Skype does not get the respect it deserves, because eBay not only publicly admitted to overpaying for it but is making a mess of its core business. Another reason may be that Skype flies in the face of conventional Valley wisdom that says it has to be all about social media. Or maybe the fact that Skype came from Europe, and we all know that Europeans are just lunch-eating dilettantes. Whatever the reason, a company that has $500 million in revenue, is profitable and growing, and has a shot at becoming the largest player in what is now a $2 trillion (yes, “t” for trillion) market, should get more respect.

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Ten Reasons

In ten years time we may look at Skype in the same way we look at Amazon and Google, as a huge built-to-last company, for these ten reasons:

1. It has revenue, about $500 million in 2008. Ahem, only in the weird world of Web 2.0 is that considered remarkable. I like using Twitter, but without sustainable revenue their future has to be in question.
2. It is profitable. We’re talking “high-teen margins,” according to eBay’s CEO at the Accel Symposium. That does place it in a different league. It means they can survive the harshest of economic climates. If Facebook is having to raise money in these markets their model must be fundamentally flawed, which means their time as an independent company maybe limited. To control your own destiny, you need to be profitable.
3. Skype’s growth is accelerating in a tough market. Skype is publicly talking about growth rates of 30% to 40%. That’s not terrible in an economy where flat is the new 30%. Skype has the perfect recession pitch: cut costs now! This shows in its most recent numbers. In the last quarter, Donahoe told us that Skype-to-Skype grew 73% and Skype Out grew 63%.
4. Disruptive technology. Disruptive technology is an over-hyped term, but in this case it really fits. Skype’s peer to peer technology enables them to dramatically under-price the competition and still make money. New users don’t cost much money – compare that with Facebook and YouTube. Even better, each new user that comes on improves the service for others – the core P2P proposition.
5. Viral marketing. Skype is the perfect viral business. I have lost count of the number of people I have told about Skype, for the simple reason that I want to communicate better/cheaper with them. Many of them are doing the same.
6. Massive market with vulnerable incumbents.$2 trillion is a lot of money. That is the size of the global telecom market. As to vulnerable, how many people feel so loyal to their telephone company that they won’t switch to get lower prices? Yes, when Skype dominates the market it won’t be worth $2 trillion any more. Even if it is worth 25% of that, say $500 billion, that is OK for the dominant player. Faced with the Skype threat, incumbents have a horrible innovator’s dilemma. To really match Skype will ruin their current business even quicker.
7. Just wait until it bites into those cell phone bills.Skype on mobile phones – really native Skype you can use for free wherever there is WiFi – has been possible technically for some time. This has been held back by the mobile operator’s head lock on the device manufacturers. At some point the damn will break. Consumers pent up rage over nickle and diming cell phone bills will ensure that a real alternative will be welcomed.
8. Skype is really mainstream. This is not about being hip or early adopter. Just show the video conversation to anyone with loved ones in distant places. You will see the surprise and amazement that makes it seem like magic.
9. It is a sticky service. Google still gets my business because they are better than the alternatives. But switching to an alternative will be really simple. When somebody suggests using something other than Skype, I resist. I have my contacts in there, know exactly how it works and have integrated some external tools. Skype can continually add new features to make the experience better as our hunger for communication is pretty well limitless.
10. Skype can do an IPO. For anyone younger than 30, we should probably spell that out: Initial Public Offering. We keep being told that the IPO market is moribund because of Sarbanes-Oxley. Baloney! The IPO market is moribund because we have lacked profitable high-growth companies that go into huge markets.

My prediction is that as soon as market conditions improve, eBay will sell Skype through an IPO. Their shareholders will pressure them to do so. There is no synergy logic being part of eBay. The value of Skype is obscured by the problems in eBay’s core business. The Skype IPO can be early in the market recovery as their tale resonates so well in a recession (markets usually recover well before the economy recovers).

Who Else?

Who else can take the title “largest winner from the Web 2.0 era”?

• Google: not really Web 2.0, though; born in 1999.
• YouTube: still losing money, no clear monetization model, and video-serving costs are substantial. It is hard to imagine YouTube as an independent company
• Facebook: how long can the fantastic hope remain the fantastic hope? At some point, it has to demonstrate a sustainable revenue model and some profit. It still doesn’t have a native revenue model that makes sense to both users and advertisers.
• Twitter: see above.
• Salesforce.com: not really Web 2.0 either; born in 1999. More revenue than Skype today, but smaller addressable market.

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It seems everyone and their dog is coming out with a netbook. Verizon and AT&T are the latest entrants in the race to produce the itsy-bitsiest, teeny-weeniest, underpoweredest laptop on the market.

Apple is the lone holdout, steadfastly refusing to cop to any plans to join the netbook stampede – although some have argued that they already have, thanks to the iPhone.

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I have to admit, if the iPhone’s keyboard was just a small better, and Safari just a small more Flash-friendly, I’d have no use case for a netbook at all… and as it is, I can barely muster a coherent argument for why I need one. Yet I covet them desperately. Desperately.

Which probably clarifies why so many people are still dying to get into this market. In a down economy, any product line with customers as irrationally interested as I am probably has at least some legs.

More Noise to Signal

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The latest release of Novell’s SUSE Linux Enterprise Desktop, SLED 11, is probably the most Microsoft-friendly Linux desktop ever, with support for various Microsoft formats and protocols that extend the functionality of Linux desktop regulars such as OpenOffice.org, Mozilla Firefox and Evolution. These additions, combined with Novell’s enterprise-friendly support plans, might just convince companies that the time is right to make a go from Windows.

SLED 11 has a fantastic deal in common with the OpenSUSE 11.1 release that eWEEK Labs reviewed Feb. 17, but the largest difference between SLED 11 and so-called community-oriented Linux options such as OpenSUSE and Ubuntu is the relatively limited selection of software packages available for SLED. eWEEK Labs Executive Editor Jason Brooks takes a look.
– …

Who doesn t want to write better content for Web pages Fantastic content can command online traffic make revenue and help the writer of that content establish a excellent reputation or even an online fan following. Well-written keyword-rich Web content is a very powerful tool. It s also what most Web sites on the Internet desire. When you know how to write better content there s a lot you can achieve….

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AOL, one of the largest national internet service providers and a global web services company, announced today that market research firm Forrester has rated it highest in “overall customer experience” in an independent study. Forrester conducted interviews with nearly 4,600 people nationwide and found that AOL rated very high if not highest in categories such as usefulness and ease-of-use. When all the categories are combined, AOL was at the top with a 71% approval rating.

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For those of us who have went on to using internet service providers (ISPs) that provide small more than basic internet access, AOL may conjure memories of free installer CDs in the mail and dialing in over a telephone line. Although AOL still offers dial-up accounts, they have been diligently growing their web destination offerings, including a full portal and news page, free email and two free instant messaging utilites, AIM and ICQ. Even with all these offerings they have succeeded in the tough job of making it simple for everyone who uses their service, either online or through their ISP, to have a fantastic experience.

We will admit to clinging tenaciously to our free AIM account that we have had for many years. Even though we may access AIM through such various third-party interfaces as Gmail and Meebo (and even have a hard time thinking of those applications as third-party) we have long since stopped worrying about the service as anything but always there and available, like the air we breathe. But, somebody runs those servers with close to 100% uptime, and its worthwhile to reflect a moment and realize that AOL has made a commitment for the simple reason of maintaining their online reputation at a very high level.

Sure, we have all heard tales about AOL ISP customer service, and of course seen pictures of AOL CD art, but the numbers tell a different tale – that AOL is committed to making sure people who choose them are pleased and have the best possible experience online.

Photo CD Reflections courtesy of Artnow314 on Flickr.

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Flat World Knowledge started out with a revolutionary thought, which was to start making and publishing college textbooks that were absolutely free online. Its business model is to offer the option for students and teachers to print textbooks in whole or part at a fraction of the cost of a standard hardbound college textbook. In addition it offers audio book versions, study guides, web quizzes and digital flash cards for a fee. And that business model seems promising enough that it has passed the VC funding test to the tune of 8 million dollars by the venture funding firms Greenhill SAVP, High Peaks Venture Partners and Valhalla Partners.

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If you follow how the market is having to adapt to a world of infinitely-available digital goods (and a excellent place to start is the blog Techdirt) it has proved hugely disruptive to many business types, especially the music and newspaper industries. Flat World Knowledge is, we are sure, only the first of many new companies in this space that are finding a profit model in this new marketplace that does not rely exclusively on scarcity.

We reckon that availability of high quality, free online college textbooks is fantastic. We can remember paying hundreds of dollars each semester for all the textbooks we needed for our classes. And if we misplaced that book or forgot to take it with us to class or to study, it might mean lost time or worse, having to re-buy the book. If a college or university chooses to use Flat World books, it would mean that the relevant reading material is only a click away online. Problems could be discussed with friends or mentors outside of school without requiring them to share the same book or buy another copy. Finally, many schools that rely on donated school books will be able to access the latest editions without having to spend more money.

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Danese Cooper, known as the Open-Source Diva after stints as an open-source community builder at Sun Microsystems and Intel, announces she has joined REvolution Computing, a provider of open-source predictive analytics solutions. REvolution focuses on solutions based on the R language. One of Cooper’s first initiatives at REvolution will be to work with REvolution R Director of Community David Smith to develop a program to better support user groups and develop new community assets.
– Danese Cooper, known as the quot;Open-Source Diva quot; after stints as an
open-source community builder at Sun Microsystems and Intel, announced March 23
that she had joined REvolution
Computing, a provider of open-source predictive analytics solutions.
At REvolution, Open Source Diva Cooper (…

In this second part of a five-part series on the factors that cause web sites to rank in the search engines we re going to take a close look at links and the age of the domain. We re also going to touch on the rate at which new pages are added the rate at which new links are added and hopefully torpedo once and for all the belief that toolbar page rank has anything to do with how high you rank on the search engine results pages SERPs ….

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According to the UK site Blogstorm, Google has started ranking Twitter search pages for topics (reckon hashtag-style words) higher, often making the front page for certain queries. This is despite the fact that Twitter blocks Google’s spider from indexing search result pages. Which begs the question, how is Google determining that these Twitter topics merit a high weight?

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Google is notoriously secretive about what influences their search algorithm to generate a given result. They reserve the right to tweak this algorithm whenever they feel it is necessary, often without warning or any obvious outside influence. We can generally assume this is to improve some aspect of what Google returns in a search, either to eliminate bogus hits, or increase relevancy, or even to avoid embarrassing top results, often called Google bombs.

But what is being observed now is even more curious, especially since Google has to rely on links pointing toward Twitter Search on specific topics in order to get a hint about relevancy at all. It makes us wonder how Google would rank these results if Twitter did really optimize their search offering for SEO.

You can see for yourself easily enough, simply search for a well loved Twitter hashtag term like #sxsw or #gaza and the Twitter search link should be in the first page of results.

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