Skype is Just Too Cheap

A lot of people are moaning about eBay’s write down of Skype. Meanwhile I’ve been taking hours and hours of conference calls from Europe this week solely using SkypeOut, and all for less than 5 euros.

If I were making these phone calls from my hotel room phone, my guess is the cost would be $2-3 per minute * 300 minutes = roughly $750.

If I were making these phone calls from my Verizon “world” phone, it would be $1.25 per minute = roughly $400.

On Skype, less than $10, even given the weak dollar.

I’ve heard it said that a disruptive solution should be 10 times better or cheaper than the competition. Well, in my brief experience Skype is 40-75 cheaper than my other options.

Skype is pricing along a steep demand curve, so pricing matters. But they’re just too far below the competition to create a big business. Imagine what eBay would be saying right now if Skype was generating 4x the revenue with the same installed base?