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« The Team Makes or Breaks it for Me | Main | Dear AOL IM Spam Blocking Team... »

How does Skype make money when everyone is on Skype?

DateFriday, May 12, 2006 at 03:57PM by AuthorCharlie O'Donnell

Andrew at Phanfare was answering a completely seperate question when he noted what I think is a really interesting consideration.

"What Skype sells, mostly, is the ability to call in and out of the
traditional phone network (SkypeIn and SkypeOut). That makes strategic
sense. The free users don’t cannibalize the sale of the SkypeIn and
SkypeOut (well maybe to a very small degree since the more Skype users
there are, the fewer people outside of Skype there are to call), and in
fact increase the pool of people who might buy the upsell."

So, when we all have free Wifi or WiMax or WiWhatever and we're all using Skype to call each other...

...  How does Skype make money?

I mean, the whole business of Skype is based on the concept that there are people not on Skype, because you only pay to receive or make calls from outside the Skype network to regular phonelines.

Can you think of another example of a business where converting every last human being on the face of the earth to customers would drive revenues to zero?

| in |

Reader Comments (9)

welcome to the api business model.
May 12, 2006 | Unregistered CommenterJeremy
the EDI business charges a monthly fee, but they often charge more when you want to talk to a customer on another EDI network. Cellphone companies charge a monthly fee, but in some cases calls between people in network are free. Also not quite the same.

But in any case, this is what I would call 'a good problem to have'. Let's see:* Skype could create levels of service, and charge for the ones above 'basic' (I don't use them, maybe they do that now)* Because Skype knows who their customers are, they could include personalized audio and html advertising* And as Jeremy said, they could charge software vendors for providing access to their API to include Skype capability in games or applications or whatnot.

There are probably a lot more as well.
May 13, 2006 | Unregistered Commenterjb
When that happens, Skype will have a complete monopoly on advertising products.

I think Skype will start parsing voice conversations (remember Gmail has set a precedent for parsing personal email) and deliver advertisements.
May 13, 2006 | Unregistered CommenterSandeep
hypothetically, if everyone used skype as traditionally as we used regular phones... would people want advertisements? i doubt it
May 13, 2006 | Unregistered CommenterJeremy
Jeremy,There is a difference between deducing what ads to serve and how to serve them - parsing voice conversations would have the same benefit of parsing emails, only much better. No surveys, no forms ... just instant knowledge of what the potential customer wants.How do you serve it - Ebay (if available by Ebay) or via telemarketing (what.. u did'nt think that was gonna happen on Skype).
May 13, 2006 | Unregistered CommenterSandeep
sounds like a new era of privacy concerns
May 14, 2006 | Unregistered CommenterJeremy
Skype also knows who you are calling and where you are calling. Coupling that information with your information (as a Skype user) is indeed very useful mined data.

It'll be a sad day when somebody calls through Skype trying to due a survey.
May 15, 2006 | Unregistered CommenterTechie
The only way I see skype making money will be turning `pay' one fine morning when all other phone companies bite the dust and it cannibalizes them after peanut buyouts. Then they will have all of us at its mercy and as its captive audience to dish out whatever they choose to dish out.
May 21, 2006 | Unregistered CommenterKrishna
In my view, when it is all 100% Skype (which is unlikely since cell phones won't be free) they would then find something else to upsell. The beauty of their near-zero cost of each additional free user is that just about anything they sell into the existing network can make money. In fact, it is probably this long term strategic view that brought Ebay in as a buyer. They probably saw it more as an advantage in enabling commerce between consumers than as a way to sell access to POTS lines.

I would not expect them to start charging for the basic communication service. To do that would open them up to someone attacking them by offering a similar service for free.



May 23, 2006 | Unregistered CommenterAndrew from Phanfare

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