How much gold do you pay pirates?

They came for fortune but were keelhauled and made to walk the plank. Now Skype's founders are back in a small fast ship, ready to sink her if they don't get paid. Do you fight to defend the S.S. Skype? Can you bribe the scoundrels and trust them to leave? Or do you bend, take them on as partners, and suffer them so you can put back to sea?

What do the two sides bring to the parley?

The Captain Z and Mister Friis wield barristers and silver. They sued Skype over the software license, swearing oaths were broken, blood is due, and Skype should be dry-docked until treasure is paid. They sued the new investment team, claiming keys to Joltid's treasure were smuggled from Joost's lockbox to key investors. And they lugged a treasure chest of cash and promises for outright ownership.

eBay and the Capitalists race to safer waters. Skype's quartermasters slaved for months to replace Skype's sails with sheets of their own making. Skype's lawyers dispute each scurvy claim and denounce them. It looks like prevailing winds for Skype's lawyers but fate, the courts, and codemongers are uncertain. 

Can eBay buy their absence cheaply this winter? Are you better off swashbuckling until a verdict comes next summer? Would you throw the Index Capitalists overboard, making room for the Dane and Swede at the Captain's Table? Could you ever turn your back once they were aboard?

The tale comes to this. Would you make a deal with the Devil himself to save your ship a battle? Or can you chart a course for open seas that leaves the pirates adrift in your wake?

Bonus Clue: Are the pirates on retainer in a grander scheme? Who benefits if Skype fails? Who would pay two billion dollars to shut Skype down?

tags: skype, joltid, joost, pirates, piracy, litigation, ebay, $ebay, $skype

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.

Pop quiz: What kind of Pirate are you?

BusinessWeek Book review: Piracy as Innovation Strategy: Can illegal copies provide inspiration? "Matt Mason, a former London deejay and the founder of RWD, a popular British magazine, argues for piracy as a business model rather than a threat. In his new book, The Pirate's Dilemma, he discusses the history of piracy--and how it drives innovation"

Volpi's Skype Business Concept: SIP, social, lite, layoffs

- buy skype, replace p2p with SIP (standard-based, open, can interwork with other VoIP systems – like the Cisco phones)

- use social graph to augment other socials via API or develop its own social

- replace heavy client with flash/html/java version – make it lightweight for embedded devices (mobile)

- clean up staff and cut costs while private

[Links are mine.] Exhibits 1-20 to Declaration of S. Dargitz In Support of PI – PUBLIC, page six, redacted.

Discuss amongst yourselves.

tags: skype, indexventures, skypeforsale, joost, litigation, lawsuit, preliminaryinjunction, injunction, dannyrimer, mikevolpi, volpi

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.

Doc courtesy of Tara Swisher.

Why Skype needed to kill off its developer program

Killing Skype's developer program was an exercise in business discipline. You prune your tree of small, weak, sickly branches so nutrients and sunlight let the whole tree flourish.

Skype's developer program (SDP) has been bloodless for years. By every measure. Growth in programmers. Number of ecosystem products. Value contributed.

What devalued Skype's developer program?

5. Musical chair management.

I've lost count of the number of managers who've taken a stab at leading Skype developer relations in the last six years. It takes time and focus to be good at devrels, to build your devrels organization, to establish rapport and relationships with prospective partners.

4. Underfunding.

Skype's management shortchanged the developer program for Skype's first four years. DevRels never got the budget or headcount it needed to educate, evangelize and support developers. Software and hardware certifications, intended to promote the Skype brand and build trust, instead became a barrier to entry and a costly delay. 

Metaphor Bank:
Prune a tree,
Remove chometz,
A controlled burn,
Put down a diseased pet,
Excise a tumor,
Balance a project portfolio,
Dumping ballast,
set developers free (Schumpeter creative destruction).

3. Broken trust.

Two steps forward, one step crushing partners. Skype me for the sad details of developers who bet on Skype's constancy and lost. Lost money. Lost jobs. Lost careers. A trail of tears and dashed hopes.

2. Who You Know.

Want to get something done with Skype? You needed an inside friend. Skype's much better now that a process culture's emerging, but it's still true.

1. Six Year Old Technology.

The perfect developer relations program cannot put lipstick on a pig.

1a. Client-only Calling APIs: So no putting Skype inside your app.

Skype's web services are all proprietary, off-limits to the ecosystem. Skype runs "naked Skype" server farms to support its Skype Lite mobile application. Skype Lite does most things a desktop client does, through Internet APIs, and without resource hungry user interfaces. It's an internal Skype as a Platform service.

Skype's third-party developers want Skype as a Platform. A SaaP would bring Skype features and the Skype network to web and mobile applications. Web applications are nearly always better business than rich clients. They cost less, don't have installation problems, are less prone to user failure, are always fresh, and take less time for customers to get their first Aha! experience.

1b. Closed Skype client: So no putting your app inside Skype.

Skype keeps users from seeing third party developers. With the Adobe Photoshop Plugin and Firefox Extension architectures, for example, you can write apps that live inside Photoshop or Firefox. They improve a user's productivity and alter the user experience. They bring specialist expertise to the exact point where users need them.

While Skype's Public API (downloadable SDK) lets your desktop program talk to Skype's desktop software, it doesn't let you change what users see and do. The Skype UI is off-limits, verboten, pristine.

So you cannot offer inline language translation, extended emoji sets, inline Yahoo! Calendar reminders, or enrich contact profiles with updates about your friends' activities. If you cannot put your enhancements where a user needs them, why build them? 

In short, the business and technology sides of the SDP were impaired to the point of irrelevance.

Skype needs to reset the program. And its platform.

More soon.

tags: skype, devrels, developers, apis, saap

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.

Skype Eats More Young: RIP Skype's software developers relations program.

Skype clients have APIs. Thousands of developers wrote Mac, Windows, and Linux software controlling a Skype client through the API. Call recording, desktop sharing, games, commerce; thousands of products.

While Skype will maintain the API, the developer relations program around it is over. The commerce component: Dead. "Skype Certified" software: Dead. Support: Dead.

Skype will continue to engineer the communications API.

They won't help you promote your software.
They won't help you test and improve your software.
They won't help you co-brand your software.
They won't help you distribute your software.
They won't help you sell your software.
They won't help you process payments.
They won't help you keep up to date on API changes.

Not that they'd executed terribly well on these in the past.

But that's what they're defunding.

Presumably all that energy and money will go into a new program for developers. Skype moved some of its devrels people to new teams, some to a team working on the public version of Skype's future cloud communications platform.

Was there a good reason to kill off the old program before the new one was up? Skype won't say. Will the old community fare poorly on the new platform? Does the current community of developers not build a million dollars in yearly value to the Skype brand? Do these developers have anywhere else to turn?

This Dear John letter went out today to registered developers along with a blog post saying much the same thing. 

Subject: The future of Skype Extras Program
From: [Someone at Skype]

Date: Fri, 11 Sep 2009 12:52:23 +0100

Dear Sir/Madam,

I am contacting you on behalf of the Skype Extras Program.

Unfortunately I have to announce that the Skype Extras program will be shut down, effective September 11rd 2009.  Despite the incredible breadth of Extras developed for Skype, simply not enough people were using them to justify our continued support of the Extras program.  It was a tough decision for us, but we want to ensure that we prioritize our time and resources to deliver our core products such as voice and video, expanding Skype among business users, and expanding Skype into mobile and other platforms. The following changes will be effective from September 11th onwards:

• We have decided that we will no longer certify new Extras. However, all existing Extras will stay certified until their expiration dates and all unused test tickets will be reimbursed.
• We will continue to distribute applications through the existing Extras Manager in Skype for Windows but will no longer add new Extras to the Extras Manager.
• All public API documents will continue to be maintained Skype will also support accessories via the Public API.
• The Skype Shop <http://shop.skype.com/extras/>  will continue to support the currently listed Extras

This decision also influences the payment terms that are currently in place. After December 11, Skype will no longer allow the use of Skype credit by 3rd Party Extras developers. A final invoice detailing the full amount of the gross revenue received from Skype users must be submitted within 45 days of this date. After the 25th of January, Skype will no longer be able to process publisher invoices.

We understand the impact that this decision will have on our community. If you have any additional questions regarding the payment terms or any of the other listed changes please don't hesitate to contact me.

Best Regards,

See also: Alec Saunders' Go Big, or Go Home. But Please, Spare Us The Whinging….

tags: skype, devrels, extras

Call me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.

Skype sets new performance records, preserves margins in 2009q2

eBay reports $170 million Skype revenue for the quarter, 25% year over year growth. 20% of revenue was from the USA (green line below). Management kept margins stable at 23.6% (the big purple line below).

8.4% of all revenue ($14.3 million) is from marketing services and other revenues. These include licensing Skype's brand for Skype Certified products, certification fees, and Skype Prime fees.

+37.3 million new accounts, 414k daily (the red line below). This brings Skype to 480.5 million cumulative accounts. The adoption rate fell slightly this quarter.

25.5 billion Skype-to-Skype minutes served in Q2 (blue line), 3.0 billion Skype-to-PSTN minutes (red line). Is the rate of growth slowing or is it just seasonality?

This puts Skype's freemium rate at 8.5 (8.5 free minutes for every paid minute). Still within Skype's historical range and very low (lower is better) compared to other services. Some companies have freemium rates around 20-1 or 50-to-1. The curvy line below is Skype's freemium rate over time.

tags: skype, skypejournal, stats, financials, revenue, profit, margin, minutes, freemium, trends, charts, statistics, performance, ebay

Call me at +1-510-455-4384, Skype me, follow @skypejournal and @Phil Wolff.
Visit our Skype Journal private roundtable, one of the longest running public Skype chats.

The Skype Restructuring: Global Products, Regional Markets

Josh Silverman joined Skype as President early in the spring of 2008; since then he has been reviewing Skype's opportunities and building a team of experienced executives who can bring to Skype the products, programs and team building expertise required to operate a business with a run rate of $600MM per year, 20% contribution margins to eBay and growing at 380,000 new account registrations per day (with "real user" growth also increasing significantly).

Summarizing the past executive appointment announcements we can clearly start to see the evolution of a business structure, along with each unit's responsibilities:

• Operations: Product, Marketing, Customer Care, Support
• Technology: Engineering, Platform, Development Community
• Strategy: Partnerships, Strategic Alliances, Acquisitions
• Administration: Global Communications Human Resources. Finance, and Legal round out the top executive team.

During our interview at CES 2009 with Skype COO Scott Durschlag, he outlined details of his restructuring of Skype's Operations team along two axes: product and geography under the mantra of providing "Skype Everywhere".

Global product offerings will encompass three divisions: consumer, business and mobile, each responsible for developing products. Each of these groups will be interacting with members of CTO Daniel Berg's technology teams to convert their technology developments into marketable global product offerings and to adapt the technology to meet product marketing needs.

• Consumer will involve the current Skype client desktop offerings along with hardware, such as Skype phones.
• Business starts with the current Skype Business Control Panel but intends to expand well beyond this starting point into a range of offerings, such as Skype for Asterisk and the recently announced IBM LotusLive developments, addressing the small-to-medium business market.
• Mobile involves current products such as Skype for Windows Mobile, Skypephone (in conjunction with iSkoot), the recently launched Skype Lite (including Skype for Android) as well as any upcoming offerings for the iPhone and BlackBerry

In addition each of these divisions will be responsible for developing appropriate customer care and support programs appropriate to market demands. For instance, the business unit will come up with ongoing support programs relevant to supporting sustainable business operations of its products' users. Ideally these programs would follow the model of Red Hat for Linux or Digium for Asterisk and build up a network of resellers and VARS who would provide relevant and timely end user support. While Dan Berg's technology team will be responsible for third party developer partner support, an additional challenge for the Business products group will be to assist with marketing of business applications offered by these developer partners.

While Skype veteran Stefan Oberg is heading up the Business unit, announcements re appointments to head up Consumer and Mobile are pending.

Along the geography axis is a recognition that, while the Products divisions have a global mandate, there are different market needs within different regions of the world. For instance, in many Asian market wireless carriers do not subsidize mobile phones as is the North American practice. This requires a differentiated approach to these markets with respect to how easily innovations, especially around reduced calling costs, can be introduced to these markets.

The geographical market responsibilities are:

• Americas: Don Albert becomes General Manager, Americas. Don has had North America responsibility for a couple of years and will now be responsible for both North and South America. With respect to the latter he is looking forward to building on all the Skype activity in Brazil, for instance. (And, yes, once again at CES Don was made aware we are awaiting SkypeIn and a Skype Store for Canada)
• Europe, Middle East, Africa (EMEA): appointment pending
• Asia/Pacific: Yesterday we saw an announcement of the appointment of Dan Neary as General Manager, Skype Asia Pacific. One of Dan's initial responsibilities will be to build and monitor closer relationships with partners such as TOMSkype to avoid embarrassments such as that created by the TOM Skype privacy breach we have reported on last fall.

Outstanding executive appointments are expected shortly; at this point it's becoming all about execution. The next six months will tell the story.

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Skype COO Outlines Skype's Software Guidelines

During our conversations with Skype COO Scott Durschlag last week at CES, Scott outlined Skype' criteria for its software development going forward.

First was the emphasis on "liquid communications" through statements such as "Skype Whenever, Wherever". Just as today you can pick up any PC or mobile platform and find all the Google Tools (Search, Maps, News, Reader, etc.). Skype wants to be on virtually any platform or device.

Pick up a smartphone, find the Skype button. Turn on the TV, find a Skype button, have a conversation. Open a web browser; start a Skype session. All this to complement Skype on the desktop. Today, besides on the desktop, you can find Skype on over 200 mobile phone handsets, several (Sony) mobile devices, Skypephone and Apple TV. But Scott emphasized, this is only the beginning. It will only start to get real when we see Skype on higher profile devices such as the iPhone and BlackBerry or when we start to see Skype seriously back into the hardware device business with vendors such as Philips and iPevo.

Then Scott outlined four benchmark criteria that every implementation of a Skype on any platform or device must meet:

• High call quality
• Simple and easy user interface
• Consideration for battery life
• Security

Last week's hotfix upgrade of Skype for Windows 4 beta 3 included the first implementation of Skype's three year effort to develop the SILK codec, increasing the audio bandwidth to 12 KHz while effectively reducing the Internet bandwidth consumed during a Skype call.

A key reason for Skype's rapid and widespread adoption has been associated with its ease-of-use. Yet Scott says the Skype conversation user experience needs to be even easier to encourage adoption by a broader user base. Developing a more effective user interface has certainly been a focus of the Skype for Windows 4 beta program. At the Skype CES press conference Scott reported that, in a recent survey of users, 88% preferred the new UI to the previous Skype for Windows 3.8. But I'm still wondering if the Skype for Windows team could take a look at Skype for Mac and implement a "drawer" type interface to manage and select the active conversation. For the longer term evolution of Skype clients hopefully Skype also has a look at Dan York's post on Skype's fragmented product strategy.

Battery life on smartphones was a key issue that prevented Truphone, who uses a native VoIP client for calls over WiFi, from launching a native VoIP smartphone client running over 3G networks. Instead they launched Truphone Anywhere that takes advantage of the underlying network 3G GSM voice channel and uses the data channel to set up a call via a server that, in turn, sets up a VoIP client. That voice channel tends to make much less use of the device battery than a constantly compressing/decompressing VoIP client that devours the underlying processor activity. Addressing the battery life issue is a major reason why we see Skype using a similar calling architecture when launching the Skype Lite Java client on over 100 Java-enabled cell phones, including those based on Google Android.

Security is an issue that I'll leave to Dan York and others who are able to cover this issue more knowledgeably and effectively. Suffice it to say that we would expect security to continue to be a feature of all Skype products, including those that use the mobile voice channel for placing calls from mobile phones.

Two take-aways from these statements:

• Fundamentally we should expect Skype, going forward, to be a provider of real time conversation-enabling software on desktop, web, TV and mobile platforms. To use an old telegraphy term: Full Stop! For instance, rather than developing their own social network, we should expect Skype to seek out agreements with other social network service providers, such as the MySpace agreement. Skype is an enabler of real time conversations; it is not in the community building or social networking business. Facebook, Twitter and MySpace, amongst others have already captured that space and done an excellent job at it.
• These benchmarks also provide a basis not only for deciding what product offerings Skype will develop but also when they are in a position to release a product.

The new Skype executive team is finally starting to set some benchmarks and guidelines against which we can not only measure executed performance but also have a better understanding of where Skype wants to go.

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Skype at CES 2009, Part II: An Overview and Observations

There's a "new sheriff in town" when it come to running Skype; CES 2009 was a "coming out" event for the new executive team.

CES 2009 provided an opportunity to catch up personally with many of the vendors we have covered in Skype Journal including Skype, Truphone, SlingMedia, Philips and Research in Motion (BlackBerry). I also had a chance to attend a most informative afternoon session of Jeff Pulver's Social Meia Jungle event. Unfortunately Palm closed their suite after only two days of CES; thus, I missed an opportunity to learn more about the Palm Pre on Saturday. As Palm had just been awarded a CES "Best of Show" award, that was a "Huh?" moment when there was only a security guard at the suite's door.. I also wanted to catch iPevo and Nokia but did not have time to get to their booths.

With respect to Skype we had three activities: the Skype press conference, an interview with new COO Scott Durschlag and Skype's first reception event Friday evening. It was our first opportunity to observe the new Skype executive team in action. While I will be providing some more detailed posts, here are a few observations:

• For the first time, a senior C-level Skype executive personally acknowledged Skype Journal's participation as a playing a significant role in the Skype ecosystem. Scott thanked us for our loyalty to Skype through all the challenges of the past two years. (That does not mean we'll always be cheerleaders; it's important that we maintain a skeptical and critical viewpoint within the context of the overall IP-based communications space.)

While we have had co-operation in the past, usually via Skype's public relations agency, from many Skype employees at an operating level, it's important for the media to be able to communicate regularly and openly with those at the C-level who are providing overall direction and developing high level strategy. Josh has initiated such openness through his blogging and interviews; now we are seeing it on a person-to-person basis.

• On the other hand many times, last week in both the press conference and our discussions, Scott acknowledged the existence of several previous controversial issues, such as technical support, platform development, the role of partners and internal management structure issues as requiring attention by the new management team. The newly recruited management team will be introducing a new level of experience and maturity to address these issues; execution over the next few months now becomes critical.
• One future post will cover Skype's new operating and management structure focused on products and geographical markets.
• Another will cover Skype's overall focus as a software platform developer and the standards being set for these developments. Within this context I'll provide my perspective on what is meant by "liquid communications".
• We'll soon have a follow up post about our discussion with Scott of what Skype's new executive team learned from the TOM-Skype privacy breach last fall and how it became a bonding exercise within Skype as well as establishing some new operating parameters to avoid a repeat.
• Skype is NOT shoving its partners under the bus. The new executive team is determining what innovation Skype will drive and what innovation they can expect partners to drive. Andy Abramson articulates his perspective on the issue:

Most of all, Skype is not sitting back. The are pushing the envelope, but at the same time sending mixed messages externally to partners and developers. But that too will change. Some recent hires have brought maturity to the table.

• We learned the answer to "Will There Be a Skype Client on the iPhone?"
• Finally, for the first time since I have been writing about Skype, we can see some well-articulated high level vision for where Skype is heading, where they need to focus and how they want to play in the real time communications market space at a strategic level.

Looking forward to writing about the evolution of Skype as it grows from a $500MM per year operation with 500 employees into a business with a revenue level and valuation that finally justifies eBay's initial investment in Skype.

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Skype at CES 2009: Initial Steps Towards Liquid Communication

At a Skype's CES 2009 press conference today recently appointed COO Scott Durschlag provided the first hints of a vision statement for Skype under its new executive team along with some initial software offerings that hint at the direction Skype is taking towards "liquid communications" or "Skype Whenever, Wherever".

In leading up to the new software announcements, Scott made a few points about Skype's recent accomplishments and focus going forward:

• Skype now delivers 8% of the world's telecom minutes through clients that now support 28 languages
• New software will drive a liquid experience on the desktop, web, TV and mobile devices
• A key goal is to liberate the Skype experience from a captive device (desktop) to more user aware devices (mobile, TV as well as embedded into appliances)
• 41% of Skype calls on Christmas day involved video, only to be surpassed at 47% on New Years day.
• New software offerings have to pass a bar of four basic criteria:
  
  • high call quality
  • super simple user interface
  • sensitivity to power management issues
  • security

He then went on to talk about new software offerings:

• New desktop clients: Skype for Mac 2.8 (launched as beta at Mac World Monday), Skype for Windows 4.0 (with a February release date)
• Release of Skype Lite, a thin client for Java-enabled mobile phones with Skype for Android to be available within a few days on Android Market on T-Mobile's G1^TM and Skype Lite general availability in the U.S. (in addition to several countries previously announced) resulting in Skype availability on over 100 mobile smartphones.
• Internally developed new Skype "SILK" audio codec which is twice as efficient with respect to bandwidth requirements for the audio and video experience.
• Skype for Mobile Internet Devices with a demonstration on a couple of MID platforms. (Update: access download information here.)
  
• Skype for Mac 3.0 to be available by year end with the feature set of Skype 4.0 for Windows.

This afternoon Phil and I spent an hour with Scott discussing the restructuring, support issues, the TOM Skype Breach and how Skype will work with its developer partners to provide a win-win direction for the development and marketing of partner applications. These topics will be the subject of future posts over the next week.

First impression: it's the first event where a senior Skype executive has provided in a public forum an outline of its vision, guidelines for achieving that vision and how it wants to work in the real time communication and IP-based conversation space. The real challenge now lies in the execution.

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Skype's Restructuring Makes Major Moves: New CxO Announcements

Over the past few months, announcements have been few and far between with respect to Skype product news. But at the same time I have often discussed Skype's restructuring moves; the first official disclosure of a restructuring was disclosed in our September interview with Skype's new President Josh Silverman. Well it appears that Josh has been busy doing interviews; today three top level appointments were announced:

Daniel Berg, previously Sun's London-based Chief Technology Officer for Global Sales and Services as well as Vice-President of Systems Engineering for EMEA, has been appointed as Skype's Chief Technology Officer, starting January 2, 2009. In a summary statement from Skype's blog post:

As CTO, Daniel Berg’s primary responsibility will be to drive innovation and ensure Skype continues to develop great software. With a mandate covering Skype’s full range of products, he will develop and maintain a global team of more than 300 staff.

Daniel has authored several books. But since he has not made any statements on his appointment yet, we could paraphrase a statement he made about his Sun activities last April in a post entitled "Travel, Talk, Repeat" on Sun's "Contrarion Minds" blog:

So he travels. A lot.

"I actually spend 25 percent of my working day, on average, in the air," says Berg, who is based in the U.K. "That's not going to the airport, not coming home from airport, that's in the air."

He knows this because he sticks to a time budget.

"I know I need to be spending this much time with customers and this much with organizational matters and this much with employee development, to make sure I'm staying focused and balanced," he explains.

His biggest challenge?

"Articulating the value Sun [Skype] has," Berg replies. "I know this has been said before, but I've been at Sun 15 years and this is the best lineup of technology, products, and offerings we've ever had. Yet when I go talk to customers, one of the first things they say is, 'Oh, I didn't know you guys did that.'"

So we'll be expecting Dan to become one of the more "public" faces of Skype. And that those air miles will keep on building up.

The second appointment is Christopher S. Dean as Chief Strategy Officer. From his LinkedIn profile, Christopher has a long history of working with startups, including periods on the venture capital side in Silicon Valley, most recently as co-founder of Texada Capital. At one point he and Skype's GM Audio and Video Jonathan Christensen were colleagues in a San Francisco-based venture capital firm called Sweetwater Partners, whose Internet traces seem to have disappeared. From the Skype blog post announcement:

Christopher S. Dean will focus on Skype’s strategy, including the development of partnerships and strategic alliances with other like-minded organisations and the acquisition of companies and technologies for Skype. His team will act as the incubator and strategic planning hub for new ideas and projects which support Skype’s technology vision and long term corporate goals.

It appears that Christopher will be based out of Skype's San Jose office; his responsibilities will be a key to driving Skype from a $500MM per year revenue business into the the multi-billion dollar revenues needed to justify eBay's initial investment in Skype. Why the "S."? I assume that Christopher is trying to avoid confusion with the U.K.'s Olympic Ice Dancing multiple Medallist Christopher Dean.

The final appointment, another key to ensuring Skype hires and maintains appropriately skilled and motivated employees, is the appointment of Anne Gillespie, whose long history of EMEA positions with Compaq and HP, brings the experience required to serve as head of Skype Human Resources.

There's still one more major executive move I am expecting - a Chief Marketing Officer who bring the badly needed messaging and market communications strategies and disciplines required for a business that's expected to attract sufficient usage to generate those multi-billion dollar sales.

And I'm sure Lee Dryburgh has no problem with my publicly inviting Dan and Christopher to register to join the rest of the Emerging Communications community at eComm 2009; after all Skype is a Platinum sponsor.

Best wishes for success, Dan, Christopher and Anne from Skype Journal.

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Skype Journal Interviews Josh Silverman: The Way Ahead - Markets

This is the fifth in a series of posts resulting from an interview a week ago Friday with Josh Silverman, Skype's recently appointed President. In this post we talk about addressing the small-to-medium business market as well as various geographical markets.
Over its five years, Skype has built up, almost totally virally, a significant base of users who take advantage of Skype to not only reduce their business communications costs but also to communicate more effectively with colleagues and customers around the world. At the same time various Skype software partners have built offerings, such as Pamela, PamFax and Skylook, that either focus on Skype as a business communications tool or include Skype amongst their options for calling. Within Skype's own offerings, the Business Control Panel provides the tools for a system administrator to handle both the deployment of Skype and the administration of Skype accounts within a business's operations.
OnState is a primary example of the latter. They have built up a call center offering that takes full advantage of both instant messaging chat and voice in dealing with both inbound and outbound calls; they also take advantage of the three founders' combined over sixty years' experience participating in the call center market. Yet, they encountered many opportunities where they had to go back to Skype for assistance since, for one reason or another, Skype's program were insufficient to address business users' requirement. The result is that today OnState offers their customers "one stop shopping" whereby, on acquiring a customer, OnState takes on responsibility for addressing Skype subscription needs, hardware requirements (headsets and handsets, implementation issues and first level technical support.
The Business Control Panel has had its limitations also; the main fear has been to mitigate potential for fraudulent or unauthorized activity through transaction value and volume licensing limits.
As for geographical markets, Skype met a much larger need for communications cost reductions in Europe and Asia than in North America. As a result over 80% of Skype's revenues continue to come from outside the U.S. The two primary needs met in North America are for "Friends and Family" calling outside North America and small businesses who are working to grow internationally - both internally and with their suppliers and customers.
In growing internationally, there has been the challenge of building user bases in widely diverse markets; "free", "easy-to-install" and a whole lot of viral marketing action have introduced significant adoption around the world. But this success has led to more business-oriented challenges in working out termination agreements, establishing effective multi-currency transaction systems (although being an eBay co-unit of PayPal certainly helps), multiple language versions of software (27 at last count) and providing multi-lingual, internationally available technical support. (We'll talk about marketing and more about technical support in future posts in this series.)
We asked Josh about the Skype's approach to the business market:

JS: Skype in the business market. There's more that needs to be done. (you guys are smart, you're asking all the right questions). Platform is a huge opportunity for us; business is another big opportunity for us. About half of the communications market is business; we have a great solution, especially for small-to-medium size businesses. We haven't tailored that solution to businesses very much; we haven't communicated to businesses that we have that solution. In the new organizational design one of the pieces of that will be to build out a business unit focused on small-to-medium size businesses where we'll have some resources available to tailor our product and some sales and marketing resources to work ... I don't think that we'll be directly selling to small-to-medium size businesses but we can work with VAR's to help support them in bringing Skype to businesses.

(Note this interview occurred two weeks prior to last week's announcement of Skype for Asterisk, a program that leverages Digium's Asterisk reseller channel for sales, implementation and ongoing support requirements.)
We then moved on to ask about various geographical markets:
SJ: North America. (Thank God for Oprah!) Skype has become much more a household name this past year (with an acknowledgement to Don Albert, GM North America). What does it take to keep that business going forward in U.S. and Canada and what are the strategies for U.S. and Canada?

JS: We're very aware that the number one way to grow Skype is to build products the users love. That is our first mandate always. Once you have a product users love, we can accelerate it by some smart marketing programs. (By the way if you don't have a product that users love no amount of marketing on earth will save you, right?) So we do have a product that users love and I don't think we have done as much as we could to communicate that.
Oprah is a great example. It is not our intention and people should not expect massive multi-million dollar marketing budgets from Skype. But there are some smart tactical things we can do working together with evangelists like Oprah to build awareness. It's our belief that once you've grown awareness, people will try it; once they try it they'll love it. and the rest takes care of itself. At the Democratic national convention we were quite happy to see many of the national broadcasters using Skype as a way to expand their coverage and you should be looking for more programs like that in the United States in the year to come.

SJ: China is your biggest market?

JS: In terms of total users it's one of our top markets; the answer is yes.

SJ: QQ is still kicking butt in China? What strategy do you have in your existing partnership with Tom?

JS: We have a great partnership with Tom who knows the local market very well. Tom is also a very entrepreneurial, innovative, fast moving company. We're very pleased to be partnering with them; they're the right partner to continue building our presence in China.

SJ: Do you have your own people in Asia?

JS: A couple of people in Asia who work with our partners to make sure they're getting the support they need and also giving us real feedback from the market on what we need to be doing on [our] core platform to be able to support Asia better.

SJ: How about India?

JS: We don't have anyone working in India. We don't have a partnership in India to announce but we are seeing good growth in India but we think it's a terrific market and we are expecting to have more focus on that in 2009
My observation, five months in, [is that] markets where Skype has the most power are markets where you have high broadband connectivity, you have a large ex-pat population, and where the local telephony system is not as efficient as it could be. Many of the developing markets meet that profile so we think we have a huge opportunity in developing markets such as India and it's our intention to focus more on that in the coming year.

SJ: To succeed in the mobile market place, mobile device manufacturers have had to build carrier relationships. What does Skype need to do with either handset manufacturers and/ or carriers to succeed in the mobile market?

JS: I don't think the carriers should be able to dictate what software the users get to use. any company, the smallest startup in the world, if it has really outstanding software ought to be able to take on the whole world and not have to hire 50 people to develop relationships with 300 carriers.

Skype Journal Interviews Josh Silverman: The Way Ahead - Platform and Partners

This is the fourth in a series of posts resulting from an interview a week ago Friday with Josh Silverman, Skype's recently appointed President. In this post we talk about directions for the Skype platform and partner programs.
When I first attended a Skype developer event in June 2006, there was lots of enthusiasm for the Skype partner program and for its integration into various third party applications and service offerings. Several of the feature requests, such as call transfer and access to the voice stream, that had come to the surface by the time of this event, have since been implemented. In December 2006 Skype announced the Skype Extras program for which there are over 100 offerings available, mostly for the consumer user but the list also includes about ten in the small-to-medium business space. Most importantly, partners have been asking not only for a platform roadmap but also for execution on that roadmap.
Skype Extras included a publishing and transaction platform, yet to date, only PamConsult has taken full advantage of these feature for its well received (and award winning) PamFax offering. On the other hand, OnState has been able to figure out how to provide a friction-free full services program for its call center customer base. However, over the past eight months market visibility of any significance for the entire Skype partner program has just not been there. Yet we see "Skype access" continue to be built into various platforms such as Ribbit and Voxeo. Skype Certification exists for only seventeen offerings. InnerPass has received Skype Certification two weeks ago (review coming). At IT Expo last week in Los Angeles I came across several service providers and application developers who wanted to have a Skype presence in their offerings.
On the hardware side there have been many innovative offerings; I have experienced many of them. As confirmed by 3 executives at last Thursday's Mobilize 08 event, the Skypephone has met with phenomenal acceptance in the nine countries serviced by 3. Yet several hardware partners have drifted away to the point where we only see limited visibility for Philips, GE and IPevo dual mode (Skype and landline) phones and a few accessory products, such as the FreeTalk Wireless Stereo Headset, from InStoreSolutions (who largely address the European market). Beyond the Skype Store availability, WalMart is carrying Skype hardware in the U.S. (and I found some at Fry's in Sunnyvale this past Saturday).
Frankly, sorting out its platform strategy and partner relationships, and giving them appropriate visibility, is perhaps one of the biggest challenges that Josh and his team face in sustaining Skype's presence in the IP-based conversation space. In our interview with Josh it became quite apparent that these issues have not missed Josh's scrutiny leading up to the business reorganization we have been discussing in the various posts in this series:
SJ: In your interview with Om Malik yesterday you mentioned as one of your key growth initiatives "Skype as a platform, embedding Skype as the conversation infrastructure for devices and services". Tell use more:

JS: We're incredibly lucky that almost everyone in the world wants to do something with us. That's fortunate because we need to be everywhere. For Skype to be successful and to fulfill its full potential we need to be part of every device and every communications experience. We can't do that on our own. We need a really robust platform that allows us to be part of other people's experiences or devices and allow other people to be part of us. We all recognize that we have a long way to get from where we are today to there. With the relatively small program we have and small investment we have made we have 15,000 partners who have signed up for our program today. I think that's a great indication that if we really invest behind this we can do something magical.

SJ: What would that future platform look like?

JS: What we want to do is lay out a set of principles around the platform that say:

• we want people to be able to incorporate Skype into their experience.
• It should be the full Skype stack of functionality
• it should include all of our feature set and not just hive off one piece or two pieces.
• When you use Skype you should know you're using Skype and
• you should have a SkypeID which works across all of our experiences,

So somebody who wants to take Skype and build it into their experience but create a walled garden of "only within their experience" doesn't build value for the greater ecosystem. If you start with Skype on one experience and then you go to another experience with another platform partner, you still need to be able to communicate. There needs to be one SkypeID that works everywhere and then it needs to hold true to some basic sense of brand principles around what the Skype brand should be. Beyond those principles we really want to allow people to innovate and use Skype and do what they will to extend the functionality for our users.

SJ: Has the architecture for this started?

JS: Right now we have created the job of GM of Platform; I hope to very soon name a GM of Platform. That person is going to have to really work on what does the architecture need to look like to support this, what are the API's going to be - reference UI's, technical documentation - as well as evangelizing to the broader community forming some of our partnerships, so we have some work to do.

SJ: Is the job posted on your job board?

JS: Not yet, we have some candidates; but if there are folks in your community that are excited by this and we haven't already filled this in the coming days [faded away but implication was to apply].

SJ: Is there a timeline?

JS: I don't want to speculate too much. We do have a API [set] today, we do have lots of people working with the API's so we have something to build from. I'm not an expert. I wouldn't be able to lay out a timeline but we are going to get an expert who can lay out a timeline. ... As with everything at Skype, we want to be fast but also make sure we do it well, in particular with a platform. It's got to be well thought through so we support our partners really well. We know there's a big responsibility in there and we take it seriously.

SJ: Would you be looking at getting the partners involved in helping design that platform and getting some feedback on it?

JS:I think that would be essential. One of the things I'm pretty passionate about is always bringing the voice of the customer in early to anything we're trying to do and I think that, for the platform, that would be absolutely essential.

SJ: What are you looking at to address ongoing partner communications issues with respect to the partner program?

JS: I take the partner program really seriously and we're aware that we've not invested adequately behind it and want to do more. The first thing we are going to do is hire an experienced, capable leader of that organization who will pull together for me a plan for what resources do we need to invest in -- engineering, partner support, evangelism, technical documentation -- to make sure we build an organization that can support our partners robustly.
What I don't want to do is over promise. Step one is, when you get somebody good in, lay out a plan and then when we're ready to announce some more forward looking things we'll do that.

Changes are not going to happen overnight when Skype is acquiring 300,000 new registrations per day and profitable. But, based on the strategy and principles outlined by Josh in this interview, going forward we should be looking to see within a three to six month timeframe:

• Announcements of the appointment of two key senior executives who bring along experience in building platforms and partnerships
• A platform architecture and developer roadmap
• Revamped plans for Skype's hardware and software partner programs

It will also be most interesting to see what forums or other means Skype provides for input into the platform architecture and developer roadmap strategy. Execution is everything, especially at this stage of Skype's growth within the IP-based conversation space.
(For background on Skype's partner program history check out: A Primer for Skype's Direction - Skype's Extras Gallery and Developer Partner Program. And for an example of what attracts developers to Skype as an ecosystem check out "On Spotlight: Don Kennedy AKA TheUberOverLord".)
Next: Markets: Business and Geographical

Skype Journal Interviews Josh Silverman: The Way Ahead - Managing the Skype Team Culture

This is the third in a series of posts resulting from an interview last Friday with Josh Silverman, Skype's recently appointed President. In this post we talk about Skype's value set, getting the business side right while benefiting from the experience and skills of the current employees and the role of product marketing.
In the last post we talked about the major issues Josh has identified for addressing along with a strategy for employee empowerment to reduce the complexity of decision processes while driving towards business success. But a critical requirement for employee empowerment is the need to establish and communicate a sense of core values that flow throughout the company and make employees more comfortable in making decisions, especially with decisions that may involve some risk. As a follow-on question to our discussion of employee empowerment I asked about the need to drive a value set through the company. Josh's response:

Skype has a great set of values. Coming into the company I'm very humbled by what they've accomplished, what a great culture and values we have. I want to make sure we nourish and respect that. So some of the values I see are:

• thinking disruptively and differently about problems, not just incrementally innovating
• wanting to have an impact on the world
• caring a lot about what we do for people and doing that globally
• a big desire to win
• a big desire for excellence
• a passion for the customer

Those are qualities that I would hold dear and want to make sure we nourish as we grow.

We then went on to the "people" challenges of getting the business side right while building on the inherent passion of the current employees.

I think everyone at Skype would agree that we, in a very short time, in about a year, hired over 150 people into marketing, product management and [other] non-technical functions. [We] essentially evolved those functions from scratch in a year. Given the pace of change at Skype, we needed to bring a lot of that expertise into the company. Of course, the challenge is that, when you grow that fast, making sure everyone knows what their role is and how to do that well ... training ... getting a common culture ... takes a little bit of time. So what I'm focused on now is clarifying the accountability of all those business roles.
By the way, to your point about 'we have a lot of passionate technical people', I couldn't agree more. Often time the best ideas come from that team. It is my belief that what the product and marketing organizations need to do is understand what problems the customer needs solved, and then to work together with engineering to think of the most creative, best way to solve that problem, hopefully better than anyone's ever thought of in the past. If you're doing an "ok" job of that, you're understanding the articulated needs of the customer - like I can't pay easily enough ... it takes too long to download ... I can't configure my devices . If you're doing a great job, you're understanding the unarticulated needs of the customer .. things like "I'd like to be able to call anyone in the world for free" ...

We then got into a short discussion about the role of the product manager as the mediator managing a balancing act between the user market and the engineering and design teams:

... It is not the job of the product manager to come up with the solution; it's the job of the product manager to quarterback the design team and the engineering team and the marketing group together to come up with the world's best solution. I think engineering and design play huge roles in that process.

Next: The Skype Platform ... and Partner Program.

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Skype Journal Interviews Josh Silverman: The Way Ahead - Righting the Ship

This is the second in a series of posts resulting from in interview last Friday with Josh Silverman, Skype's recently appointed President. In this post we talk about the key issues Josh found necessary to address and establishing a framework for employee motivation and empowerment.
Over the past couple of years I have written many posts lauding Skype, largely for its conversation infrastructure technology; I have also, from time-to-time written posts about the need for Skype to address the business infrastructure surrounding the deployment and use of the technology. With 300,000 new registrations daily, 30 to 50 million active users within a given day, and demand in the small-to-medium business market driven by its inherent cost advantages, Skype needs to right the ship when it comes to all aspects of turning Skype into a business that delivers customer satisfaction while sustaining profitable growth..
Some have thought that Phil and I are Skype Cheerleaders and, in their simplistic world, want instant solutions to problems. Doesn't happen in a business that has become as large as Skype. To take maximum advantage of Skype's technology, Skype needs leadership at the top that delivers a sense of mission, a set of inherent values and and a management structure suitable to a business that has grown as large and as rapidly as Skype. Business processes need to become readily scalable. Within such an environment, the Skype team needs to execute; employees need to know their responsibilities, to be held accountable for them, and, most importantly, to be empowered to act in their area of responsibility.
When we asked Josh Silverman, who took over as Skype's President five months ago, as our first question, :"What has changed at Skype in the past year (since Niklas' departure)?" he replied that he could only speak for the past five months. He then confirmed my suspicion: he has used this time to delve into all aspects of Skype - involving internal team and individual employee meetings, learning more about customers and their needs, examining market differences worldwide, reviewing both current and archived Skype forums and websites and even surveying media, all as input to determine what management structure and what cultural environment were needed to right the ship. What follows is a high level view of his action plan. (Note: where appropriate he has already discussed these moves with the Skype team, so there are no surprises here for them.)

1. Define a mission statement
2. Establish a set of values
3. Restructure for business success
4. Improve the user experience
   
5. Evolve the business model
6. Develop a technology roadmap.
7. Establish a framework for effective customer and partner relationships
8. Build market awareness

In building out on his response, Josh identified as issues to be addressed:

• clarify Skype's mission and strategy going forward
  
  
  • be clear about what Skype is trying to accomplish
  • be clear about decision making
• maintain an ongoing sense of momentum around building great products
  
  
  • the Skype 4.0 beta program
• understand their customers and bring their voice into the company.
• a big issue: organize the company structure to clarify roles and accountability for people
• establishing employee accountability: define who owns what internally
• add people skills and resources consistent yet scalable with the level of customer growth
• grow internal talent while adding experienced management leadership
  
  
  • bet on the people who brought Skype to this point
  • bring in experienced outside help to scale

On the core subject of building employee responsibility and accountability Josh responded:

We need to clarify accountability and roles for employees ... I'm a big believer that, if you take a small cross-functional team, give them a mission, a lot of room to innovate, they're going to come out with fantastic products. So we're moving our organization more in that direction.
Skype, I don't think is different [from] a lot of hypergrowth companies, in that the business grows so fast that it is very hard for the organizational structure to keep up. What ends up happening is people just take on extra responsibility here and there as the needs come up. And pretty soon you find yourself in a place where it's really not clear who owns "this" ... there are some really important things that nobody owns and some things that two or three people all think they own it.
So we need to step back and say, ok, lets' take a fresh look at this and make sure everyone is really clear about who owns what, what are you accountable for, and what resources do we have and then let them go forth and empower them. So that's what we're doing right now and I think in the coming months we'll be in a much better place for everyone. ... I've been very public with my team about it and they're all very supportive .... and they're quite excited for us to do that.

On building the right mix of people, skills, capabilities to execute:

I'm a big believer that, when a company is growing as fast as Skype, just keeping up with the scale and evolution of the company is a major promotion every year. So what we want to do is grow a lot of our internal talent and take bets. I'm also a big believer in taking bets on a lot of the people who have been with you from the beginning, who understand the business and culture. But I also believe in bringing experience from the outside ... who have seen this before and had to scale this way before and can help us to figure out how, as we inevitably get a little bigger, to stay agile and, in fact, I think we can get even more agile as we get bigger, if we're smart about it.

On getting employee empowerment right:

Everybody needs to know what their accountability is. I'm a believer that empowerment doesn't mean everyone can do anything ... because then everyone starts overlapping and, actually, you end up with a big mess. What empowerment means is everyone is really clear about what the company is trying to accomplish, everyone is really clear about what they're accountable for and, within that accountability, they have the scope to make all decisions. It doesn't mean they can make any decisions they want but they're really clear about where their decision making begins and ends. If you do that everybody feels empowered and we grow much faster. By the way I also believe that the best decisions you make are almost always made at the level of the working team. So I aspire to a world where very few decisions flow up to the executive ranks other than "what are we trying to solve for?" and "how much resource are we investing in any given initiative?" and "do we have the right talent?".

Next post: Managing the Skype team culture

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Skype Journal Interviews Josh Silverman: The Way Ahead - An Introduction

This is the first in a series of posts resulting from in interview last Friday with Josh Silverman, Skype's recently appointed President. In this post we provide an overview of the range of topics discussed and some background to the interview.

On Friday Phil and I participated in a one hour wide ranging interview with Skype's new President, Josh Silverman. Having listened to both Skype's team and the market over the past few months, Josh is starting to take the high level measures required to grow Skype from a technology "marvel" into a full-fledged conversation infrastructure business that is "just there" when you want to converse ... anywhere, anytime. Having personally participated in a corporate restructuring over a decade ago, suffice it to say that, while technology has been rapidly changing in the interim, the basic requirements for growing a business from a "wonder" into a sustainable, world class enterprise have not changed. After all, you're dealing with human interactions and we're all still emotional beings who need motivation internally (to build a functional employee team) and a "wow" level of excitement externally (to build an appreciative user base). Some background facts that have led to the issues that Skype must address and the action plan Josh has determined to be necessary:

• Skype, in its first five years, has grown to its over $500MM annual run rate faster than either eBay or PayPal
• Skype has about 500 employees worldwide with over 150 joining in the past year
• Skype delivers about 6% by minutes of the world's international calling traffic

Recall, that during Josh's interview with Om Malik, he outlined three key growth initiatives:

• product innovation: making Skype easier to use and more reliable; the video opportunity
• paid services and their marketing:
• Skype as a platform: embedding Skype as the conversation infrastructure for devices and services.

In many ways our discussion expanded on those themes. Because of the range of topics we covered and given short posts make for easier and more readily absorbed reading than one long post, we'll cover the interview content in several posts over the coming week. But our topics will include:

• Restructuring and reorganizing with new focuses while delegating responsibility
• Skype's platform strategy and the infrastructure required to execute
• Skype's approach to the business market
• Geographical markets
• Generating broader awareness through marketing
• Tech support

Since Om had already asked the questions about Skype on iPhone and the eBay relationship, we left those out of our interview in the interest of using our time with Josh to learn more about Skype's internal evolution and the direction in which Josh sees driving Skype as a publisher of conversation infrastructure software and services.
Next: Righting the Ship