Niklas Zennstrom Skype | Luxembourg
Watching Niklas Zennström's young company Skype grow is like driving past a McDonald's back in the '70s—every time you look, another million have been served. Skype's appeal is even more obvious than a Big Mac's: the firm provides software that lets people make free phone calls over the Internet. Since Skype was launched last August, over 15 million people in 170 countries have downloaded the program; according to Skype, about half of those actually use the software. "We don't think you should pay for making phone calls anymore," says Zennström, a serious, soft-spoken Swede. Trouble is, he's not charging for using Skype, either.
It's not the first time that Zennström has pursued a counter-intuitive business model. In 2000, he and co-founder Janus Friis launched KaZaA, a peer-to-peer exchange that allowed users to swap music and videos. Now Zennström is in the vanguard of Voice over Internet Protocol (VoIP), a technology in which voice traffic travels over the Internet. Stockholm-based Gartner, Inc. analyst Katja Ruud estimates that about 100 million people worldwide will use VoIP by 2008. Even giants like AT&T, BT and Verizon realize they've got to offer VoIP. Zennström practices extreme VoIP: free calls and free software. The catch is that Skype users can only call other Skype users. Zennström admits that "we have almost no revenue" and that, eventually, this will be a problem. So he plans to ask Skype users to pay for connections to non-Skype customers, and to license the software, especially to cell-phone makers. If the tech works well in cell phones, Skype could start serving billions.—By Mark Halper
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