Stuart at the Skype Journal thinks
the Vonage IPO is, well, a joke. He disagrees with my proposition that there is real value in the Vonage brand and
in Vonage's relatively high potential market cap (sure Vonage is losing money--but eBay is losing far, far more on
Skype) and instead argues that eBay's community building expertise will position it to whomp Vonage in the coming
years.
Now, there are a lot of things Vonage could learn from Skype, like how to achieve ubiquity through
customer choice. Skype does this by supporting all major desktop platforms and by offering an API for add-on products
(albeit a weak, front-end-only API). Skype also does this by allowing customers to use the Skype social network
in a participatory (free), not obligatory (paid) manner, if they so choose. Vonage now appears poised to embrace
consumer choice too, as Tom pointed out a few days ago. Bring your own SIP will rock.
My counterpoints to
Stuart's post are these (and bear with me here, because it's hard to compare Skype and Vonage, but when I read Stu's
piece, that's what I perceived he was attempting to do)--
-- eBay spent 2.6 billion dollars to acquire a
>$100 million / year revenue stream in the form of Skype, and all rights to Skype. Vonage, on the other hand, hasn't
even spent three hundred million yet, and already has a revenue base that approaches double that of Skype's.
Advantage: Vonage.
-- Sure, Skype is a great community building apparatus, but it really
doesn't (yet) achieve anything Yahoo and even Microsoft were doing 7 years ago. Y! and MSN grappled for years
with figuring out how to make money using social networking before eventually deciding they couldn't and retreating
back into deriving revenue almost solely from advertising and content syndication. Skype has no such
luxury (thank goodness for sugar daddy eBay, though). Vonage, on the other hand, offers a real value proposition
to a very real community of telecommunications users: decrease costs, increase user mobility and empowerment, and, soon
anyway, do so using open
standards. Right now, perhaps the most important driver to IP telephony is resentment of Ma Bell's lethargic
personality. So, you've got to ask, is Skype nearer to replacing Bell as Vonage is? Bottom line--no. That's
why people pay for Vonage, Packet8, and VoicePulse, and why they, by and large DON'T pay for Skype. Advantage:
Vonage.
-- Now, comparing technologies I use Skype every day, and love it. But until it
gets the regulatory compliance, user-monitorable QoS, user-controllable encryption techniques, user-selectable codecs,
and at least some form of SIP gateway support, it is at a disadvantage to Vonage and other large VoIP carriers.
You can't just walk away from "yesterday's telecom", as Stuart says, because the telephone is a highly useful
and familiar apparatus. I don't know about you, but i like the idea of the telephone as an embedded, PC-independent
device. Vonage offers me this ability, Skype does not. Advantage: Vonage.
-- Vonage
provides a direct-to-user service proposition, while Skype requires unknown third-parties to be involved in signaling
and media transmission. Not only is this a potential security hazard, but it also makes regulatory compliance nearly
impossible. Advantage: Vonage.
-- When the time comes to dump the PSTN, Vonage will
be there. So will the other pure-plays? But where will Skype be? As it stands now, Skype's biggest revenue
source is PSTN minutes. Vonage, on the other hand, treats PSTN minutes as a cost of doing business, and doesn't
tie revenue to them the way Skype does. So, at least at this point, who is more dependent upon the PSTN for
solvency? Skype is, of course. But now that Skype is a plaything of eBay, they can bleed all the cash they
want for years to come and this issue won't matter. My point is, don't bite the hand that feeds Skype, and, at
least for the time being, that hand is Ma Bell. Advantage: Vonage.
One final thing. I do
think it's somewhat foolhardy to assume that Vonage's basic plan of shipping out ATAs to folks who connect a telephone
and replace their home phone line is really their strategic end-all-be-all. Come on, Vonage wants to be done with
the big telcos just like you and I do. But they want to make money on the way there.
1. "Vonage, on the other hand, treats PSTN minutes as a cost of doing business, and doesn't tie revenue to them the way Skype does."
Could you elaborate more on this? Vonage's calling plans are also based on PSTN minutes and areas, but differently from Skype they put them in chunks and call them 'plans'. So isn't Vonage's revenue and profit also generated from PSTN? Anyway, I'm interested in your take on this - how's Vonage's business model for making money different than Skype's?
Thanks!
Posted at 6:11AM on Feb 10th 2006 by Zipped