More people Skype in Chinese than in English. One of eBay's justifications for buying Skype was help entering China's consumer-to-consumer ecommerce. Now rumors: eBay will sell its Chinese operations to Skype partner Tom.com. Or to Skype rival Tencent, maker of QQ. Or eBay buying Tencent. eBay doesn't comment on rumors.

QQ broke 20 million simultaneous users in June 2006, compared to Skype's 7 million. They have 549 million accounts (vs. Skype's 130), 224 million active IM accounts. And nearly all of QQ's users read Chinese and speak at least one Chinese language. Compared to Skype's language diversity this means QQ is comparatively ubiquitous in China.

A Tencent-Skype merger could work, at least on paper. This would blend Skype's technology, QQ's userbase, and Tencent's enterprise RTX and Tencent Messenger workplace messaging. Aside from the vital soft stuff like cultural-fit, the businesses and products might match up.  Who else might rapidly build Skype's markets and capabilities? More M&A consolidation to come? What does Skype need? How would you define critical mass and market dominance in 2008?

Our friend U. Yogu, a Ph.D. chemistry student at National Taipei University of Technology, attended a concert there today. Skype partner PCHome sponsored the event, had a booth and gave out prizes, like a Skype ball with a headset inside. More photos from the event.

• DEMO China. Sep 06 - Sep 08, Tianjin.

• Star Trek 40th Anniversary Celebration & Conference. Sep 08 - Sep 10, Seattle, Washington at The Science Fiction Museum and Hall of Fame. But you can celebrate anywhere. Remember, Gene Rodenberry's folks were showing wearable combadges, machine translation, and flip-top phones on television in the 1960s, setting expectations we rose to fill. "Skype Trek" anyone?

• VON - Fall 2006. Sep 11- 14, Boston, Massachussetts. This is old-school VoIP's big get together, where everyone's selling to carriers and the huge enterprise. They've had a year since eBay shocked them by paying billions for Skype. Now everyone's had a year to react. How smart are the responses?
  
  Several companies will launch Skype-related products at VON.
  
  Skype Journal's Jim Courtney, Kevin Delaney, and Martin Geddes will be there; Kevin and Martin speaking.

• Digital ID World 2006: Managing The Decentralization of Identity. Sep 11 - Sep 13, Santa Clara, California. Managing user directories, architecting name spaces, authentication, authorization, identity banking, identity brokering, ID lifecycles, namespace harmonization. Managing digital identity is just one thing that Skype helps user do but that others do better.
  
  Stuart Henshall and I will be there.

• MobileHCI 06 - Human-Computer Interaction with Mobile Devices and Services. Sep 12 - 15. Espoo, Finland. Designing Skype for PCs is only vaguely like designing for devices that fit in the hand, with poor resolution, spotty connectivity, positional awareness, and that travel in your bag or pocket. We'll know Skype for mobiles are maturing as (a) their user experiences distill Skype's essence while (b) diverging from Skype for the Desktop's design assumptions and conventions.

• The Future of Web Apps Summit. Sep 13 - Sep 14, San Francisco. A killer cast of Web 2.0 luminaries (aka the people you see at all of these events.) AJAX and web services redux, maybe a few new ideas.

• Social Network Tools and their Business Application: Blogs, Podcasting, Instant Messaging, RSS and Wikis. Sep 20 - 21, London. Classes. Reminds me of the Social Tools in the Enterprise Symposium I spoke at two summers' ago. Euan, buy Stowe a glass of red for me.

• OneWebDay: A time to celebrate the Internet. Sep 22, all over the world. "One web, One world, One day." What will you do to share your appreciation of the net? I'm still working on my project.

• LoveParade SF. Sep 23 - Sep 24, San Francisco.

• Internet Research 7.0: Internet Convergences. Sep 27 - 30. Brisbane, Australia. Scientists from around the world sharing their findings. Huge conference, 200+ sessions. Brilliant hallway. Would love to see Pamela Koch's presentation: Beauty is in the Eye of the QQ User: Perceptions and Press about Instant Messaging in China. A shout out to fellow metablogger Alex Halavais.

Know an event we should cover? Leave a comment here or a tip.

The VoIPWiki Blog reports a Chinese firm reverse engineered Skype's communications protocol. It allows Skype-to-compatible softphone calls.This is credible; I've talked with a member of the team that built a Skype-compatible softphone. They hope to go public by month end. We're eager to discover if they will publish the protocols, offer Skype-compatible consumer software, offer Skype-compatible engineering products to other developers, sell their firm to a bigger company, or simply offer consulting services.

I've also used a demo version of software that crawls the Skype cloud, downloading profile data. From another group. This is not "the Skype database" but the natural white-page listing that all users put in their public profile. Skype's servers, and the financial data kept there, are not touched by this system. Screenshots:

Both systems build on detailed knowledge of Skype network parts not on Skype's servers.To build a Skype-compatible client, they had to figure out:

• how to see and navigate through the Skype cloud, to find a Skype client.
• publish their own client's profile into the Skype cloud, so a Skype client could find them
• negotiate starting the call session, including encryption and

Publishing the Skype calling protocol would create new opportunities for products and developers:

1. Third parties can build Skype connectivity into their own software, no longer requiring an official Skype client.
2. It may open up creation of Skype-compatible server software. So your salesforce system could IM you.
3. It could open up Skype to PBX integration. So you might preserve Skype identity, authentication, encryption, and presence while routed through an Asterisk server.

The profile probe is a slightly different issue. In this case, software that mines the Skype cloud for profile data is working with "dirty data." The collection is unverified, often clearly faked (an unbelievable number of people live in Antarctica), old, and incomplete. It does have some gems. Correction: The cloud has email addresses, hidden in the Skype user interface but used to locate friends. The cloud has email addresses, but they are hashed and not human readable. 

I'm not sitting at the management table, but Skype has several choices.

Open. They're already on the path to opening up more of their apps at the API level. Skype could embrace this at the protocol level too. This is the hardest thing to do, but may pay off in the long run. Exposing these protocols is the only way for the Skype network to become an industry standard. And it would put Skype in a position of leadership the way Microsoft is for dot net, Sun is for Java, and Adobe is for Flash.

Switch. Skype could change the protocols, breaking the new software. This is a costly and temporary solution; tricky but doable. Replacing Skype clients for updates is hard enough; getting everyone to migrate could kill the brand love. It won't be long until the Chinese engineers figure out how to get in again.

Quash. Skype might try to blow out the startup's fire. eBay has a powerful combination of PR, lobbyists, litigators, and business allies. Even in China. Skype could try to accuse the startup of piracy. My guess is Skype will tread litely. These tactics rarely work in China and often tarnish the reputation of the outsider applying the pressure.

Ignore. Skype has enough to do. Wait and see.

Invest. Buy the team, put them to work. 

Jim Courtney says technology does not a brand make. It takes quality control, aesthetics, user experience, customer services, an ecosystem of ancillary products, and integration with other systems. Skype's and eBay's marketing are a higher barrier to entry than technology.

Skype personnel were not available for comment. Hat tips to 9Skype, Jan Geirnaert in Malaysia and Lee Dryburgh in Austria.

Technorati Tags: skype, ebay, skypejournal, security, privacy, compatibility, ecosystem

"Skype is currently not doing business in Korea, nor does it have a telecoms operation in Korea. Should Skype begin to conduct business in Korea, either directly or with a local partner, all applicable laws will of course be followed." This on Monday from DongChol Beh, Skype Market Manager for Korea. Parsing carefully, this means you cannot buy Skype credits if you are in South Korea (or is it if Skype believes you are in South Korea? or you can't buy it with a South Korean credit card?). You can spend Skype credits if you have them on SkypeOut to South Korea land lines.

It's in response to headlines like:

• ZDNet Korea: Skype, new memberships halted!
• VoIP news: Skype in trouble with South Korea government
• The Korea Times: Skype Probed for Unregistered Marketing
• 21talks: Skype accused (again) of illegal practices
• Strategy Page: South Korea Puts the Screws to U.S. Troops
• Jan in Malaysia: South Korean government held off on its plan to ban the use of VOIP

Hmmm.

• Auction & Skype's Korean site.
• Launch announcement from last month with disclaimers about SkypeIn and SkypeOut.
• Notice from Skype about the continuing problem.

It's a story of growing pains, of Skype moving in to a country, running into an obstacle, and backing off to re-enter correctly.

It's also about large local phone companies lobbying hard with government regulators to restrict competition from VoIP. (Sound familiar?)

Follow-up questions unanswered by press time.

• Was Skype doing business in Korea before?
• When, for which products, and in what manner?
• When and why did Skype stop?

If Skype or its partners are subject to fines for infractions, then we may not get answers for a while.

Skype clearly plans to serve the South Korean market with SkypeIn and SkypeOut. What about PayPal? At the moment, PayPal only lets South Koreans withdraw money, not send money. This must be tough for eBay since South Korea is eBay's fourth largest market, after the United States, Germany, and the UK. More than 34 million Koreans use the Internet, about 70% of the population.

The regulatory embarassment, customer inconvenience, and deferred cash flow must be difficult for Skype's portal partner, Auction. It's unclear if Auction-Skype is a joint venture, an Auction project, a Skype project, or a Skype subsidiary. UPDATE: It is an Auction project, working on behalf of Skype, its sister company.

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Justine Lau wrote the China 'to block VoIP calls for two years' Financial Times story. I'd like confirmation from a government source and from the four big Chinese telcos. Skype has already twisted the product comply with strange requests (IM censorship, five minute limits on voice calls). Is this an administrative choice or is it just a gambit in international trade talks?

The fallout according to Skype Journal:

1. The two year ban won't survive consumer pressure.
2. If it does, QQ wins. The ban buys a two year window to consolidate their lead and become irreversibly dominant. Already 3-4 times more people use QQ IM than Skype. Unlike Skype's userbase, they all read and write Chinese.
3. More pressure on US and Indian Skype staff and partners.
4. eBay was hoping for a boost from Skype's growth in China. Maybe less so.
5. Fearmongers thrive. Companies that monitor, filter or otherwise block Skype will get a small kick out of this; bigger if they have contracts with Chinese authorities. Check out how Verso (NASDAQ:VRSO) and SurfControl (LSS:SRF.L) stock prices perform.

The first part of Lau's article:

China will not allow paid-for calls between computers and conventional telephones for at least two years, according to the head of Tom Online, the Chinese internet portal which has a joint venture with Skype, the internet telephony company.

In the clearest indication so far of when charged telephone services based on the "voice over internet protocol" system will be launched in China, Wang Leilei, Tom Online's chief executive said the government "is not going to issue VoIP licences until 2008".

The news will be a disappointment to Skype, which told the Financial Times in November that it was in talks with Chinese telecoms operators which it hoped would clear the way for the launch of its computer-to-telephone service, dubbed SkypeOut.

Chinese fixed-line operators are concerned that SkypeOut, which allows users to make calls from computers via the internet to fixed-line or mobile telephones at lower rates, could undermine their core business.

Skype currently offers a free computer-to-computer telephony service to its 9m users in China, although calls are limited to five minutes. It also launched a free computer-to-telephone service about a month ago, which has signed up 10,000 users a day.

Mr Wang said that Tom Online, which claims to have more than 70m users, was not disappointed that it could not launch SkypeOut commercially.

"For Tom Online, our strategy is to grow our user base. With a big user base, there is a lot you can do. Revenue [from SkypeOut] is not important to us because we have not put in a lot of cost," said Mr Wang.

Tags: life, business, skype, skypejournal, ebay inc, vrso, srf.l, surfcontrol, verso, blocking, freedom, china, tomonline, tom, tom-skype, qq, ft, voip

In a few hours the Skype Day in Japan begins.

Some people started the party early. Lenn Pryor who leads Skype's Developer Program is in Japan for Skype Day celebrated his birthday. Hosted by Skype International Marketing Manager Melany Libraro and Shinici Iwata who leads the Skype Developer Program in Japan. Lenn's gift, an iDog.

"Happy Birthday, Lenn", from Skype Journal.

Thanks to Iwata-san who shared his pics with me of the birthday party.

I just realized something. The three top guys in Skype's Developer Relations Program, Lenn, Iwata-san and Lester Madden, all hail from Microsoft.

Robert Hernandez, International Alliance Manager for Columbus CRM is attending with his wife Dian. He promised to get some photos for our Skype Journal readers. Robert and his wife hail from Prague, Czech Republic.

Of course Dick Schiferli and Robert also spent time working for the beats in Redmond, Washington.

Another attendee will be Robert Lo, COO of PChome and IPEVO the developers of a family of Skype Certified USB handsets.

Looks like an exciting event. It is billed as a Global Partner and Developer Conference. A similar event is scheduled for London on November 30.

More from Japan later today...

Richard Zhao Liang and Bill Campbell.

Although the worldwide VoIP market is booming and Skype has wooed millions of users, its road to China is not so bright as in other parts of the world, especially for revenue.
There are four kinds of VoIP services: phone to phone, phone to PC, PC to phone, PC to PC. In China, the phone to phone and phone to PC are clearly defined in law as the basic telecom services that no one besides these six services providers can provide: China Mobile, China Telecom, China Netcom, China Unicom, China Railcom, and China Satellite Com.).

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Deal done. Retail VOIP in the offing? Views later.

eBay has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration.

Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.

Full text of news release...

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"Is Skype in China risking compromising their encryption and anonymity model?" so asks my Danish contact Torben Nyhuus after reading this article on Yahoo turning state's evidence:

Information supplied by Yahoo! helped journalist Shi Tao get 10 years in prison

It is an interesting question. The Skype Partner TOM does have a different version of Skype. H'mmmm...

TOM Online faces severe competitive and regulatory problems in China per reports compiled by Jirong Zhou. Jirong posted to his Zalbazone blog that TOM Online is not only far last in a three-way race for the Chinese IM market, but that major telecom operators are defending their own VoIP strategies (vaporware?) by blocking Skype.com and SkypeOut in major Chinese cities.

This is another example of telco incumbents aggressively defending their turf. Could Skype have picked a better partner, one with stronger guanxi, one better able to negotiate access to China's major markets and forge more alliances with China's regulators and incumbents? Right now they're walking away from SkypeOut revenue. How long until Chinese users get the same service as Skype users everywhere else?

The full article, including screenshots of the blockage and quotes from Tom.com CEO Wang Leilei follow...

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Skype and TOM Online announced an exclusive joint venture (51% TOM Online, 49% Skype) to "further cement their strategic partnership in China's rapidly growing online communication market." Hutchison Whampoa Ltd. owns TOM Online.

The deal is for "simplified Chinese" which seems code for "not-Taiwan." Executives have not been named. Neither company responded to questions about which personnel will leave TOM or Skype for the new firm.

Hutchison Global Communications works with Skype as a distribution partner in Hong Kong, facing customers through the "HGC-Skype" portal. TOM and Skype do the same thing for China.

Li Ka-shing owns TOM Online and Hutchison Wampoa. He is a 75 year old Hong Kong billionaire (Net Worth: $12.4 bil), number 19 on the Forbes list of the 400 richest people in the world in 2004.

In Skype Journal:

• Skype’s new Portal Plays..., where Skype actually modifies their software to include a browser that links to TOM-Online properties.
• China keeps VoIP Illegal despite various Chinese companies' projects.

The Skype and TOM Online news releases...

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From China Tech News:

China's Ministry of Information Industry (MII) reiterated that it still has not formulated guidelines concerning VoIP businesses and that many current VoIP businesses could potentially be illegal.

Companies like Netease (NTES), Tom Online (TOMO), Skype, and Tencent have all started VoIP services in China. And the 263 Group and HL95 have also recently entered the sector.

The VoIP sector offers great financial rewards for companies because voice communications on the network can be as much as ten times cheaper than traditional fixed-line phones.

MII says that it is still testing VoIP and forbids illegal "phone cafes" from opening in China. It also offered no clear date on when it will issue guidelines for businesses to operate legally.

Two new announcements from Skype Portal Partners (Onet - Poland and TOMSkype in China) appear to confirm my thoughts about Skype becoming a Global Media Network player as apposed to a being a Global Telecom as Skype touts on their home page.

Onet Poland

Breaking news from Gdańsk, Poland with Skype Journal’s contact Tomasz Tybulewicz reports via the Polish media site WirtualneMedia that Skype has partnered with Onet Poland’s biggest web portal. Skype will deliver a special Skype version which is Onet-branded. The first version is 1.3.11.48 and may be downloaded here.

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U.Yogeswaran is a student in Korea on Skype. He first contacted me some months ago. This post captures his observations on Skype in Korea. I was intrigued by his Daum comments (Skype - Daum Partnership Note this agreement was only signed two months ago!), interest in SkypeIn numbers and the perceived impact of video. Sometimes it is just useful to listen to what others say. These are his comments:

My origin is India, came to Korea for higher studies. These are my observations about Skype.

I am proud to say that in my school (Gwangju Institute of Science & Technology), I am the 1st person to introduce Skype to my friends, after that it spreads like a fire between international students. Skype is still not as popular as MSN and other messengers in Korea. The availability of internet is quite good, so I hope the usage of Skype will steadily increase.

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James Seng is running an exciting experiment with Wi-Fi handsets and SIP at Apricot 2005. Every attendee is able to use the new phones in the same old way. It's an important step. Wonder what they will be doing at TED in this regard this year.

Skype recently announced a deal with HGC in Hong Kong while news is now breaking of another deal in Korea with iMate. iMate is the largest distributor for Windows Smart Phones. Both these announcements are interesting. They also suggest a "quickening" for the pace of change. So far the HGC release looks similar to the old formula applied elsewhere. (Scary after deals in Taiwan, China, Japan and Korea, we can call this version common place.) with one difference. HGC is a landline operator. In the case of iMate it is a technology story. Now we have a Smart Phone distributor promising Skype mobility with your mobile. Skype's PDA version is already running on some iMate products.

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