but developing a server-based technology for larger calls
• Video
• File Transfer

Stefan then pointed out that we are only at the beginning of seeing the features that can be built both into Skype and into third party applications.

Back to the phone: why is the phone so ubiquitous? Five 9’s reliability (even in power outages) and a simple user interface. Stefan mentioned a few guidelines for adding features:

• Don’t bloat the client – keep it simple
• But aim to be the Swiss Army knife of voice communications
• Look for hardware integration in addition to software features.

He then went on to point out as a simple example how Skype gets complicated as soon as a desktop user installs Skype, realizes they need a headset but need to plug/unplug the headset on the back of a(n older) desktop PC. Such a complication (or to use Stefan’s words – “such a terrible user experience”) limits the mass market appeal of Skype; it is a goal of Skype to overcome such hurdles to mass adoption.

Stefan’s concluding slide was his opening slide: “Better than a phone”. We look forward to experiencing new features from both Skype and their third party developer/partner community.

As an aside, Stefan mentioned during his introduction (Carl Ford has a unique way of introducing speakers at VON conference sessions) that there are four divisions to Skype: his (Skype for Desktop and Skype Hardware), Skype Mobile, Skype Telecom (working with termination partners) and Skype eCommerce.

In response to a question about their approach to the business market, Stefan emphasized that Skype is staying focused on its mass market potential as they do not have the resources to address the business market. However, he gave a couple of examples of partners who are addressing the business market: (i) Web Dialogs with their Unyte web conferencing application and (ii) integration with SalesForce.com.

As described in the Voice 2.0 Manifesto, the business opportunities for Skype and their partners lie in the Applications.