VOIP services

Skype Extends Its Tentacles

STOCKHOLM -- VON Europe 2005 -- Skype Technologies SA CEO Niklas Zennstrom announced his latest tactical maneuver here this morning as he launched an affiliate program for his upstart VOIP service provider (see Skype Offers Affiliate Program).

In giving Europe's VOIP community, which has gathered in Stockholm for a four-day IP telephony love-in, an update on the progress of his P2P IP telephony firm, Zennstrom announced the scheme that will allow Website managers and bloggers to "promote Skype and make money from it. They'll be able to earn up to 10 percent commission."

Affiliates will earn commission if click-throughs from their site result in Skype service or product sales. "This is the same sort of model that made Amazon so successful. Any Website that's seeking stronger communications with its audience can benefit from this program," says Zennstrom.

The program has been in test mode for two weeks and has already attracted 1,800 willing affiliates, according to Skype.

"It's the cool brand in the industry, and there aren't many in the industry. I can see this taking off -- Skype is a funky name to have on your site," says Heavy Reading senior analyst Graham "Funkmaster" Finnie.

Zennstrom hopes the program will increase even further an already bulging user base. There are now 39 million Skype users generating 1.5 billion VOIP minutes a month, and the CEO says about 150,000 new users are downloading the firm's IP telephony software every day.

Of those users, Zennstrom says 1.4 million have signed up to his company's pay service, SkypeOut, which allows Skype users to call regular PSTN numbers (see Skype Calls Out, But Is the Pope In? ). And with the pre-paid service costing a minimum €10 (US$12.57), that means the company has generated at least €14 million ($17.6 million) in revenues, though of course it has partners to pay, and the payments process doesn't always work as planned (see Skype Names Carrier Partners and Skype's Plastic Problems).

News of revenues will undoubtedly please Skype's investors, but what's the company's exit strategy? (See VCs Pump $18.8M Into Skype .) Zennstrom says, "The transition to VOIP is here to stay, and we plan to get more people to use Skype and to make this a long-term profitable business."

The CEO also says the company's success has been underpinned by the approach of its development team, which hasn't been recruited from traditional vendors such as Ericsson AB (Nasdaq: ERICY) and Lucent Technologies Inc. (NYSE: LU). "Our technology has been developed by people who are problem solvers... We haven't spent our time developing softswitches and session border controllers."

The softswitch community also got it in the neck from show organizer Jeff Pulver, arguably Skype's, and Zennstrom's, biggest fan. He opened Tuesday's proceedings by lambasting the softswitch community for doing little more than "replicating the features of Class 5 switches."

"There's been no innovation," groused Pulver.

He followed that with glowing praise for Zennstrom and pals. "If there's one company that's made a real difference in the past year, it's Skype. If you're from a traditional telecom carrier and you don't think you've been disrupted in the past year, you're wrong -- you have. If nothing else scares you, Skype should. It has vastly improved the broadband Internet communications experience. This isn't about protocols -- this is about vision and drive."

Then Pulver suggested that Zennstrom should be considered for the Nobel Peace Prize, because there'd be far less warfare in the world if people communicated more, a process that Skype is encouraging. He seemed serious, too.

Skype is undoubtedly a shining example of an IP telephony success, and just the sort of company Pulver would love to see thrive and validate his pro-VOIP stance. But Pulver's Skype hype stems from a business relationship as well as a technology appreciation.

Earlier this year one of his companies, Pulver Communicator, announced interoperability with Skype, and Pulver told reporters today that "there's going to be some Pulver/Skype news announcements this year." (See Pulver.Communicator, Skype Interoperate.)

— Ray Le Maistre, International News Editor, Light Reading

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