Skype – free internet calling, now a part of eBay
"There's no question in my mind that Skype will become a $1
billion company."
Tim Draper, of Draper Fisher Jurvetson, in Business Week,
November 2004
Perhaps even Tim Draper was a bit surprised at the value that eBay gave
to Skype less than a year after his prediction – not $1 billion, but
$2.6 billion in cash and stock, with additional incentive payouts of
$1.5 billion by 2009 if Skype meets certain performance targets. eBay
paid these billions for a company that has yet to turn a profit –
Skype’s current plan calls for profitability by 2009.
Skype usage
almost doubled during 2005. At the beginning of the year, the Skype
network averaged around 2.4 million users at any point in time. At the
beginning of 2006, the Skype network is now supporting around 4.4
million users.
Skype continues
to expand its service offerings. The newest version of the software
includes video conferencing capabilities, available at no charge for
those users who have a webcam.
“Before we met with Pierre [Omidyar] and Meg [Whitman of Ebay], we
didn't think we had anything in common. … And apparently they did not
think that either. But when we started talking, we had an "Aha!"
experience in the meeting. We both kind of went crazy on the whiteboard,
mapping out ideas.”
Skype co-founder Niklas Zennstrom, in Business Week, 19 Sep 05
Adding Skype to eBay auctions gives buyers and sellers additional
channels for communication. This should broaden eBay’s appeal and allow
it to continue its premium pricing approach. It might even drive up
eBay’s growth, which has flattened out between 2004 and 2005.
In addition,
it’s easy to see how Skype could be an added feature in other profitable
internet commerce applications, such as gambling.
Even
eBay investors are warming up to the deal. While the stock fell four
percent on the news of the deal, to around $37, it has since gained
ground and is trading at $46.
YourEncore
– Open innovation for less
YourEncore provides large companies with retirees as consultants.
These are mostly scientists and technical managers who have retired from
the research labs of large corporations, often with years of technical
experience. Member companies, like Lilly or Boeing or Procter & Gamble,
can hire these consultants to supplement their existing workforce for
particular projects.
While Skype was
one of the biggest innovation stories of 2005, there were no news
stories on YourEncore. I recently talked with the company’s CEO,
Brad Lawson, to get an update on its performance. He highlighted
several factors contributing to the service’s steady progress:
Ø
Doubled the number of member companies.
YourEncore
has increased the number of client companies from four to nine. At the
same time, the company changed the terms of membership. At the
beginning of 2005, companies had to pay $50,000 to join. Now there are
more flexible membership arrangements, including a “pay as you go”
subscription option.
Ø
Increased the size and utilization of the retiree network.
There are now
more than 800 highly qualified retirees who are part of the YourEncore
network. In the last year, 35 percent of these retirees worked on at
least one project for YourEncore.
The companies
who use the service are almost always extremely pleased with the
results. Lawson estimates that 90% of all projects are finished early
and below budget. The YourEncore service has an average
satisfaction rating by client companies of 4.6 on a five point scale.
What Lawson has
found most remarkable about the YourEncore service has been the
great work that comes from retirees for a small fraction of the cost of
a full time employee. Using retired experts from the YourEncore network
costs much less than technical consulting firms or even in-house
technical staff.
Most of the
experts in the network don’t need the money to maintain their standard
of living -- they have pensions or other forms of income. Instead, they
want to work because it keeps them engaged in a range of problem-solving
activities that they find enjoyable. As a result, YourEncore has
the potential to be a strong competitor in providing project-based
technical services.
In order to make
effective use of the YourEncore service, however, prospective clients
need to prove to themselves that using retirees to address technical
challenges actually works. As Brad Lawson notes:
“Most people find our service to be
a wonderful idea, but putting it into practice is another challenge.
There is typically a lengthy cycle for clients to complete the process
of engaging retirees, completing their projects, measuring the results
of the project and then communicating those results throughout the
organization.”
Brad Lawson, CEO YourEncore
Demography is
destiny, however. As the workforce ages, the services offered by
YourEncore will become more necessary. Companies will have limited
choices in finding experts to solve their technical and project-related
problems.
Supply shortages
are one of the major forces for innovation, and we can expect services
like YourEncore to grow as the workforce ages. Stay tuned.
More Information:
-
Here’s a
transcript of my recent
interview with Brad Larson, the CEO of YourEncore, as
well as Brad’s summary of the year.
-
My March,
2005 Update on notable Service Innovations is
here.
-
Here’s a
piece I wrote on 26 Sep 05 on the
eBay acquisition of Skype.
