Analysts: Skype Freebie Is Defensive

Skype Ltd. says its offer of free SkypeOut calls for U.S. and Canadian users is a promotional event, but analysts say it’s coming in response to growing competitive pressure from the "Big Three" IM providers. (See SkypeOut Free to US, Canada.)

The eBay Inc. (Nasdaq: EBAY) division said Monday its users can make free calls to traditional landline and mobile phones inside the U.S. and Canada for the rest of the year, and maybe longer.

“Millions of consumers around the world are flocking to Skype every month, and we believe free SkypeOut calling will rapidly accelerate Skype adoption in the U.S. and Canada,” Skype’s North American general manager Henry Gomez said in a statement Monday.

But close observers of the growing IM-based VOIP business say Skype’s move is at least partly driven by competitive pressure from other services.

“Skype is feeling the pressure from Yahoo, AOL, Microsoft and likely another few unannounced [IM/VOIP services] on how to keep their users using Skype,” says VOIP guru/blogger Andy Abramson.

"Don’t forget that Skype took away IM client users from the Big Three by offering them voice; now Yahoo, AOL and Microsoft are offering voice," Abramson says. "As a result, Skype has to come up with a reason to keep their users using it." (See Skype's Still Talking to Itself.)

In March, Yahoo Inc. (Nasdaq: YHOO) announced that its Messenger IM/VOIP client can now place calls to, and receive calls from, regular phones. (See Yahoo Launches VOIP Service.) The names of the new Yahoo services -- PhoneIn and PhoneOut -- left little doubt that Yahoo is gunning for SkypeIn and SkypeOut users. Yahoo's arguement, and MSN's for that matter, is that with Skype users only get IM and VOIP, but with Yahoo they get both services imbedded in a wealth of other content and services. Plus, Yahoo's PhoneOut was less expensive for U.S. and Canadian callers -- 1 cent per minute.

Just last week, Time Warner Inc. (NYSE: TWX) division AOL said its AIM IM client would soon be equipped to make PSTN-connected VOIP calls to POTS lines and cellphones anywhere. The new service, called AIM PhoneLine, will also provide free phone numbers so that AIM users can accept inbound calls.

Consultant Jon Arnold of J Arnold & Associates sees Monday's Skype announcement as a direct response to the new AOL product. “This is their way of saying that the IM platform business is their space," Arnold says.“This is about getting people to sign up and about reestablishing their brand in the space."

Both Abramson and Arnold spoke to Light Reading from the VON Europe show in Stockholm.

Until Monday, U.S callers paid 2.1 cents per minute for PSTN-connected calls in the U.S. or Canada, while Canadian users paid 2.4 cents per minute, according to the company’s Website.

A Skype spokeswoman told Light Reading the Skype service has always been a European phenomenon. North Americans account for a disproportionately low number of total users: The spokeswoman said 100 million people have downloaded the Skype client worldwide, and only 6 million of those reside in the U.S. The number of Canadian downloads, she said, was unavailable. (See Skype Hits 100M.)

“Until November of last year we didn’t have a marketing person in North America” the spokesperson said Monday. “This is the first time that prices for North America have been different than for Europe.”

Asked if the sweet deal for U.S. and Canada might remain after year's end, the spokeswoman replied: “We’ll have to see how it goes... Anything’s possible.”

— Mark Sullivan, Reporter, Light Reading

scs_reader 12/5/2012 | 3:53:51 AM
re: Analysts: Skype Freebie Is Defensive I think the Skype founders are laughing all the way to the bank on this one. Their timing was actually pretty perfect in terms of cashing in. I think that it was pretty obvious that all the big boys would embed this stuff soon enough (doesn't exactly take rocket science to do it.) Obvious to everyone except Meg and her online auction company.
Mark Sullivan 12/5/2012 | 3:53:51 AM
re: Analysts: Skype Freebie Is Defensive That's a lot of lost revenue for eBay. That revenue was figured into the company's justification for buying Skype in the first place. Now it vanishes.
optoslob 12/5/2012 | 3:53:50 AM
re: Analysts: Skype Freebie Is Defensive My guess is that Skype (Ebay)is seeing the US telecom industries recent moves, to be the "gate keeper" of internet traffic, as a direct assult on their business. I think they are just hitting back, just a little jab to let "Ma Bell" know that Ebay wants to be treated with a respect!

fiberous 12/5/2012 | 3:53:49 AM
re: Analysts: Skype Freebie Is Defensive If you have paid for Skype-out credits in the
past you still still get charged for calls.
jaanus 12/5/2012 | 3:53:45 AM
re: Analysts: Skype Freebie Is Defensive fiberous -- if you are in North America (US or Canada), you do not get charged. If you are in North America and still did get charged, please contact our Customer Support to sort this out.
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