Prepared for Purdue Entrepreneurship
Certificate Program
Team Analysis & Discussion
Spring
2007 © Hank Feeser
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Dial
S for Skype, P for profits
Sure, Skype can shave a few bucks
off your phone bill. But now it's helping savvy entrepreneurs create brand-new
business models.
By Hillary Woolley, Business 2.0 Magazine
November
10 2006: 8:40 AM EST
(Business 2.0 Magazine) -- Free
Internet phone service was always likely to change the world - but until
recently we had no idea how. A little more than a year after eBay (Charts)
bought Skype for $2.6 billion, the service has become a business tool on a
surprising scale.
A
million people worldwide, 300,000 of them in the United States, will rely on
Skype as their primary means of business communication in 2007, according to
telecom analyst Albert Lin at American Technology Research. And those are just
the power users: Skype says nearly a third of its 113 million users now log on
to make work-related calls.
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That suggests the next few months
could be a boomtime for brand-new Skype-based business models. What can't you
do with an intercom on the Web?
"This is a growth
industry," Lin says. "Most people look at Skype and think they're
just going to save money. It's only recently you've seen any attempts to turn
the technology into another business."
Business
models whose time has come
Saving money, of course, can be
enough in itself to transform a small business. When Bill Lewis taught software
to executives over the phone using a landline, he suffered phone bills as high
as $10 an hour and felt tied to the San Francisco area code, where he could get
a lot of execs as pupils.
With Skype, Lewis is bringing in the
same $5,000 a month he did when working on a landline. (There is, after all,
only one of him.) But now he has no overhead from phone charges.
And he's doing it from Puerto
Vallarta, Mexico, where he lives two blocks from the beach. He's considering
taking on employees and says a small expansion could triple his revenue.
Lewis's business at least was
possible before Skype. But more interesting are the ideas that have only now
become commercially viable, like that of entrepreneur Mike Hollands.
A former language teacher born in
Brazil and schooled in England, Hollands often experienced shortages of fellow
teachers. So he tried a few tentative language lessons over Skype, and was
delighted to find they worked. He set up his tutorial company, Toniks
Languages, in April 2005.
This time Hollands had no trouble
with staff shortages: He got 900 applications for 12 virtual tutor positions in
less than a week. The tutors, who live around the world, get paid $30 an hour.
If Hollands had to pay conference
call fees to set up the group classes, he says, it would cost him $25 an hour
and erase his profit. Instead, Toniks is making $40,000 a month.
Life
free e-mail, free calls are here for good
It's not just language learning.
Skype users are offering everything from voice-overs to band rehearsals. Mark
Miller, a Chicago-based piano teacher, uses Skype to give music lessons to
students as far away as Australia. And as the customer base grows, so will the
opportunities.
"Tens of millions of downloads
will evolve into millions of regular users," says Richard Edwards, a
senior research analyst at the Butler Group. "And the way people use Skype
is very much like intercom over the Internet."
He predicts you'll see doctors
talking to patients via Skype, as well as instant tech-support services for
frazzled PC users.
Services like Skype also have the
potential to change online social networking.
That's why San Francisco-based
engineer Charles Carleton has spent two years developing Jyve, a site that lets
members form communities, then makes money when they sell each other services -
such as a short calculus tutorial or a session with a tax adviser.
Using Jyve, which is in
invitation-only beta mode, service providers can log on, write quick summaries
of what they offer, and name a price. Payment between teacher and pupil is made
through PayPal, and Jyve takes a 20 percent cut.
Of course, there's a high likelihood
that Skype will eventually raise prices - owner eBay has already said that
beginning in January, it will charge for calls from PCs to phones.
But even if Skype tacks on fees for
premium services, free basic Internet PC calls have become like free e-mail -
they're here to stay. As business users have already proven, migration to a new
phone service is easy. The next Skype - whatever that may be - would also be just
a phone call away.
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The Skype way: A business model VCs love
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