Kazaa to Skype

From KaZaA to Skype

By the year 2002, Niklas Zennstrom and Janus Friis not only invented KaZaA, but also entered the Internet telephony market known as Voice over Internet Protocol (VoIP) with their new service, Skype. Creators of KaZaA avoided the illegal trading issues that Napster had to deal with by creating a FastTrack Software. This enabled PCs logged on to KaZaA to find and share files with each other using supernodes. KaZaA could not be legalized for illegal trading since it kept no track of what was being exchanged among users. It became the most downloadable program in 2000 but few years later companies like Time Warned filed a lawsuit against KaZaA. As a result, owners sold it an Australian company, Sharman Networks.

Zennstrom understood the opportunity in the VoIP industry and figured that VoIP hasn't made a great impact in the market yet. So he and Friis created Skype that offered VoIP and Instant Messaging. VoIP is basically a routing of voice conversations over the internet or via any other IP-based network. The business and economic characteristics of VoIP industry are the functionality and mobility of VoIP that attract the customers. Skype attracted millions of users due to its low-cost infrastructure and its reputation that derived from the users of KaZaA. It was easy to use and had really low PC requirements. According to the case study, some speculators said that Skype provided better security than other phones since it used the same encryption as certain government agencies.

Strategic Group Map for VoIP Industry:

Companies Maintenance of Infrastructure Product Quality Pricing Policies Target Markets Geographical Coverage Features Offered Encryptions for Calling Security

Skype Low-Cost Great Free PC Users Worldwide Instant Messaging, VoIP, Conferencing, Voicemail Excellent

Vonage $400/User Good $15-$25 Monthly All Users Worldwide VoIP Average

The companies that are in a best position to capitalize on the VoIP technology are Skype and AT&T. Skype has the potential because of its low-cost infrastructure and its decentralized technology. It doesn't cost anything to add any new users; however it needs to offer more features such as voicemail, conferencing, etc. to generate revenues. Skype's main focus is to attract more customers which will result in the quick adoption of the service. The economy is the favor Skype because there is a huge increase in the number of broadband and Wi-Fi users. This means that Skype can target more customers such as users of laptops, PDA's and cell phones. Moreover, due to FCCs regulations, there have been many debates whether VoIP service providers such as AT&T should be made to contribute to the universal fund. However, this is an advantage to Skype since it does not use telephone numbers, it doesn't contribute