Making Skype More Profitable and Ultimately Better

SkypeThere have been a few articles floating around talking about the fact that eBay is considering selling Skype. Although the talk is mostly related to new Skype CEO John Donahoe referring to “synergy” and weather or not the two business are complimentary. I think this might be cover for “profit”. The acquisition of Skype by eBay was a curve ball in most commentators eyes and there is no doubt that it has likely had a negative impact on Skype’s revenue and image.

That discussion made me think about what is it about Skype that is stopping it from being a giant (a bigger one). Number one in my book is the fact that most users don’t pay for any calls they make. They use it as a communication tool while online. They take advantage of Skype’s free calling, which is great. But there is no profit to be made from free. This is despite the fact that paid calls are cheap and deals like “Skype Pro” were top value for money. Indeed the new “flat rate unlimited calling” is also feature rich and again cheap. So if the majority of users are not taking them up on these great offers what can they do?

Charge for the use of Skype. That’s right charge for it, make Skype a subscription service on a per year basis. Before you go screaming your butt off hear me out. If you are screaming you must use and value Skype, I hear you. Skype is one application that I could not live without.

One of the strengths of Skype is the user base, it is massive. Used by an estimated 30% of all internet users and accounting for 95% of all VoIP traffic. Watching the total users online I see a constant + 10 million. There are questions about “active” users on Skype, given that total registered users is reportedly over 100 million but that is what I see on a regular basis so lets use that in our math.

With this huge user base Skype is in a great position to use that market share and economy of scale to charge a minimal subscription fee and make a very large profit. Consider this:

Skype have 10 million active users. Charge $10 per year for the use of Skype free calling PC to PC, therefore outside of SkypeOut. Given the fact that some people won’t pay this and ditch Skype lets be conservative and say that they lose 50% of current users. Now we have 5 million users paying 10 dollars a year. That is 50 million dollars a year! That is profit that they just don’t have coming in right now that could make Skype a whole lot better. Skype’s revenue is currently running around 500 million, subscriptions then would account for 10% of total revenue, that is a lot for any business.

I don’t think that they would lose 50% and I think that it will benefit users and Skype. I would pay 10 bucks a year. I might consider paying more. Why? I think that it is that good and I don’t have a problem paying for a quality service. I have used a number of VoIP services and none compare to the quality that I get from Skype, especially for recording. Generally speaking Skype is constantly reliable and stable, making it easy to use and dependable. Ten dollars a year is a very nominal fee for a great service.

In addition if I knew that the addition of a fee might make for a better Skype and encourage more development, great. They could even concentrate on working on some of my gripes:

  • No record feature native to the software
  • Bloatware like Skype Extras
  • Creating a stripped down version for optimizing call quality

I know that many people will disagree with me and strongly. I may even get flammed for putting ideas in their head. But quite frankly I don’t want to loose Skype. I sure as hell don’t want to lose it to the likes of Microsoft or some other web company that will pollute it with rubbish… “Yahoo! toolbar will be installed with Skype” (in fine print at the bottom of the EULA). Skype should concentrate on being a VoIP service, not a games platform, not aan application client, not anything else.

I will say though that subscriptions without value adding to the application and development of more bloatware would be a disaster. But the opposite would make for Skype to develop and maintain a platform for which there is no equal. As long as they add that record button.

Would you pay 10 bucks for a killer app?

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5 Responses to “Making Skype More Profitable and Ultimately Better”

  1. honest ape Says:

    I think you’re right on the money on all counts. Skype’s business model has been flawed for way too long. I can see why ebay is looking to dump it. However, there is great potential for profit if they handle it right. I guess it’s easier to just sell it than put the work into making it profitable…

  2. The Rooster Says:

    Thanks @honest ape. I am not really sure how this will be received. But I think that it is a viable solution and one that most users won’t mind. But your right – the cards have to be played out right. Otherwise they will alienate users and damage their name and therefore user base.

    I am honestly expecting to get flamed 😛

  3. Christopher Says:

    That is very true Rooster, but this will have minimal impact for those who primarily use Skype’s Unlimited North American calling plan but help to explain both increased revenues and lower usage on a worldwide scale. Skype is very good and useful too. But how do Skype make its profit? I mean, nobody works for free, everybody needs food on the table 🙂 Why dont skype make it like the multi level marketing ( everybody who can make somebody use skype will get credit ).

  4. kuma Says:

    i’d pay a wee bit more if the functions i desire so so long can be worked on with just a bit of more money from every user. I’d pay for that record button and I’d pay even more for better call quality. The reason I refrain from skype is just i heard so many bad things about calling online, the reason why I stick to traditional cellphones and phone booths for international call. Or I just use emails with visuals anyway.

  5. kerrygrante Says:

    i think placing a fee on the free service is something that can be done but careful consideration has to be taken before any fee is added. for me $10.00 is way too much $5.00 will make skype keep more of their user base. i started using skype from october 2003 and have started paying for skype from the moment the fee base service started.

    Skype users should encourage their friend & love-ones to buy the skype phone ( which does not require a pc ) and subscribe to an unlimited plan.

    lastly i think this can be worked out in a way that does not let them loose any member at all. i may get alot of fire for this but ill say it anyways.

    have two versions of skype, just like the other p2p products out there.

    1. the free version should be scale down to include less features and alot of advertising. (forcing users to look or listen to a short add before making another call)

    2. pay $5.00 – $10.00 a year and get the rest of the features without any adds.( and the record botton too)

    i want to hear what other think of what i said


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