Where’s the value in Skype buying Gizmo5?
Michael Arrington broke a rumor that Skype is in talks to buy Michael Robertson’s Gizmo5. I don’t see much value. You buy a small company for five things: cash flow, IP, brand, relationships, and people. Does the firm produce cash flow? When you make half-a-penny a minute, you must sell a gazillion minutes. When you have intense competition, manage churn. When price-per-minute falls, find non-minute sources of revenue. When market prices fall, build volume for buying power over your termination suppliers. As of March 2009, "Gizmo5 serves more than six million consumer and business users" after six years. Skype adds that every 17 days. I don’t know if Gizmo5 has been successful enough to create attractive cash flow. If Skype owned the business, could Skype quickly build profits? Gizmo5’s IP prime asset could be its SIP gateway. They’ve built on top of it a SIP-to-Skype (OpenSky) gateway, support for Google Talk, and Gizmo Voice, a Gizmo5/Google Voice mashup. If the code is good enough, it might be the base of an enterprise server product or a hosted service. If you trust Julian Cain’s critical fact-checking comments in Mike’s story, I doubt the code would survive due diligence. If the systems is rock solid, scalable, and easy to adapt, Skype might save two to six months development time by buying. The brand is fine for VoIP geeks, is known to buyers of cheap/free calling. However Gizmo is far from a broad consumer brand. Test for yourself. Gizmo5’s business relationships are available to Skype with a phone call. No exclusive channels of distribution. No high value marketing partners. No namespaces bringing millions of new Gizmo users. Which leaves the team. I have no idea if they have real depth of SIP talent, well integrated as a team. But it wouldn’t be hard for Skype to cherry pick the entire industry for the best SIP coders, architects, and production operations staff. Out of all of these, is there enough value that Skype might buy the company? Maybe. Robertson is a pirate in the entrepreneurial sense: he’s smart, flexible, opportunistic, and aggressive. He might add a healthy bloodthirst to Skype’s buttoned-down corporate/geek culture. photo by J.D. Lasica. tags: skype, gizmoproject, gizmo5, michaelrobertsonCall me at +1-510-316-9773, Skype me, follow @skypejournal and @Phil Wolff.
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