Skype Interview: 23 Million Users Driving Broadband Proliferation

BY RICH TEHRANI

I was recently fortunate enough to interview Niklas Zennström, Skype CEO and co-founder. There are lots of amazing comments in this interview -- such a staggeringly large number of daily downloads as well as the low cost of adding new Skype users.

RT: Skype recently had 50 million downloads. This is quite a milestone. What does this mean to the VoIP community?

NZ: Skype is the leading VOIP-category product worldwide, with more than 24 million registered users, and more than 130,000 new users per day. We believe that Skype's success and continuing growth proves the market is ready for major communications advancements. We will continue to develop Skype so that it operates on a large variety of platforms with seamless cross-platform function.

RT: Metcalfe's Law states the value of a network grows as approximately the square of the number of users on the network. I understand you have 23 million active users now. Have you seen a larger ratio of users to downloaded copies? Do you see usage to download ratios growing according to this law?

NZ: Skype's download figure will always be larger than the number of registered users as we continue to innovate and delight with new functions and free upgrades. As for the network effect, we're certainly seeing that growth. We're recording more than 130,000 downloads per day today, compared to 90,000 per day in October last year and 30,000 in March.

The cost and quality gains consumers reap with Skype builds a natural incentive for users to tell their friends and continue our viral growth.

RT: Will the purchase of AT&T by SBC impact your business model at all?

NZ: No. Skype's P2P architecture for Internet telephony is more efficient than a traditional telecom provider's network or other VoIP provider's because it doesn't need central servers or central resources to scale. Our marginal cost is zero for each call and the cost of adding new users to Skype is less than $0.01. We will keep Skype-to-Skype calling free and maintain the efficiencies of a technology business.

RT: At our last Internet Telephony Conference & Expo (ITEXPO) in Los Angeles, you mentioned that workgroups in companies were a growing part of your business. Is this still the case?

NZ: Yes and we will be releasing Skype for Business this year, targeting groups not enterprises.

RT: What else in your business has changed since then?

NZ: We've been busy expanding our carrier relationships and regional partnerships, most notably in Asia. We've published an API and made it freely available for non-commercial use.

RT: How have your paid services been doing? Do they grow as a steady proportion of the free users?

NZ: SkypeOut, our first premium, pre-pay service has more than 735,000 users around the world. We continue to expand payment options and will unveil additional premium offerings throughout 2005.

RT: Do you have any fear that broadband providers will limit the quality of Skype traffic or the ability to transmit on their networks at all?

NZ: No. Skype is driving broadband proliferation and use worldwide, which helps broadband providers' businesses.

RT: Do you have plans of providing an IP Centrex-like hosting model in the future for corporations?

NZ: We've not detailed the Skype for Business offerings, but in general we've not looked to old models for developing solutions for customers.

RT: At our recent ITEXPO you mentioned you had more users on your network than there are SIP users and subsequently SIP support wasn't that important to Skype. Have you changed your mind on this topic at all?

NZ: No – we believe that interoperability will be important but we are not receiving much demand for SIP support

RT: Is it true Skype calls cannot be tapped? What implications does this have for governments trying to monitor the security of their homelands?

NZ: Skype is end-to-end encrypted for superior privacy. Your question re government monitoring applies generically to all global communication.

RT: Where does Skype stand on emergency notification services (911 in the states)? Can you fully support such services? How?

NZ: Historically telecom companies have been required to provide emergency services as the telephone was the only means of communication. These issues are larger than a single company but we're aware that it's a massive challenge to reliably provide E911 services due to the nomadic and global nature of modern communications. Numerous parties will need to work together to look at the bigger picture and allow any modern communications application to provide emergency service, including email, IM, SMS and voice.

RT: Where will Skype be in five years? Ten?

NZ: We'll continue to grow as The Global Internet Telephony Company in defining a new market and a new opportunity using technology much like global Internet brands such as Google, eBay or Amazon.

RT: What is the biggest competitor you have now? Your biggest challenge?

NZ: Our biggest challenge is managing our priorities and staying focused on developing Skype to continue to delight the users. We don't look at what other companies are doing; our core DNA is listening to our user base and innovating according to their demands.

RT: What do you personally want to be remembered for if you could choose one thing only?

NZ: As I said the last time we were together, "It's not the big that beats the small -- it's the fast that beats the slow." Like all other entrepreneurs, I am an optimist.

RT: You have started two incredibly viral software companies (previously Kazaa) and affected the lives of tens of millions of people. What's next?

NZ: I'm devoted to developing Skype and expanding its promise.

Rich Tehrani is TMC's president. He welcomes your comments. Participate in our forums.