With Verizon and Facebook Partnerships, Skype Positions Itself for App World Dominance
Listen to Steve Jobs and you'd think the future of phones was face-to-face video calling a la the iPhone 4. But thanks to data caps and the growing need for smaller smartphones -- and not to mention innate human shyness -- video calling may have a limited future. Skype, by contrast, is hard at work improving voice calls in a way that could be much more groundbreaking.
In a rather timid press release today, Skype outlined its grand vision for its product; in a phrase, you could call it "call ubiquity". While most of us are still marveling at things like visual voicemail on the iPhone or voicemail transcription on Google (GOOG) Voice, Skype has outlined a future in which devices across your home and car can share a call -- letting you wander from room to room as your call switches from your phone to your PC to your television.
If Skype can succeed in overcoming the technical hurdles -- and there are many -- it will have created an environment in which the devices dissolve into the background, and all that matters is the call. In short, it will have brought telephony up to speed with email and content management by shunting most of the work into the cloud. That's no minor feat.
Skype is one of the few companies that can effect this change of its own volition, boasting half a billion users worldwide and partnerships with carriers like Verizon (VZ) and television OEMs like Panasonic, LG and Samsung. Skype predicts that next year 100 million PCs will ship preloaded with its software.
But perhaps more beneficial than its lofty dreams are Skype's other newfound alliances: specifically with Facebook. The companies have quietly rolled out contact integration, so that Facebook users can add Skype buddies via their profiles. Sure, it's not an earth-shattering start, but it could be an important lead-in for American users, who haven't adopted Skype with the celerity of their European counterparts.
Skype's essential mission for the last several years has been to recruit American users -- we're a big pool -- and Facebook's user base is ripe for it. And because of Facebook's extensive capabilities as a platform, Skype integration could potentially run much deeper in future quarters. In its quest to stay relevant in a world of Gchat and now Apple's FaceTime, Facebook may want to jump on Skype's user base to get users voice- and video-calling, rather than organically growing its own, which would presumably take too long.
Skype, however, is keeping its options open. Apple has said that FaceTime will be an "open platform," and thanks to Apple's elusive definition of "open," Skype is playing wait and see. While Apple sorts out its new frameworks, Skype is plowing ahead with its Verizon alliance, which promises to bring Skype to a litany of 3G dumbphones this year.
That's good news for Skype, of course, which gets first crack at recruiting regular non-smartphone users who aren't being innundated with trillions of competing apps. It's also good for Verizon, which has figured out a way to route Skype calls over its CDMA network instead of its data network -- meaning you're still using minutes.
But all these deals, potential and actual, have significant ramifications not only because they grow Skype's user base, but because they drastically improve its revenue engine. Until now, Skype has been primarily a desktop PC phenomenon, relying on paltry overseas calling rates and cheap SkypeOut numbers to generate cash.
Now many tasks performed by PCs are falling to smartphones and tablets, making Skype low-hanging fruit for telecoms. By partnering with those carriers, Skype's earning power will earn itself a lot more leverage on them.
That will provide more cash, of course, allowing Skype make the kind of capital expenditures it wants. But it will also position it as a power player in mobile telecom, able to bring 500 million callers -- and who knows how many more Facebook users -- to the table. In two years, it may indeed become the most powerful app in any market.
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