Skype Journal: Hardware helps Skype make some numbers, but not all of them
January 14, 2006 11:54 AMTo compete in the upcoming voice wars, Skype must have as many active customers as possible. It must fuel its growth in revenue terms too. Hardware helps with both.
First, most users won't use Skype without extra hardware. The minimum of earbuds and a microphone works for the occasional user, but many people want to "pick up the phone" when they hear it ring. Others need headsets to sit at the phone. And others need gear to keep Skype running even when their PC is off. Hardware helps Skype extend its reach and boost per-customer usage.
The current hardware offerings are mostly brain dead, not creating a complete Skype experience. This is OK: it is early. As more competitors enter this space, software will make the gear smarter, adaptable, and better blended with our many communication styles. We're already seeing this in Creative's embedded Skype, in YapperNut's Amy software making their YapperMouse phone smarter, and in ActionTec's VoSKY Exchange plugging Skype into your SMB-sized phone system.
That brings us to money. Skype gets abouts 5 percent of the wholesale price on Skype Certified gear, which Skype eagerly co-markets. On Wednesday we'll hear eBay report their financials for Q4-2005 and for the year. Folks have been guessing revenue from Skype about $60 million for the year. How much can hardware fees contribute in 2006 to a hoped-for $200 million? Let's pull out our handy numsum calculator:
Let's say they want to make $50 million in license revenue this year. They get 5% of products that wholesale for a weighted average (pulled out of thin air) around $20 (I'm thinking $35-45 headsets). To make that number, they must sell one unit to nearly every Skype user on earth, pulling $1 billion at wholesale ($1.5-2 billion retail?) through distribution channels. Tough? Impossible?
What can you change? Boosting the user base, establishing a recognized consumer brand, and getting retail shelf space makes it possible to move gear; all of these will cost money. Some users will buy more than one item a year for multiple Skype contexts: work/home, friends/family, fashion/function. Businesses will buy gear for the workplace at wholesale prices in thousands of dollars per site and for many employees (think call centers) although the distribution channel is more likely ICT/VAR/System Integrator than store front.
Skype Certification revenue, while growing and important, won't dominate Skype's 2006 financials. What will?
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Comments (2)
There have been 13.7 million Skype Orders in 2005, including "rejected orders, trials, free minutes, etc.". (this is NOT an estimate, yes it is rounded). If you estimate a mean value of 7 € per order, you get about 120 million US$ revenue from skypeOut, SkypeIn, and voicemail orders. The 7 € is a pure guess, based on a very unsignificant sample of Skype Orders that i followed-up.
Posted by: Jean Mercier at January 14, 2006 3:31 PM
Phil,
They first month I used SkyPE, I knew then that the directional microphone and speakers I was using would not cut it. I then purchased my first USB Cyberphone K (total now four [4] of which second was bad and refund was refused from VoipVoice so I then bought the next two units from PC Mall) and used them without too many problems.
One of my clients really wanted a cordless phone to use with SkyPE and on a trip to Hong Kong, bought the Dual Phone, that was not suppose to work here in the United States. We were able to get it to work using UK as the language and country of choice without problems after auto-updating the software. It works well, and the sound is good.
I came real close to buying one myself, but wanted a cordless that I could take with me and show to other clients. I now have two Linksys CIT200 Cordless USB phones that sound great, have great distance, and are fairly easy to use which makes it easy for me to suggest as a purchase for use with SkyPE.
Posted by: Whose Paranoid at January 14, 2006 8:12 PM