How Free SkypeOut in North America should make investors happy
Five effects of the announcement:
- Easier to try.
- Targets North America.
- Better for enterprise sales
- Will affect rivals
- Small effect on hardware partners.
In one stroke Skype simplifies the choice to try Skype. No need to whip out a credit card or think about minutes. Just download and call. No trying to understand SkypeOut rates. No getting the boss to buy or reimburse credits. Simple. It will be easier to get someone hooked on SkypeOut to pay later, than to bring it up before installation.
This promotion targets Skype's hardest market: North America. Skype's penetration in the US has been horrible, at least compared to other countries. So Skype North America is knocking down barriers to adoption. First with hardware distribution. (One theory: people trust products in retail channels. Another: they want a handset experience.) Free calling takes NorthAm to the next level of accessibility.
This change was also necessary for Skype to penetrate the business market. Skype's business servers and digital identity models aren't up to the challenge of serving enterprises where people have multiple affiliations, roles, payment methods, and IDs. Skype IT has made strong progress in the last year, but Skype needs adoption now, before Microsoft Vista's launch. It needs enterprise and SMB buy-in more than it needs the cash flow.
This promotion is the action of a market leader. It will starve small competitors for seven months. It will force Microsoft, Yahoo!, AOL, Earthlink and Google who charge for "out" services to reconsider. And it puts Comcast, AT&T and even Vonage on notice about pricing their own offerings.
Skype Certified hardware has often come with a gift certificate for free SkypeOut minutes, anywhere from 30 minutes to an hour. During the promotion period this will matter less. It's a small hit compared to the brand value of Skype Certification.
The coolest thing about this: it shows management in touch with unpleasant realities, and a willingness to confront them. All told, Henry Gomez and friends are doing the right things at the right time.
News release follows...
Skype Introduces Free Calls to Traditional Landlines and Mobile Phones in the US and Canada
San Jose, CA, May 15, 2006 - Skype®, the global Internet communications company, today announced that all US and Canadian-based Skype customers can now make free SkypeOut™ calls to traditional landline and mobile phones in the US and Canada. Previously, Skype users in both countries were required to pay for Skype calls from their PCs to traditional telephones. Free SkypeOut calls to the US or Canada will be available to US and Canadian-based Skype users until the end of the year.
Skype has now removed any cost barrier for its American and Canadian customers to keep in touch with friends, family and business associates. Skype anticipates that completely free calling in the US and Canada will expand Skype's increasing penetration in North America and solidify Skype's position as the Internet's voice communication tool of choice. More people will now have the chance to benefit from Skype's premium services and online calling capabilities.
"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 US and Canada," said Henry Gomez, General Manager, Skype North America. "We're very excited to be bringing Skype's convenience and voice quality to so many people for free."
While SkypeOut calls within the US and Canada will now be free, SkypeOut calls to and within all other countries will continue to incur charges. Those charges are unchanged by today's announcement and remain among the lowest available to consumers.
Last week Skype released a new beta version of its software that adds even more features and functionality to Skype's voice and video calling options, including: SMS; simplified dialing; payments in Skype; Outlook contact integration; call quality management; simplified registration; shared contact groups; and improved conference calling. On May 1, after just more than two and a half years in operation, Skype achieved 100 million registered users worldwide.
About Skype
Skype is the world's fastest-growing Internet communication offering, allowing people everywhere to make unlimited voice and video communication for free between the users of Skype software. Skype is available in 27 languages and is used in almost every country around the world. Skype generates revenue through its premium offerings such as making and receiving calls to and from landline and mobile phones, voicemail, call forwarding and personalization including ringtones and avatars. Skype also has relationships with a growing network of hardware and software providers.
Skype is an eBay company (NASDAQ: EBAY). To learn more visit skype.com.
Skype is not a replacement for your ordinary telephone and cannot be used for emergency calling.
Comments
This is really going to mess with Skype's competitors. AIM won't be getting traction with its new free phone numbers promotion. Ditto for Yahoo and MSN. And just imagine what it'll do to a Vonage IPO this year. Poor Vonage!! Skype's progress in North America has been slow so far, but someone please tell me why it won't grow unbelievably fast from here onwards.
Posted by: aaytch | May 15, 2006 11:19 AM
Hey aaytch!
Thanks for stopping by. It is an interesting game to play with the competitors (and Vonage). It is a pretty clear message from Skype that they won't this game by increments.
However I am not sure it will make a dent in downloads for Skype America. Cost does not appear to be a driver here. But we will wait and see.
Regards, Bill
Posted by: Bill Campbell | May 15, 2006 01:27 PM
For once I agree with Mr Campbell, this will have a negligible effect on Skype pentration in the US. I sent the Skype news to several US cohorts, whose response was: "I already have free calls on my mobile, on my home phone, on the other services I use, why do I need this?". The US market is MUCH different than the ROW, and it is reflected in Skype's penetration in the respective markets.
This is a sign of desperation on the part of Skype trying to do anything to get it going in the US market, in order to try and get enough uptake to create possible synergies with eBay's largest market. The Skype after effect is a declining eBay market capitalization, not an increasing one...
Posted by: MuppetMaster | May 15, 2006 11:25 PM
Hi Phil,
My question (http://blog.thylmann.net/2006/05/skype_free_us_t.html) remains really. Why only US->US? Why not World->US? Based on IP traffic the costs should be the same. Then again, a lot more people would use it as it would be a free international call and that might a bit much for eBay to pay :)
Posted by: Oliver Thylmann | May 15, 2006 11:38 PM
Oliver,
Indeed, leaving the rest of world out of the promo for calling into the US is an affront. It is this very customer base that has made Skype what it is, now they leave them paying for Skype's last ditch attempt at gaining US/Canada marketshare. Sad state of affairs indeed.
MM
Posted by: MuppetMaster | May 16, 2006 02:14 AM
i love skype and use it . I have out and in and lots of skype2skype. However if skype wants to capture the us market y not lift up all the market. im spanish and i fon the usa regularly. Now i read that a european company is offering yanks a better deal than i get here in europe. Shouldnt ALL of us be included?
Posted by: levihello | May 16, 2006 06:39 AM
Hey Muppet!
Good to hear from you again. Correction needed: This is the second time you have agreed with me. (grin)
I wonder if my analysis may be wrong. I have had an inordinate number of people contact me who are truly excited. They are mostly in the 15 to 22 year old crowd. It seems Skype hit a hot button here.
The difference between the ROW and North America is not so much free calls but rather basic math skills. If you pay $75 per month for 1000 minutes the cost per minute is not free.
Certainly, costs have gotten very low so people do not think about them like they did 20 years ago.
I think it would have been brilliant had Skype allowed ROW to call for free into North America. That would truely be a wake up call to prople who never heard of Skype. Good for the Muppet for that one.
Hurry back... Regards, Bill
Posted by: Bill Campbell | May 16, 2006 07:27 AM
I am not in the 15-22 age bracket, and I'm excited. The point I'm trying to make is not that it will have a measurable effect on downloads (it's huge already), but that Skype's competitors will be killed by this move. There are a lot of big (and small) companies that thought there was some opportunity to get traction in VOIP on the american continent, and now those opportunities are greatly reduced. Some of those companies probably need to see financial success this year, especially Vonage and possibly a few of the SIP services. Clearly Skype/Ebay is in this game for the long-haul. There is no evidence whatsoever that this move is one of desperation as suggested by Muppetmaster.
Posted by: aaytch | May 16, 2006 07:59 AM
Im in spain trying to skype 2 skype with a usa based computer then to skypeout from there. it should allow me,a european, to get free our calls to any usa cell or regular fon. i guess the business is now for someone in the usa to set up a usa based computer for skype2skype connections and then to allow originatorto then call out for free. Can this be done?
also why not set up local numbers in many us cities whereby skype users can call with their cell fons athat local number and get into their skypeout. They they can call cheap . a local skype number in major cities. a cell fon call to that local number and WHAM!! youre talking to japan.
Posted by: sara | May 17, 2006 01:10 AM
Free - sounds great, doesn't it? Sure, I love a great deal. Has anyone tried to USE IT though?
After being a skype user for a while (only skype2skype, though) I thought I would return to the fold and try setting up a 'work-related' account to test out free calling BEFORE recommending it to my friends (since I am the one they call for trouble shooting, I thought it was better that I understand any potential snags at the outset).
Istalled Skype -no problem.
Set up my account - yep, all good.
Followed instructions to make a call within north america,blah blah blah - Won't let me dial.
At all.
Nope, no phone calls, no possibility of dialing, no possibility of activating skype out, but finally, a link allowing me to buy 10 EUROS (now, let's see - an offer for NORTH AMERICANS for free calling IN North America) worth of Skpe credits.
Anybody have any information on this? Is it just a misunderstanding on my part? What looks to most like a great marketing ploy is looking to me like a market-killer for Skype if this is really the case. I sincerely hope it was just a mistake, or something that i have done wrong, because I do think it is a great service with a lot to offer. I think that overing free overseas calling might have been an even better move, but, at this point, not being able to make a supposedly 'free, easy to do' call is making me feel a little bit perturbed.
If it IS my mistake, well, it wouldn,t be the first time I was wrong :)
Posted by: Holly | May 22, 2006 10:37 AM
Correct me if I'm wrong, but if I remember my world geography correctly, isn't North America composed of three major countries: Canada, US, and Mexico? From what I can tell, this is not a "call North America free" promotion, it's more of a "call Canada and US for free ONLY" promotion. I know the official press release stated US and Canada only but throughout the press release there was several mentions of targeting North America and increasing Skype's popularity in North America. But from my point of view, North America is composed of three major countries and by stating only US and Canada along with "North America" is excluding one very big country, Mexico.
Posted by: Jorge Luis | June 6, 2006 01:57 PM