Brian Hayes, Keila McCarty, Lesley Poberezny

Strategic Management Bus 794Prof. Tanvi Kothari

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Strategic Vision

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Simple Timeline2003 – Skype Founded2005 – Skype acquired by eBay2009 – Skype sold to investment group, eBay retains 35%

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Main Competitors

Past StrategiesMinimal Advertising, Maximum Buzz

A software company

Increase platform offerings and subscriptions

FREE, FREE, FREE

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SWOTStrengths

First Mover

Low user acquisition costs

Firm foothold in Europe and Asia - more than 80% of revenue comes from outside the U.S.

U.S. VOIP market continues to grow

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SWOTWeakness

20 million online at any time but mostly using free services

No other “in” gathering customers to its services

Group video chatting not available

Does not advertise or incorporate advertising into their program

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SWOTOpportunity

Design a successful model for earning revenue

Build on brand recognition to engender customer loyalty and boost revenues

Skype has only 1% market share in the growing U.S. market

Expand to new markets Geographically Commercial and non-commercial markets

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SWOTThreats

Flattening growth as market becomes saturated

Governmental regulation of communications (FCC)

“Last mile” connecting Skype to consumers is owned by its competitors

Quality of and access to Skype services dependent on internet access and quality

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Strategic Issue #1Current Revenue Model

4 out of last 5 years lost money

Cumulatively almost $2 billion

Skype’s model cannibalizes own revenue

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RecommendationDevelop a Sustainable Revenue Model

Define Product OfferingAdvertise – Differentiation!Increase online presence with partnershipsIncrease subscription servicesMaximize amount of time users spend online

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Skype Offerings

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Company Voice Call

Phone Call

Video Call

Instant Messaging

Desktop Sharing

File Sharing

Skype X X X X X X

Google Voice X X X

Apple (Face Time)

X X

Facebook Chat

X

GoToMeeting X X X

Cisco WebEx X X X X

ImplementationDevelop a Sustainable Revenue Model

Immediately perform extensive product/market reviewDetermine which has prospect for sustainable revenueThrough strategic alliance with partners will drive growth and revenue subscriptionsWill drive usage and proportional revenue

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Strategic Issue #2Shrinking Revenue Growth

Limited Skype RelevanceLimited channels (partners)Competitive offerings could potentially lock up profitable revenue streams

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RecommendationSocial Networking

Increase RelevanceFacebookLinkedIneHarmony

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Implementation Social Networking

Partner with the following social networking websitesDating Sites (eHarmony, Match, etc.) LinkedIn and

FacebookThis will increase Skype users from 540 million to 1 billion,

profitability from $13 mil to $159 mil

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(millions) 2009 2010 2011Revenue 718 812 1,137 Cost 338 400 568 Gross Profit 380 412 568 Operating Expenses, Interest, Tax, etc. 749 399 409 Net Profit (369) 13 159

ImplementationSelling Ads

Revenue/profitability is incremental to existing revenue structureAdditional $7 mil increase in net profit (from $159 mil to $166 mil)

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(millions) 2009 2010 2011Revenue 718 812 1,137 Cost 338 400 568 Gross Profit 380 412 568 Operating Expenses, Interest, Tax, etc. 749 399 409 Net Profit (369) 13 159

2011 ad 1,187

593 593 427 166

RecommendationEducation

Increase UsersIncrease Relevance

Schools Catch them while they are young

Introduce them to other cultures Enhance their learning experience

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ImplementationEducation

Partner with interactive whiteboards (e.g., Smart Board) at schoolsCreate the Skype Classroom at top teaching universities

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Strategic Issue #3Net Neutrality

Proposed Legislation not allowing ISPs to control content or access

Comcast – prevented users from gaining access to file sharing websites

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RecommendationNet Neutrality

Do not engage large ISP-VOIPs directly in large business salesBecome more politically activeTarget

International/Widespread BusinessesSmall BusinessesWebsites

Prepare for sale

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Implementation Net Neutrality

Advertise on net neutrality & potential consequences

Use popularity overseas to feed into American market

Offer free month to new small businesses applying for licenses

Rebrand to websites as a software service

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Overall Implementation TimelineYear 1

Define product offering/establish advertising scheduleHave a contingency plan for passage/non-passage of Net

Neutrality billBegin partnership strategy

Social Networking, EducationYear 2

Review of Year 1 initiatives (NN, advertising)Survey/Questionnaire (with regard to education)Establish rate schedule (selling)

Year 3Review of Year 2Prepare for public offering or buyout

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Questions?

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