• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

Skype-ing Success

Photo Credit :

Some of the biggest names in Silicon Valley including eBay, Google and Facebook have courted it. While eBay bought Internet phone service company Skype in 2005 for $2.6 billion, it did not fit into eBay's plan of things. Now, Microsoft is all set to shell out $8.5 billion (Rs 38,100 crore) in cash to acquire Skype. Despite losing $7 million last year and with $686 million in debt, Skype is still a sought after asset.

The advantage that Microsoft has is that it can integrate Skype into virtually all its offerings — be it Xbox, Outlook, Lync, Windows Phone, Messenger or Hotmail. That will give it a headstart over Google and Facebook, which have also seriously looked to acquire Skype. However, the problem that Microsoft is likely to face is monetising Skype's free-to-use voice over Internet protocol (VoIP) technology. Microsoft will need to find ways to convert the core users — 170 million subscribers with 207 billion minutes of conversations a year — of Skype's free calling service to some kind of a premium service.

But, why would the majority of Skype users who have not paid for the service agree to opt for a paid service? Looks difficult, though one way out is to offer customers who pay a fee access to better quality of service. The other means could be to offer premium services to businesses that are looking to lower their communication costs. The third option is to add advertising to video conversations.
For now, Microsoft has to look at the various services onto which it can launch Skype. It could be interesting times for the customer, of course at a price.

(This story was published in Businessworld Issue Dated 23-05-2011)