I asked my contacts "What does the eBay purchase mean for you and or your company?"

From Taiwan. A manufacturer of Skype hardware. He wouldn’t let me use his name.

"Actually, our eBay experience is terrible. I truly wish they (Skype) can become better... every email we sent to them is just like throwing a stone to the ocean. That is why I do not see any difference having eBay buy Skype."

From Sweden. Ben Isacsson:

"Yes a very, very new culture will emerge. At least for me. I will stay (with Skype) for a while - but only until I find a non US-owned program."

From South Africa. John Sjolund

"To be honest I do not really think that it will impact our business much. We use Skype all the time in our business and love it. I am confident that this move will only mean that the product gets better.

I think that it could involve very interesting revenue generating opportunities for other businesses through the use of papal credit as opposed to Skype credit. I think the incorporation of PayPal is golden.

I am hoping that they don't move it into an exclusively North American thing now however.

I am very excited by the prospect. I listened to the eBay webcast and was very impressed with the eBay people.

From the UK. Robin Batt, marketing consultant in VoIP space.

"I'm amazed and astounded. It doesn't make any sense at all! I just heard the news and am thinking it thru give me a few minutes....

Well, first off, I guess that marks the end of the Internet ‘crash’ – or the beginning of a whole new bubble. Good news for the Internet industry (that someone would pay 2.6 BN for a company that's not yet turned a profit and only just starting to generate any revenue at all)

I have to say I can’t quite see the logic behind the marriage. Sure they can cross sell into each others' communities, but Skype hasn't exactly experienced problems with customer acquisition (maybe eBay has - I dont know). If this is all about enabling eBay buyers to talk to each other - and generating additional revenue from the voice calls, then:

a) I don’t see why they would buy Skype - why not build their own P2P voice functionality

b) I can see that generating some additional 'net new minutes' - but I don’t know that eBay users need to talk to each other, or how many would pay to do so (to justify that kind of a purchase price)

I might be being shortsighted, but I don’t quite get it. All of eBay's other recent acquisitions have been in the marketplace/ecommerce space – logical. Perhaps eBay were simply feeling left out of the VoIP hype/race with Google, Yahoo, Microsoft etc.

Also, it'll be interesting to see what they do with the brands....2 very powerful brands, but with really quite different brand values."

From Prague, Czech Republic. Robert Hernandez, a developer of a Skype enabled product for Columbus CRM.

"Skype has undoubtedly fused with one gigantic community and infrastructure, ready to take on those 'other camps' currently making a lot of noise. If Skype's current partnering model holds up, we see great opportunities in relationship management and all the ideas going around this. This is 10+ in our scale."

From the UK. Marcus Williamson. Connectotel, the developer of a Skype SMS product.

"We hope that eBay's acquisition of Skype will mean a timely solution to the issue which all developers of services on Skype face, namely how to bill for services on the Skype network. As the owner of Paypal, Ebay already has expertise in the area of payment systems and has a well-defined eBay API and Paypal API. The next step for Skype/eBay should be to provide a payment API to allow developers to credit or debit a user's SkypeOut account for micropayments. Skype/Ebay would benefit by taking a percentage of each transaction, as Paypal already does.

Paypal API info:
Ebay API info:

From the UK. Martin Schoenenberger. Skype User and Swiss Investment Banker.

"Through this acquisition eBay gains a strong foothold in the the rapidly growing VOIP market. By joining the eBay, Paypal and Shopping.com platform, Skype will be able to aggressively expand their user population. The synergies will be enormous."

From Estonia and Skype. Jaanus Kase, Blogger for Share Skype.

"A large part of the deal is the promise that Skype will stay independent, just as PayPal has. They got acquired by eBay some years ago but they're still operating fairly independently, joining forces with eBay at places where it's good for users, just as Skype will do. (Quote from Skype Forum: )

From the Skype Forum. Judging by the early feedback on the Skype Forum, it looks like a lot of people care. The results of the early poll (monitor it here ) sum up many of the comments so far by participants on the Skype Forum.

In your mind, is the eBay acquisition of Skype a good thing?

• Yes - 29% (8)
• No - 70% (19)
• I don't care - 0% (0)

Despite the negative poll numbers, most see it as an opportunity.

From Canada. From me...

Many questions are answered in this eBay financial disclosure (pdf download). For an overview of the purchase visit this eBay investor relations page.

So eBay buys Skype. Who cares? I do. The road for the next year will be tough as cultures merge and evolve, but the end result will likely be very positive, as many developers above indicated. Skype will likely get the resources it needs to compete.

This is a shock. It touches all us Skypers. It appears end users are worried about the change; but most business people are embracing the opportunity.

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.

eBay will host an investor conference call to discuss the announcement at 5 am Pacific Time today. A live webcast of the conference call can be accessed through the eBay's Investor Relations website at http://investor.ebay.com. An archive of the webcast will be accessible through the same link.

Full text of news release...

On Skype.com:

eBay to Acquire Skype

London, September 12, 2005 – eBay Inc. (Nasdaq: EBAY; www.ebay.com) 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. The acquisition will strengthen eBay’s global marketplace and payments platform, while opening several new lines of business and creating significant new monetization opportunities for the company. The deal also represents a major opportunity for Skype to advance its leadership in Internet voice communications and offer people worldwide new ways to communicate in a global online era. Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world.

“Communications is at the heart of ecommerce and community,” said Meg Whitman, President and Chief Executive Officer of eBay. “By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net.”

Founded in 2002 by Niklas Zennström and Janus Friis, Skype offers high-quality voice communications to anyone with an Internet connection anywhere in the world. The Skype software is easy to download and install, and enables free calls between Skype users online. Skype’s premium services provide low-cost connectivity to traditional fixed and mobile telephones. Skype’s software also offers a robust set of features, including voicemail, instant messaging, call forwarding and conference calling. Upcoming product innovations include Skype video, expressive content such as avatars, and customized toolbars for Outlook and Internet Explorer.

One of the fastest growing companies on the Internet, Skype already has 54 million members in 225 countries and territories. Skype is currently adding approximately 150,000 users a day and has created a thriving ecosystem of products, services, developers, and affiliates. Skype is considered the market leader in virtually all countries in which it does business. In North America alone, Skype has more users and serves more voice minutes than any other Internet voice communications provider.

“Our vision for Skype has always been to build the world’s largest communications business and revolutionize the ease with which people can communicate through the Internet,” said Niklas Zennström, Skype CEO and co-founder. “We can’t think of any better platform to fulfill this vision to become the voice of the Internet than with eBay and PayPal.”

“We’re great admirers of how eBay and PayPal have simplified global ecommerce and payments,” said Janus Friis, Skype co-founder and senior vice president, strategy. “Together we feel we can really change the way that people communicate, shop and do business online.”

Zennström and Friis will remain in their current positions. Zennström will report to eBay CEO Whitman and join eBay’s senior executive team.

A Powerful Ecommerce and Communications Engine

Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.

The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate. eBay’s other shopping websites — Shopping.com, Rent.com, Marktplaats.nl and Kijiji – can also benefit from the integration of Skype.

PayPal and Skype also make a powerful combination. For example, a PayPal wallet associated with each Skype account could make it much easier for users to pay for Skype fee-based services, adding to the number of PayPal accounts and increasing payment volume.

In addition, Skype can help expand the eBay and PayPal global footprint by providing buyers and sellers in emerging ecommerce markets, such as China, India, and Russia, with a more personal way to communicate online. And consumers in markets where eBay currently has a limited presence, such as Japan and Scandinavia, can learn about eBay and PayPal through Skype. Skype can also help streamline cross-border trading and communications.

With its rapidly expanding network of users, the Skype business complements the eBay and PayPal platforms. Each business is self-reinforcing, organically bringing greater returns with each new user or transaction. The three services can also reinforce and accelerate the growth of one another, thereby increasing the value of the combined businesses. Working together, they can create an unparalleled engine for ecommerce and communications around the world.

Transaction and Financial Information

eBay will acquire all of the outstanding shares of privately-held Skype for a total up-front consideration of approximately €2.1 billion, or approximately $2.6 billion, which is comprised of $1.3 billion in cash and the value of 32.4 million shares of eBay stock, which are subject to certain restrictions on resale.

The maximum amount potentially payable under the performance-based earn-out is approximately €1.2 billion, or approximately $1.5 billion, and would be payable in cash or eBay stock, at eBay’s discretion, with an expected payment date in 2008 or 2009. Skype shareholders were offered the choice between several consideration options for their shares. Shareholders representing approximately 40% of the Skype shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Shareholders representing the remaining 60% of the Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close plus potential future earn-out payments which are based on performance-based goals for active users, gross profit and revenue.

The above-mentioned dollar and eBay share amounts are approximate, based on the Euro-Dollar exchange rate and eBay’s stock price as of September 9, 2005. The final value of the stock component of the consideration may vary significantly from this estimate based on the value of eBay stock at closing.

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.
About eBay Inc.

Founded in 1995, eBay pioneers communities built on commerce, sustained by trust, and inspired by opportunity. eBay enables ecommerce on a local, national and international basis with an array of websites – including the eBay Marketplace, PayPal, Kijiji, Rent.com and Shopping.com – that bring together millions of buyers and sellers every day.

About Skype Technologies SA

Skype, the Global Internet Communications Company™, allows people everywhere to make free, unlimited, superior quality voice calls via its award-winning innovative peer-to-peer software for Windows, Linux, Mac OS X, and Pocket PC platforms. Skype is available in 27 languages and is the fastest growing voice communications offering worldwide. Since its launch in August 2003, Skype has been downloaded more than 163 million times in 225 countries and territories. Fifty-four million people are registered to use Skype’s free services, with over 3 million simultaneous users on the network at any one time. Skype Technologies SA is headquartered in Luxembourg and is growing its offices in London and Estonia.

Forward-Looking Statements

This announcement contains forward-looking statements regarding Skype and the expected impact of the acquisition of Skype on eBay’s financial results. Those statements involve risks and uncertainties, and actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the timing of the closing of the transaction, the possibility that the transaction may not close, the reaction of the users of Skype’s services, the future growth of Skype’s user base and public acceptance of Internet voice communication services, rapid technological changes in the Internet voice communications sector, the reaction of competitors to the transaction, global developments in the regulation of Internet voice communication services including those provided by Skype, the possibility that integration of Skype’s offerings following the transaction may be more difficult than expected, and the possibility that entry by Skype and eBay into potential new lines of business will not be successful. More information about potential factors which could affect eBay’s business and financial results is included in eBay’s Annual Report on Form 10-K for the year ended December 31, 2004, the company’s Quarterly Reports on Form 10-Q, and current reports on Form 8-K. All forward-looking statements are based on information available to eBay on the date hereof, and eBay assumes no obligation to update such statements.

The eBay announcement:

***A New Way to Communicate***

I’m excited to let you know that eBay plans to acquire Skype, the leader in online voice communications.

Skype has set a new standard in online voice communications with
outstanding sound quality and unmatched ease of use. And like eBay,
Skype has a fast-growing community -- some 54 million Skype users
around the world already use their PCs to talk with one another.

And best of all, conversations between Skype users via PC are free. You
can get up and running on Skype in just a few minutes. Just go to http://www.skype.com/go/x.home to learn more and download the free Skype software application. Try it – it’s fun!

Over time, we intend to make voice communications a part of the eBay
marketplace – a huge step forward in making transactions faster and
easier, as well as bringing even more interactivity and humanity to the
eBay Community.

You can include your Skype ID in your About Me page. For now, however,
Skype links may not appear in View Item pages. We’ll be working with
you, our Community, over the next few weeks to thoughtfully work out
the details of how eBay and Skype will interact, including any policy
changes that may be required.

We expect this acquisition to be finalized soon. In the meantime, you can learn more about our Skype plans in the news release we issued just a few minutes ago.

Working together, eBay, PayPal and Skype will redefine online trade and
community. I hope you’ll join us in this exciting new chapter in eBay’s
history.

Sincerely,

Meg

The Ebay rumors are hilarious. Nobody can verify or confirm anything. Not even vague denials from any of the parties. Who benefits from the leak? Skype's VCs pushing valuation buzz and Skype's bizdev team, both to better arm-twist partners.

Everything Skype can offer eBay or its subsidiaries (technology, network access, Skypification of its user experience, PayPal currency conversion of Skype Minutes) can be delivered as a service, without an equity entanglement.

And then you get the Skype Voice announcement. Bill Campbell does a fine job skewering the outrageous charges imposed by Skype. Can you imagine paying 30% of a sale to your credit card company? Or to your phone company for letting you hook up your computer to the phone network? That's Skype's program!

But that's not the worst of that deal. It's that Skype's BizDev team is driving for tactical profit but creating a strategic disadvantage. I'm tempted to say they're trying to think like a mobile service provider but Bill says it looks like simple opportunism.

This deal is an innovation killer.

This type of deal, cherry picking three players out of an entire industry, only reinforces Skype as a "walled garden," a private, tightly controlled place with one master. The other way to do it is to set things up so anyone who wants to compete can do so. Publish protocols and specs and some common tools for call termination (SkypeLite, maybe?) and for commerce. Set rates comparable to what credit card processing companies charge for debit transactions; Skype minutes are risk free since all funds are prepaid cash.

By the way, do you understand what Skype Voice companies do? They are middleware. You call a number. Their computer picks up the phone and answers with a recorded message. It creates a user experience for you using a library of prerecorded messages, a little speech recognition, Voice-XML to guide the conversation, and whatever database of content you're sharing. Like calling up for movie times and making it easy to search for the blockbuster playing near you.

Enormously helpful.

And these companies offer the service now, on regular phone lines, on toll free numbers. They make their money by selling their service to companies that want to engage their customers over the phone. Like banks for bank balances. Or a newspaper for delivery problems. Or a shipper for tracking problems. In none of these examples does money change hands. It's just my business process talking to customers in a convenient, narrow, well structured conversation.

They don't pay the phone company extra for the privilege.

Skype's partnership model doesn't allow this. If there's no revenue, nobody gets paid. And Skype must be paid before they let you pick up when a Skype caller rings you.

Skype's model doesn't allow public service implementations. The volunteers who put together KatrinaHelp would love to implement a service like this but will not charge the dispossessed to find a lost child.

And companies that want to plug in their own IVR systems are shut out too.

Like Bill said, it's a mess.

Instead of putting up a new api, protocols, etc. upon which vendors can innovate and add value the way tellme adds value (terminating calls and doing something with it), they are doing custom deals for a handful of players for short term cash, closing out the developer and entrepreneurial ecosystem including dozens of Tellme rivals.

Skype can fix it but, as it stands, the Skype Voice program is one step back.

How do you open up your software's user experience to outside parties?

It's distressing to hand your hard fought, crisply crafted, sophisticated design to imperfect strangers.

But you must.

It's key to learning new things. To multiplying the value you create by the curious, concerned, and committed. To meeting more customer needs. To lock-in.

So what's the best way to do it?

Prior art includes plug-in standards, high level human-computer interaction specifications and browser based methods.

With plug-ins, you parameterize everything within a few fixed guidelines. Think about Adobe Photoshop plug-ins, all looking more-or-less the same, but packaging different calculations in one consistent set of controls.

Sometimes a plug-in definition restricts too much. Kai's Power Tools went outside the Photoshop client to create user surfaces that better served user goals than anything possible within the plug-in UI spec.

"An interface is about hiding complexity from the user, It's about guiding a process, without cognitive understanding of what goes on beneath. Interface design is the art of enveloping the observer in an enticing, "try this" exploration with ever-new elements and designs as the tools to triumph in new territories." - Kai Krause

Ever wonder why it's easy to learn a new Macintosh program? Apple's famous UI specs for the early Macintosh OS guided the design of Mac apps.

Enter the AJAX era [wikipedia], a universe of loosely coupled, thoroughly decentralized, OS-independent applications. Where 14-year-olds can create toolbars for Firefox that produce new navigation of Flickr's photo site. Where users record and share Greasemonkey scripts that rewrite web pages so phone numbers become clickable SkypeOuts. Where Vonage users write and share desktop widgets to show Vonage status, minutes used, and performance. Where a weekend hack shows a Google map of a Craig's List of apartments renting near you.

Ten years' ago users were putting up words and pictures on the web.

Five years' ago users were storing them in databases.

Now we're creating applications, in a wave of design riding atop existing data, databases, and services.

The elements are straightforward, even if creating an effective platform remains an art.

So here's my first cut wishlist to open Skype's UI.

1. Open up your embedded browser to users
2. Let us open arbitrary web pages
3. Open up your tabbing and menuing navigation, subject to to
4. Expose its document model
5. Add JavaScript
6. Add Java
7. Support the web2.0 protocols: RSS, Atom, XML-RPC, SOAP, etc.
8. Support Flash
9. Open up the messaging/alerting system
10. Open up the help/documentation system
11. Build a toolbar system, so I can configure feature sets
12. Docking of external UI components/widgets with or within the main application
13. Skin the UI, so I can distribute my enterprise's branded skin or my Natasha Lyonne fan club skin.

Let

• engineers add functionality,
• designers adapt function to specific purposes,
• partners to channel their content, and
• users to make their copy of Skype their own.

Create a safe and flexible place, and they'll experiment and play.

The SkypeNet and SkypeWeb announcements are interesting. A bit scary too. Not for Google, the intended target, but possibly for members of the Skype Developer Community.

Lenn Pryor in today's Share Skype blog had this to say,

"We are announcing two new initiatives that make Skype and the Web a little more interesting and open up new possibilities for the developer and partner community... "

I am glad Lenn feels that SkypeNet and SkypeWeb will "open up new possibilities" because Skype's actions have been shutting down opportunities for developers.

Using the Skype API the Development Community created Web Presence Applications, integrations to e-mail systems like Outlook, and browsers like Internet Explorer, along with voice messaging/answering systems, like Pamela. In each case Skype moved into these tested and proven markets, thus eating the children they had spawned. Now the Skype Ecosystem is offered another API─ SkypeNet API.

For me, Skype’s new announcement just killed a $10,000+ contract for web presence I spent five months cultivating. Thanks, Skype. However, where I see a blunder of biblical proportions (lev 26:29 And ye shall eat the flesh of your sons, and the flesh of your daughters shall ye eat.), Martin Carleton, a developer of the Jyve Web Plugin for Skype, sees the move by Skype to be very positive.

A third perspective comes from Martin Geddes,

“Skype's limited resources are too diffused. Is a Skype toolbar really the biggest strategic imperative, something that cannot be done by a third party? An in-house video solution? Yet another web presence server?”

If Martin's insight is correct then Skype may be shooting itself in both feet: loss of strategic focus and a disheartened ecosystem. These are big problems to have just as Google Talk is emerging into the marketplace and as Yahoo and Microsoft sharpen their swords.

I have yet to meet a software developer who has made any money with their Skype Add-on applications. And yet these add-ons have created value for Skype. CRM and Outlook add-ons increase the use of SkypeOut. But the developers get no share of the revenue. Isn’t sharing good?

What do you see? Is Skype eating its children? Is SkypeNet and SkypeWeb creating new developer opportunities? Is Skype losing strategic focus? Tell us what you see.

I had an interesting discussion a few days ago. One of those rambling international ones with a fellow who like me has watched Skype from the beginning. I jotted a few notes down, ideas and points that were made or fleshed out.

• Skype 4 Million Active Users Online
• Is Skype Netscape
• More than Buddies
• Free Calls
• Voice Differentiator
• Developer Program
• Skype Video?

Skype 4 Million Active Users Online

The Skype client shares how many are online. Currently I see just over 2.5m. Before the summer arose, we saw this number peak around the 3.25m point. The numbers have been at best flat or declining since then. So if Skype numbers are soft and college kids return to school in September, then we would expect a jump. Conclusion: if Skype is at less than 4 million users online by end of September then somewhere we have all miscued on growth. In that case, Skype may rush video to market to bolster numbers.

Is Skype Netscape?

Microsoft ignored Netscape for a good year, then turned everything around to kill it. Microsoft's IM client sucks. Skype is not Netscape, and there are several voice/IM clients in the play today. Yet, some believe that Microsoft can still turn the corner on Skype. Here's their challenge. Skype, unlike other IM replacements, has created a new "collective" cross-platform buddylist, including phone numbers and people that had never used IM before. The shaping of these new buddylists are now well underway. The more numbers, more names and more buddies people have on Skype the more difficult it will be to jump back to an old client. I have to move the majority for it to be successful. Otherwise I am again using dual clients. Unless there are new features that materially affect the way I work or socialize, the desire to shift won't be there. Just look how long people stuck with the old telephone.

More than Buddies

In my case I have over 250 buddies/numbers on Skype. I never collected the same number (or even came close) on any other messenger system. I'm sure it is an extreme (although my SmartPhone mobile has even more contacts in it) Migrating back to an old IM system even an improved one will not be easy. Add to this hardware (like RTX dual-phones) say $150 in misc hardware that one buys over the next year. Will that work with the new IM system? Will I have to write it off or will I be able to download a software upgrade that will allow it to now work with another IM system. How long will it take the manufacturer to catch up? Hardware represents a potential psychological lock-in.

Free Calls

Voipbusters is providing a free calls almost anywhere service that I reported on last week. Skype isn't working hard enough to reduce call costs. On the one hand, one voice in me says that isn't necessary and why antagonize Telecom's further. The other voice shouts "Free" is a fundamental part of the business model. So how does Skype make all my calls free? How does Skype reduce my broadband cost to zero? Is this an advertising mechanism? Does Skype empower me to sell some data? How can Skype create a better conduit for information exchanges between buyers and sellers? Can Skype more economically deliver the mail.... so to speak? Skype's economic opportunity is to reduce the cost of connecting to the net to free. They are getting there on interconnecting (PC to PC). If Skype doesn't do it the next new entrant will. Does it make sense? Should one use subsidies from one industry to fuel the growth of another? Why not?

Voice Differentiator

So far the only real differentiator Skype has had is voice. It's that part that really made the difference. While firewall busting and installs are important it is the stickiness of voice that created Skype and keeps it growing. However, we've seen no real advancements in voice since Skype launched and GIPS provides the majority of the audio solution. It's now been duplicated and adopted by others. So where is Skype's innovation? Where is the next generation features that will be harder to duplicate and more compelling? I'd look to presence and location information. Concurrently, identity - profile provide an interesting possiblity for leverage. The challenge will be how to enable and gain consumer trust.

Developer Program

Cynicism around the developers program remains. This may stem from Skype's willingness to do deals with "big names" e.g. Motorola, Logitech, Plantronics, (even when some of them have yet to launch a product) and yet completely ignore the small companies and individuals. This leaves one to wonder where it leaves a company like VoipVoice who make the CyberphoneK and provides one of the best software API integrations for usb hardware. It would appear inevitable that Skype just absorbs their plug-in and builds it into the product. Thus any Skype certified hardware device will be supported.

Skype Video?

It may be a question of when. It may also be a question of for what? Will Skype Video be limited to Windows only? Have they choosen a codec that will enable video to follow into OSX, Linux and Symbian? A video solution that stops at Windows won't have the same impact.

"When will Skype open access to their codecs?" Doc Searls asked me at the Always On picnic. It's not clear they will. If they do, the Jerk-O-Meter is an example of the kind of application you could build. A project of the MIT Media Lab, it analyzes voices during the call, telling users how much they are paying attention. Per their project page, "The current version of the application runs in Linux on the Zaurus VOIP phone. It uses Ron Caneel's code to extract the activity and stress levels in real-time."

The Skype API doesn't expose the audio stream; you must work through the operating system to get at it. The same is true of the upcoming Skype Video.

There's money in analyzing and transforming media streams, whether for call centers (like the Jerk-O-Meter), annotation services, call/video quality boosters, semantic content detectors, translators, relay services, or simple stress/lie detectors. The Skype API should safely expose the media streams, and provide mechanisms for user authorized manipulation and substitution of that media by a friendly application.

It won't be easy, but the market value is huge.

João Brogueira writes:

On 1 June 2004, Jean Mercier posted an article on SkypeJournal making an analysis of how many users are online at a certain our within a 24 hours period. This raises the question of how to register the values without being waked up during all night.

The same Jean Mercier as per request of Bill Campbell, of SkypeJournal, shows how to make a video to register the Skype window and the number of users online.

I was surfing the Web today and I found this very interesting post claiming to have miniSkype, a small program that can not only register these values but also export them directly to a database for later analysis.

In short:

1. Jirong Zhou posted a test program on his blog, likely written by others.
2. It logs in to the Skype network, without Skype.
3. It gets data from the Skype network, like the number of people online.

Let me describe the screenshot for you...

It is a Windows XP desktop and three windows are open.

Two stacked on the left are titled "miniSkype v0.0.0.01". They each have a Log In/Out dialog panel on the left, showing "shantou001" logged in with a five character password and a "Log Out" button. To the right of the dialog panel is a text box showing a log of miniSkype's activity.

The first window's log shows:

Login
listen on random port
connecting SkypeNet ...
SkypeNet connected

The status bar shows a "1", "3", "login success", and "305271 Online".

The second window's log shows:

Login
listen on random port
connecting SkypeNet ...
SkypeNet connected
Logout
SkypeNet not connected
Login
listen on random port
connecting SkypeNet ...

and then scrolls out of sight.

The second status bar is the same as the first except that the number of people online is 3047812.

The third window is an application, what appears to be a utility from Gunagzhou's http://www.sky.net.cn/, makers of personal firewall software. It shows open applications and their network connections. One of the instances of MiniSkype.exe (running on drive E:) is shown with both a TCP connection (open on port 1389?) and a UDP connection.

Accessing the Skype Cloud Without Skype?

So does this mean...

• Skype's access to the cloud can be reverse engineered? If so, we can write applications that can write and read to the cloud from servers or clients. So if Skype doesn't write a version for your platform (let's say the PalmOS, for example) you might write your own.
• Cloud data is posted in the clear? While conversations are encrypted, it isn't clear that profile data and presence status is. And, I'm assuming that MiniSkype didn't encrypt the login process beyond common https.
• The MiniSkype client successfully logged in through Skype's own admin servers? If so, can Skype be selective about which clients have access? Should Skype publish a Terms Of Service about touching the cloud? In other words, how should Skype sanction access to the cloud?
• Having accessed the cloud, what other data from the cloud is available? Everything described in the Skype APIs? More?
• Can MiniSkype ask questions about other people, the way the Skype client can see buddy list presence and profile information?
• Is this intensely cool? Widely important? Or dangerous?

As an educational aid, Telepocalypse is pleased to offer its readers this essential glossary of industry terms. Simply print it out, fold it up, and stick it under your keyboard for your wife to discover and clean away next spring.

SIP. Abbrev. Standard Initiation Protocol. A meta-technology designed to inspire people to create new, proprietary and competing standards and implementations containing subtle incompatibilities.

VoIP. Very Old Idea Phone. A revolutionary way of extending Bell's original vision for the telephone, allowing you to dial with a mouse click as well a touchtone keypad and rotary dial.

IMS. Internet Monetisation System. A minor adjustment to Internet Protocol to add a "price" field to packet headers. Earlier versions referred to Innovation Minimisation System. This usage is now deprecated. (Expected release Q2 2012, not available in all markets, check with your service provider in case of sudden loss of unmediated connectivity.)

E911. Slang. Emergency! 911. Whenever an incumbent telco feels chest pain, hot flushes, and sudden loss of wealth, they should call their local political office and declare an “Emergency 911”. (A tax-deductible campaign donation of the usual $911,000 is also expected in return for rescue service.)

ATA. Auntie's Telephone Adapter. Gives your desk phone a thicker, less flexible "Ethernet" cord and and weighted anchor to stop your clumsy aunt knocking it onto the floor again.

SBC. Archaic. Session Border Confuser. System designed to prevent Skype users in different corporations from being able to talk to one another. No longer in common use.

August 2-4, 2005 - VoIP Developers Conference - at South San Francisco Conference Center starts today in San Francisco. Let us Skype phreaks convene Wednesday, 7pm, in the lobby. My mobile is +15102061138. If you're attending and have South San Francisco dining suggestions, please leave a comment on this blog post or a Skype chat (evanwolf).

This new whitepaper The Skype Payment API from Connectotel should wake up everyone in Skypeland.

I found it on the Skype Forum.

Summary:

The proposed design for SkypePay would allow any Skype user to make use of his/her existing SkypeOut account to pay for goods and services. At the most basic level, the process of making a payment via SkypePay can be considered as a transfer of an amount
between one Skype user’s SkypeOut account and another.

This whitepaper is an epic. If implemented, and the rumour mill says that it will be, SkypePay has profound consequences for everyone: The Skype Developer Community, for the users of the Skype Global Network and Skype. As well, it opens up a whole new developer community ─ those engaged in producing content. From home movies, games and porn.

It is a show stopper for MSN and Yahoo.

Niklas Zenström has always talked about delivering “services”. SkypePay would make this easy for everyone, not just Skype to get paid for services: consulting on any topic, teaching languages, just let your mind wander.

What an awesome way to build a community.

"How the hell can you make money with a system that is for free?" , asks Skype Forum member, tropicaljantie, the real-life Belgian Jan Geirnaert, residing in Kuala Lumpur, Malaysia.

That's a good question Jan. The big travesty in the growing Skype Ecosystem, Skype Developers Program, and the API is the lack of thought by Skype staff about how developers will make money.

We have had some feedback in the Skype Journal...

Here is a comment to Stuart's post Skype Developer Ecosystem Gets a "D-". Jason Terando, the developer of the Skype API COM Wrapper, had this to say:

"One unfortunate trend seems to be Skype adding functionality without regard to what has already been developed. One example is voice mail. A few parties went to great trouble to build voicemail apps, only to have Skype include it as an included feature (albeit not for free). Likewise, Skype has committed to an API/web-based mechanism for retrieving on-line status, which a couple of parties have already worked hard on developing, only to see the rug pulled out from under them."

In an interview about Spontania's Video4IM, CEO Enrique Dominguez talked briefly about his business model.

"As you say, Skype is free, but out of the free version comes premium services. We follow the same strategy. We are a private owned profitable company, and obviously we need to generate revenue to keep these black figures ongoing."

"Regarding Spontania Video4IM, in some weeks we will announce some cool premium features; among others, videoconferencing between PC users and 2.5 and 3G mobile devices. This would drive Skype-Out minutes and open the door for new subscription models."

Niklas Zennström created a market of 45M users who want just about everything for free. Niklas makes millions and soon billions by nickel, diming and Euroing his captive Skype Users with valuable services, while members of the Skype Ecosystem get economically pummeled.

Jan, let's hear how our readers might answer your question, "How the hell can you make money with a system that is for free?"

Here is my pick of five SkypeAPI enabled products that can really change how Skype works for you. Better call answering, new call forwarding and video solutions. Plus enhanced collaborative desktop sharing and a way to silence your iTunes.

I apologize in advance to Mac users. This really is a Windows list.

Five Software Winners:

1. Pamela-Systems Pro

This is the Swiss Army Knife for Skype. From answer machine to call recorder and automatic podcasting this solution provides a range of ways to personalize how you answer callers, what messages people get when you are away, etc. It is a great complement to an always-on Skype PC. Even for just a few of the features you can hardly quibble about the price. Cost: Euro 17.50.

2. Video4IM

Spontania's solution, still in beta, hasn't yet always provided me with an unpixelated cam image. The most important aspect is how this program makes video calling easy. You can even set it so it connects as soon as a Skype call from another Spontania user comes in. Provide the personalization functionality like Pamela has and Id have auto video calls with my favorite buddies. At the moment no one makes it easier or faster to launch a video call. Thats going to be a behavior changer. Cost: Free

3. Jyve Web Tools

Two big things. Forward calls you don't want to miss (Skype is working on this now) and the solution for making all your directory listings come to life. Yep are you online or off-line. It the world in which wikis and blogs share your presence info. More importantly, Jyve's created a standard to enabling chat messages off any website. If you have Jyve installed then you can text them on Skype directly from their blog or profile on a dating site.

4. Jybe Collaboration Tool

I know it sounds like Jyve but they are completely different. Jybe enables sharing everything quick and easily. Share word documents, PowerPoint, hey simply share MS Office online. Thats cools that brings accelerated desktop sharing to work while in chat video and voice calls on Skype. I only have one reservation at the moment. The beta version is not encrypted. Thus use your head. I am sure an encrypted version is in the works. Cost: Free.

5. MiTunes

Who can Skype and not want automated muting of their iTunes? I know some would like it in the call to. Still when a call comes in muting iTunes helps when you do not have a separate USB headset or second sound card. Its just a simple program. Not very elegant when you first boot it. Then it runs in the background. If you like iTunes, and Skype you should get it. Cost: Free.

There are other software solutions and other options. Few integrate with the SkypeAPI like these do. It's not surprising that software solutions really begin to use and extend concepts for the API. However, Skype's original purpose was to create a range of "hardware" solutions and collect a royalty. Phone, handsets and devices that would plug-into Skype. The best executions of those are the Olympia Dualphone and CyberPhoneK. While devices like the Actiontec work, they don't really harness the power of the SkypeAPI.

These are the fruits of small developer teams that lead the way to Skype's future. They are the "software" offspring from the initial Skype API products not envisaged by Skype. They've helped generate discussion, user interest and have helped define Skype changing developer direction. Downloads range from a few thousand to 100's of thousands. For some to work, both you and your buddies must have them. So share the news and use them.

SkypeForge.com is just a domain for now. A door. What should be on the other side? What can a developer community do to support itself?

SourceForge is the inspiration, of course. Others of note include Novell Forge, operated by Novell for open source developers and MamboForge.net, operated by the Mambo developer community.

Share code, designs, references, tutorials. Enable conversation via wiki, IRC, blog, listserv, bug tracker and feature request service.

This may fail to ignite. Developers may not have the numbers, the passion, or the commercial self interest.

Is SourceForge the right model? What other approaches may work or fit better? Association or membership communities? Professional guilds?

Stuart Henshall, Skype Journal's publisher, posted his Grade "D-minus" for Skype's developer ecosystem. I think it's too harsh. Slightly. I give their developer program to date a "C".

Two reasons: My metrics biases are a hair kinder. And I cut Skype a lot of slack for their small size and tender years.

"Doctor, the labs are in."

Out of a gazillion things that describe the state of an independent developer ecosystem, which do you check? What labs do you order? [No, seriously! Which ones?]

Generally, you model what you want the system to do. You diagram the states and flows. Then you seek out metrics that sense general system health, that help diagnose problems and prescribe solutions.

In this case, you want a large and vital business ecosystem. It's many outside developer subcommunities, several subcultures within Skype, and the processes you design and deploy to keep virtuous cycles going.

Some of my favorite measures...

1. How many communications has Skype initiated to ISVs (Independent Software Vendors) this month? Include calls, chats, email, visits to developer-focused web pages, etc.
2. Number of registered individual developers. SkypeAPI knowledge and talent live in the conversations among developers.
3. Number of registered individual developers who put the Skype API on their CV/resume.
4. Number of registered developer companies.
5. Number of signups on the main developer listserv (is there one? are there focused ones for each product?)
6. Days from time new feature is announced until an API is published
7. The existence of draft APIs and public forums for discussion of those APIs
8. Number of developers with Skype tattoos
9. Percent of Skype's in-house developers blogging in public

We seek qualities like vision, heart, strategy, transparency, growth, trust. Operational competence, execution, responsiveness. I think a lot of it is there, but shrouded or repressed.

My sense is the problems are those of young adulthood, in the organizational sense.

For example,

Message Control Freaks. These are "clueless" marketers, in the Cluetrain Manifesto sense. They stifle communication across the corporate firewall. They focus on message compliance instead of dialog. Every company needs people like this, but stronger voices in opposition must prevail.

BizDev-Driven Engineering Priorities. Money talks. So do wealthy partners. Do partner needs really match those of your core audience? Are they pulling for elegance and simplicity? Or for feature overkill? Again, balance counts.

Balance is a sure sign of organizational and managerial maturity.

Skype Technologies is not yet Grown Up

It would be great if we could index for corporate maturity.

A story: When I was hired to train and certify computer dealers by Compaq (employee 56), it was part of a comprehensive strategy to develop an independent reseller channel. Two rungs up the hiring chain from me, Compaq hired the best people they could find who had similar experience selling hardware through reseller channels. A few came from IBM but most were execs at copier companies.

These guys knew everything about keeping dealers happy.

• Lots of information.
• Point of sale support.
• Terms and conditions.
• Inventory and order management.
• Scarce model allocation.
• Co-branding.
• Cooperative advertising.
• Margin creep.
• Territory density control.
• Education and training.
• Rewards and recognition for everyone involved in the dealership, from junior service techs and sales people to managers and integration engineers.

They hired the people and built an organization who could roll-out a channel into major US markets in a year, into world metros in two.

Compaq also had to convince software developers that it was IBM Compatible, that their software would run. Compaq wouldn't have launched successfully if Lotus 123 hadn't launched at the same time and on Compaq's first luggable.

So Compaq mounted an aggressive phone and advertising campaign to recruit software developers, to convince them to test and certify their software. It worked. We published thick directories of compatible products. These directories went to computer buyers and to the dealer channel, because software sales sold computers.

Applications sell platforms.

Skype is like that first and second year of Compaq. Scrappy founders. Growing so you don't know everyone anymore, or even ("we have a department for that?") what they do. The culture of adrenaline. The overwhelming number of demands on time, the proliferation of choices. The sudden fame by association.

I was at Compaq when they grew through this stage. It's a tough phase. People make lots of mistakes because they're making lots of decisions. You just hope you know which ones are key and that you take an extra beat to choose well.

At this time last year, Skype was half the size it is now. In fewer locations. Each time headcount doubles, they will have new organizational and operational challenges.

So I'd give Skype's Developer Ecosystem a "C"

On an absolute scale, with 100% being world-class performance, I give them a "D" for the first six months of 2005. I concur with Stuart's rating of the developer program. They've made more than their share of errors. The effects have been expensive and painful for developers, and have sown fear, uncertainty, and doubt.

But remember they are a small company. Microsoft and IBM and Sun are a hundred times larger than Skype. And they've had a generation to build and optimize their independent developer programs. Skype is just staffing up its developer program, and they seem on course. So I bring their grade for the half-year to a "C". Better days ahead.

Skype Technologies S.A. is failing its independent software developers.

What must Skype do to develop a successful developer community? How would you score them? How do you approach such a problem?

Developing an effective developer community requires more than just the desire, it require a model, something that will stretch the internal team and inspire developers. It must be so simple that the parties get it. So effective that key dialogs can start.

Eight key dimensions drive the success and behaviors necessary to nurture an effective developer community. This is not just about words. It is also having the right types of personalities and roles involved to make it happen. Too often a developer community is viewed with systems focus. I'd offer up that it is about people. People in all these roles

Judge for yourself: How does Skype's management of the Skype API and developer program score on each of these factors? Where could they improve? How would this map versus Microsoft or Java or...... Rate them "A" to "F" on each of these. Rate them today, then rate where you think they will be in six months. Are they on tract to be the ultimate partner for developers? What new ground must they break to get there?

1. Architecture Evangelism: Are the systems and documentation for developing your product on the Skype platform clear and comprehensive? Are short-term feature release timetables published? Are road maps disclosed and updated? Are contacts easy to find? Do you know who to talk to? Is access managed and measured? Is the developer education program diverse (accommodating many kinds of programmers), dispersed (geographically and across time zones), stepped (from beginners to gurus, from generalists to specialists), affordable, and comprehensive?

   Score: D-

   In Six Months? This is totally dependent on Lenn Pryor. C maybe.

2. Creative Opportunities: Does the API expose many features? Can they be combined to do novel and interesting things? Do they provoke innovative and competitive products and services? What unique opportunities does the API offer? Can solutions bridge APIs etc? Does the Skype developer program provide tools for experimenting and testing a developer's work in progress?

   Score: B.

   In Six Months? This will be a C- unless they expose more

3. User Experience: Does Skype help developers create "star" products and services? Toolkits? Is there effective brand synergy and marketing impact? Are third party tools seamlessly blended into the Skype user experience? Best practices: Apple's UI standards.

   Score: F.

   In Six Months? We'll see whether they become developer friendly C-.

4. Supportive Team: How effectively does the ecosystem work as a team, as a community? How free and productive is the exchange of ideas? How effective is Skype's communication and updates to the community? What is the opportunity for co-development with Skype? What are the risks of Skype obsoleting third party products through surprise changes to the API? When and how does Skype compete directly with developers and other partners? How well is Skype staffing to support the developer community? Best practices: Microsoft Developer Network.

   Score: F.

   In Six Months? Unlikely to see a roadmap in less than six months. Could still be an F although a frustrated and trying F.

5. Legal Agreements and Public Policy: Are contracts and deals between Skype and developers effective? Are they fair? Do they reflect the realities of how programmers develop software and how users use software? Is the legal language clear? Are accurate translations easily available? Are the license terms and conditions best-in-industry? How much does Skype protect developer rights and interests? How well does Skype protect developers by protecting end user privacy? How actively does Skype advocate to governments and industry for personal data privacy, the right to connect, and against hostile regulation?

   Score: F.

   In Six Months? Complete lack of action or general obstruction. This needs to be an A if Skype is to win.

6. Business Exchange: Working on Developer Time: Do you respect the ISV developer's time? How many minutes does it take for a developer to get a technical answer? to apply to the developer program?

   Does the Skype application enable a two way information exchange? Is data flow through the API one way or two-way or even multi-way? How much is static vs dynamic? Exchanges with the client, exchange of information with the user? Security of information? Privacy management, user rights protection? Can developers build on information exchange to create commerce transactions?

   Score F:

   In Six Months? I truly wish for improvement. C.

7. Value Creation: How's the money managed? Integrated? Can payment to the Skype ID be made? Can withdrawals or payments be made? Who pays for services or products? Does Skype offer download "options" for certified software add-ons? Is there a river of monetary opportunity?

   Score: D. Although other free services are creating value on Skype's back.

   In Six Months? D expect little change.

8. Investors & Peers: As a developer can you sit at the table? Do you coexist like eBay resellers, integrated into the financial ecosystem? Is Skype a positive facilitator or are their always barriers? Are investors willing to put money in? Who bankrolls the opportunity? Are business cases relatively easy? Do you travel first class or coach?

   Score: F:

   In Six Months? D at best on current trajectory.

My conclusion.

Now many will say I am very harsh. You are probably right. Most developers would say "Skype is doing their best." "They