Sten Shares Skype Vision & Strategy

[Skype's Sten Tamkivi talks about the future.  Photo by Shel.]

Rick and I were both impressed with Sten Tamkivi, Skype’s 28-year-old head of operations, who spent an hour with us in a far-ranging and candid discussion on his company’s strategy and vision.

The core of that strategy, according to Sten, is Skype ’s intention to increasingly derive revenue from non-telephony services. "We view SkypeOut and SMS to be the kind of telephony-related revenues  that we see fading away in the long run, even though they have a very healthy growth rate today. What we are looking into are new things like PayPerLead advertising, which we're doing together with Google and Yahoo, SendMoney, etc.

This is of course necessary because it's core telephony service is free and will remain so. This shift is allowing the company to thrive.  Revenue in the last reported quarter was equal to revenue in prior fiscal year. The company continues to grow at a phenomenal pace, acquiring 250,000 new users a day.

He said he pays no attention to new challenges from upstarts like Jajah and Rebtel. “Very few VOIP services do not compare themselves to Skype." That means they are positioned to follow not lead. "Skype is more focused on staying ahead by focusing on its own opportunities,” he told us..

Instead, “the biggest threat to Skype today is not being able to develop non-telephony streams of revenue. There is excitement in eating our own revenue streams,” he told us, adding, “The notion of counting minutes is technologically obsolete. It’s impossible that calls will be paid for by minutes 10 years from now."

He declined to discuss statistics, on the record, but told us that the acquisition by eBay was highly successful from a financial perspective.  As Rick pointed out during the meeting, eBay sellers were increasingly using the “Skype me” button feature to close deals, a tactic that was met with cynicism when the acquisition took place last year.

Skype will also continue to migrate its telephony services from the computer to handheld devices, preferably embedded into phones as it is doing with the Netgear Skype phone. First, the penetration of cellphones is huge and second, people prefer ease and mobility of handhelds to being tethered to computers. In short, they will go this route because that's where the people are.

He told us that the number of Tallinn-based employees doubled last year to about 270, overwhelmingly technical. There has been extremely low turnover since the acquisition—perhaps 5-6 people. One problem that is emerging is that the technical talent pool in little Estonia, of 1.4 million may get tapped.  Proportionally, Skype's 250 Estonian engineers would be equivalent to a US company employing about 250,000 engineers.

Sten told us that Skype has begun to look elsewhere, attracting people from 33 other countries, mostly in the EU.  He’d like to tap in to the rich and available Ukranian and Russian talent pools but the government is reluctant to issue them visas.

Why? “When you have been occupied for 50 years you want, you just want to keep some people out.”

Still, there are advantages to operating in a small country, where everyone seems to know each other on a personal basis. “When I have trouble with a labor law, I can just call the prime minister.”

Skype's story was in Naked Conversations because it grew through word of mouth at the fastest rate iin history. Conversations are still driving the company's growth even though the company has begun to use some traditional marketing efforts.  Sten has PR people schlepp Skype executives periodically to meet the press, for example.

Skype will now be part Global Neighborhoods for another reason. Skype has made international conversations easier, and cheaper letting some people talk more than they could previously have afforded to do and allowing others to speak internationally when they previously could not have done so.

[NOTE--Several changes have been made o this posting, based on clarifications in additional conversations held through email with Sten.]

Comments

[Bernie Goldbach]

Skype's standalone devices are the business. They're robust and make Skype less of a hassle to use. My first generation Skype DECT phone is better than the second generation Siemens Gigaset I formerly used in my home.

[tim]

“When I have trouble with a labor law, I can just call the prime minister.”

if this is a joke, sten is extremely funny. if it is not a joke, this is extremely worrying.

[shel israel]

It seems like everyone in the country has access to government officials. It is no joke. Today I had exclusive interviews with the president and former prime minister who has a good chance to become the next prime minister as well. It's called access and it's not just for Sten.

[Lenn Pryor]

Nice to see you got over to Tallinn Shel, Sten is a great guy and a very talented leader at Skype. I am sure you learned a lot while in Estonia, the world is changing fast. During my time in Tallinn and at Skype I know I did.

[Vincent Oberle]

US is about 200 times bigger than Estonia, not 1000 times, so Skype's 250 Estonian engineers would be equivalent to a US company employing about 50,000 engineers.

But that's a detail. I work myself at Skype in Tallinn and it's true that the turnover is amazingly low, the few people that left the company did it mostly for personal reasons (like foreigners going back for familly reasons). I think it comes from a few factors: We are doing amazingly cool and interesting things, and it's a great place to work, fun, relaxed...

[Philippe]

Sten is right : Skype is not about telephony but about communication... it is more than a nuance :-)

[Wilson Ng]

Big businesses and big governments have depersonalized the relationship too much.

Yes, in Asia too, being able to call a high government official and having that relationship so things are ironed out to the advantage of making the business environment better is an essential requisite in doing business.

There is nothing wrong, as long as all businesses having the same stake have the same privilege.

[Latest 2008 Skype Download]

great blog!!!

dont you just love skype? we have had it ages now and love it.

i highly recommend it to anyone who hasnt got it yet