Post on 11-Jan-2016
© 2008 by Skype. Commercially confidential.
Competition and Pricing AnalysisFor New Unlimited Packages
9 April 2008
Slide 2
Executive Summary
1. Competitive analysis
Consumers think of Skype as competing with: Internet majors: Google, Microsoft, Yahoo, AOL VoIP pure-plays: Gizmo, Jajah, Wengo Not telcos and cable providers
2. Pricing analysis
Unlimited packages are ground-breaking Flat-rate pricing is almost unheard of amongst internet
majors and VoIP pure-plays Lack of lengthy contract is unique Packages are significantly cheaper that everybody else
Slide 3
Three broad questions
1. Who are Skype’s main competitors?
2. How do Skype’s new, flat-rate packages compare to the market?
3. What are the key trends in Skype’s various markets?
Slide 4
Three broad questions
1. Who are Skype’s main competitors?
2. How do Skype’s new, flat-rate packages compare to the market?
3. What are the key trends in Skype’s various markets?
Slide 5
Access Providers
VoIP
Skype’s view is...
We’re taking customers from telcos – because comparitively we’re much cheaper for international calls
Our strongest competition comes from access providers
Among SkypeOut active users we are losing to other VoIP providers
Telcos
Slide 6
Supply-side approach Triple-play providers Internet blue-chips VoIP pure-plays
Demand-side approach Ask the customers!
Two approaches toidentifying the relevant competitors
Slide 7
Use
rs’ e
xper
ienc
e
Price
The “true” calling experienceThe “true” but
supposedly cheaper calling experience
The “replacement” calling experience
Supply-side analysisreveals clusters of competition
Slide 8
Demand-side methodology
In absence of consumer survey data, we used Google to tally all the firms mentioned in the context of Skype’s competition.
We conducted 9 searches: Google.com: Skype competition, Skype competitor, and with whom
does Skype compete Google.de: Skype konkurrenz and Skype konkurrent Google.fr: Skype concurrence and Skype concurrent Google.it: Skype concorrenza and Skype concorrente
For each search, we looked at the top 10* results and recorded the name of every company mentioned on the page
Sample universe of 77 webpages, 90 companies, 207 mentions
* Discarding any duplicates
Slide 9
Demand-side analysisshows online players are Skype’s main competition
Specifically Yahoo, MSN, and Google
Telcos and ISPs? Not at all
The VoIP pure-plays to a lesser extent
Source: Primary research
Slide 10
These results consistentacross all geographies, with minor variations
US/UK top 5: Yahoo, AOL, MSN, Gizmo, Google
German top 5: Jajah, Google, Yahoo, ICQ, AOL
Italian top 5: Gizmo, MSN, Sony, Yahoo, Jajah/Teleo
French top 5: Google, Wengo, MSN, Yahoo, Gizmo
Slide 11
These results consistentacross all geographies, with minor variations
US/UK top 5: Yahoo, AOL, MSN, Gizmo, Google
German top 5: Jajah, Google, Yahoo, ICQ, AOL
Italian top 5: Gizmo, MSN, Sony, Yahoo, Jajah/Teleo
French top 5: Google, Wengo, MSN, Yahoo, Gizmo
Nowhere do consumers associate Skype’s competition with telcos and cable providers
Slide 12
Three broad questions
1. Who are Skype’s main competitors?
2. How do Skype’s new, flat-rate packages compare to the market?
3. What are the key trends in Skype’s various markets?
Slide 13
Pricing methodology
We looked at online majors, VoIP pure-plays, and traditional telcos in five countries: Online majors: AOL, Google, Microsoft, Yahoo VoIP pure-plays: Gizmo, Jajah, Wengo, Vonage France: Orange (France Telecom), Free (Iliad), Neuf Cegetel,
Alice (Telecom Italia) and Tele2 Germany: Arcor, Deutsche Telekom, Freenet, United Internet Italy: Telecom Italia, Wind, Tele 2, FastWeb UK: BT, Virgin, TalkTalk, Tesco US: AT&T, BellSouth, Comcast, Verizon
We found 12 packages offered by 6 companies that are broadly similar to Skype Unlimited Domestic, Unlimited Europe, or Unlimited World.
Slide 14
Flat-rate bundles
Online majors VoIP pure-plays Triple-play providers
AOL PAYG Gizmo PAYGDeutsche Telekom
Bundles
Google N/A Jajah PAYGFrance Telecom
Bundles
MSN PAYG VonageBundles& PAYG
Telecom Italia
Bundles
Yahoo PAYG Wengo PAYG TescoBundles& PAYG
Online space is mainly PAYG
Triple-play firms prefer bundling
Source: Primary research
Slide 15
Flat-rate bundles:Domestic
Firm PlanPrice
(monthly)Description
Tesco Anytime UK £5Unlimited calls to UK landlines. 70-minute max call length.
Vonage Residential Premium $25Unlimited calls, US & Canada.Mobiles possibly excluded.
Virgin Talk Unlimited £19Unlimited UK landlines. 59-minute max call length.
TalkTalk Talk3 £7.5* Unlimited calls to UK landlines.
Skype Unlimited Country: €3
*Includes broadband
Slide 16
Flat-rate bundles:International
Firm PlanPrice
(monthly)Description
Vonage Call Europe $35 29 countries. Fixed only.
Arcor International I €4 25 countries. Fixed only.
Telecom Italia Smart Addition: Int’l €10 22 countries. Fixed only.
TalkTalk Talk3 International £10* 36 countries. Fixed only.
Skype Unlimited Europe: €4
*Includes broadband
Slide 17
Flat-rate bundles:International
Firm PlanPrice
(monthly)Description
Tesco Anytime World £8.50 30 countries. Mobiles unclear.
Vonage Basic World $31 17 countries. Fixed only.
Arcor International II €15 25 countries. Fixed only.
TalkTalk Talk3 Total £14.5* 66 countries. Fixed only.
Skype Unlimited World: €9
*Includes broadband
Slide 18
Flat-rate bundles:The upshot
Domestic Europe World
Skype €3 €4 €9
Arcor €4 €15
TalkTalk £7.5 £10 £14.5
Telecom Italia
€10
Tesco £5 £8.50
Virgin £19
Vonage $25 $35 $31
Source: Oanda, 5 March 2008Exchange rates: 1.31 euro/GBP, 0.66 euro/USD
Skype’s new packages are much cheaper than competing bundles
Domestic Europe World
Skype €3 €4 €9
Arcor €4 €15
TalkTalk €9.83 €13.10 €19.00
Telecom Italia
€10
Tesco €6.55 €11.14
Virgin €24.89
Vonage €16.50 €23.10 €20.46
Slide 19
Three broad questions
1. Who are Skype’s main competitors?
2. How do Skype’s new, flat-rate packages compare to the market?
3. What are the key trends in Skype’s various markets?
Slide 20
2006 penetration rates(fixed/mobile connections per 100 population)(broadband connections per 100 households)
Source: Ofcom , “The International Communications Market 2007”
Slide 21
High variety in fixed vs.mobile usage across countries(monthly minutes per capita, 2006)
Source: Ofcom , “The International Communications Market 2007”
Slide 22
Despite mobile’s growth.fixed-line call volume still exceeds mobile(monthly minutes per capita, 2006)
Source: Ofcom , “The International Communications Market 2007”
Slide 23
Fixed vs. mobile(percent of the population)
Source: Ofcom , “The International Communications Market 2007”
13% 18% 10%
38%13%18%
22%
8%
73% 61% 65%48%
0%
25%
50%
75%
100%
UK F rance G ermany Italy
F ixed andmobileF ixed only
Mobile only
Slide 24
PAYG rare outside EuropeEven in Europe, much regional variation(mobile calling plans by type)
Source: Ofcom , “The International Communications Market 2007”
Slide 25
Broadband penetration(connections per 100 population, 2006)
Source: Ofcom , “The International Communications Market 2007”
Slide 26
High variation in VoIP usage (percent of internet users who report using VoIP, Q3 2007)
Source: Ofcom , “The International Communications Market 2007”
Slide 27
Within the UK, Skype leads the pack
High variation in VoIP usage (percent of internet users who report using VoIP, Q3 2007)
Source: Ofcom ,“VoIP Research Report,” June 2007Note: UK total exceeds 16% because some consumers use multiple VoIP providers
Slide 28
Conclusions
Skype’s main competitors are not telcos and cable providers. Instead: Internet majors: Microsoft, Yahoo, Google, AOL VoIP pure-plays: Gizmo, Jajah, Wengo
Skype’s Unlimited calling packages are disruptive. Highly unusual amongst the internet VoIP competitors (though
commonplace for telcos and cable firms) Lack of lengthy contract period is unique Significantly cheaper than existing fare on the market
There are important national differences in phone usage and pricing.
Slide 29
Recommendations
At present, Skype needs to focus more on its internet competitors and less on the likes of BT and Deutsche Telekom.
In the future, the competitive set may evolve over time. Hence:
Skype should conduct more direct consumer research to better
understand who its competitors are and how they view Skype versus the competition.
Skype should start tracking consumers’ perceptions periodically so as to understand the competitors’ movements
Slide 30
Appendix
Slide 31
The internet blue-chips
Slide 32
The internet blue-chips
Slide 33
The internet blue-chips
Slide 34
The VoIP pure-plays
Slide 35
The VoIP pure-plays
Slide 36
The access providers
Slide 37
The access providers
Slide 38
The access providers
Slide 39
The access providers
Slide 40
The Telcos:France Telecom
Slide 41
The Telcos:Deutsche Telekom
Slide 42
The Telcos