Skype's 'success' speaks volumes

Not even 600 million downloads and legions of satisfied customers guarantee profits

By many measures Skype has been a remarkable success, primary among them (for me) that the videoconferencing it enables has managed to virtually reunite my sister in Minnesota with her family in Massachusetts.

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However, Skype has not been the kind of financial success one would have expected from a company that once commanded $2.6 billion from eBay (their bad) ... and there are ample reasons to doubt that a financial windfall will ever happen. Lee Gomes, a senior editor at Forbes, examines some of those reasons in a piece published this morning. He summarizes the problem tidily:

Revenue of $719 million isn't bad, but is hardly remarkable when your product is used by hundreds of millions of people.

Technologies like Skype are so disruptive, as they say in business school, that they tend to destroy the very economics of their own business. Thanks to Skype and its many imitators--every Web chat program now has audio and video built in--there is no money to be made in computer-to-computer communications, certainly not between homes.

Yes, this has been apparent for awhile now and Skype has many fellow travelers in this rickety boat. However, it remains a remarkable characteristic of the Internet age that technology that can deliver so much value to so many people can be worth so little to the people who provide it.

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