Smartphones cannibalize Skype's own market

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Skype's own success may lead them to cannibalize their own paid call revenue stream. Here's why. By Karn G. Bulsuk

Skype's own success may lead them to cannibalize their own paid call revenue stream. Here's why.

By Karn G. Bulsuk


Ever since its inception, Skype and other VoIP applications have long been healed to the end of telco dominance of long distance and overseas calling. Utilizing the internet instead of traditional methods of routing your call, Skype can offer much lower calling rates, or even free PC-to-PC calls, striking fear into the hearts of every telecommunications company.

Skype's success has only increased as we moved away from dial-up internet into cheap availability of broadband, removing the last barrier to crystal clear calls. This period saw the emergence of Skype handsets, making Skype a permanent, non-PC experience for the first time - going as far as to replace the land line for some.

With the widespread availability of 3G mobile internet, the immense number of smartphones being sold with Skype being a downloadable app, as the deep integration of Skype into Windows Phone 8, the company's technology is now literally accessible by anyone, anywhere. Within a few years, smartphones are expected to overtake the sales of feature phones, meaning that smartphones will become the new normal.

Ironically, Skype's own success may lead to them cannibalizing their own market. With the ubiquity of smartphones with Skype, their paid user base may shrink: those who buy Skype credit to call traditional land and mobile phones. If you and your friend both have Skype enabled smartphones, which are now mostly always-on, and they can be used to make free calls via the internet (VoIP), why would any of you need to buy credit again?

One of the ways that Skype is looking to increase revenues is the development of "Conversations Ads", which is a marketing-spin on normal square ads during audit conversations. Skype probably has figured out that during a Skype call, they pretty much have a captive audience, and hope to captivate callers into discussing or clicking on their ads.

Will this be enough to off-set the inevitable decrease in paid calling, as a result of cannibalization? Ads have served Google well, and it may just be enough to keep Skype going.

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Karn G. Bulsuk: Full Speed Ahead: Smartphones cannibalize Skype's own market
Smartphones cannibalize Skype's own market
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Karn G. Bulsuk: Full Speed Ahead
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