I was just commenting on that yesterday at the office. The AI is ruthless in skirmish mode. I consider myslef a good RTS player (not great), but I was only starting 2nd level buildings and had a 2nd-level hero when my base gets nailed by 2nd level units and a huge army led by two heroes, one at 4th level!
Even using the cheat to give you extra 500 wood and gold didn't help. I wish there was a way to tweak the AI's level of difficulty.
It is unbelievably difficult!