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Skype Drops The Bomb On VoIP Market

David A. Utter
Staff Writer
Published: 2006-05-15

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For the remainder of 2006, calls made from SkypeOut within the US and Canada to any landline or mobile phone will be free.

No strings attached. If you're reading this somewhere in the United States or Canada, Skype has a deal for you.

The company has decided to try the time-tested 'loss leader' approach to building market share. It's an approach that has been used in conventional brick-and-mortar stores for decades. The shop lures you in with a great price for an item, and hopes you'll stick around and buy more stuff.

Skype has a store for accessories and associated items. Its owner has a lot more stores, though. That would be eBay, which purchased Skype for $2.6 billion, and could pony up another $1.5 billion if Skype hits a few financial goals.

EBay is promoting the free Skype deal on its homepage. There isn't an associated promotion with it, yet. Shaving six months off of its available time to make that $1.5 billion in bonuses doesn't look like a logical step for Skype, so we expect to see some type of integrated promotion, possibly with eBay's reality show, "Make It Happen," appearing on ABC over the summer.

When eBay purchase Skype, there was a lot of talk about integrating it with big ticket auctions like autos and real estate, or for various service-type auctions. The theory holds that customers will be more comfortable parting with larger sums of money if they can talk to the seller before or during a sale.

For now, the promotion offers a way for pretty much everyone with a computer and a decent Internet connection to talk to friends and family on the cheap for six and a half months. Skype hasn't decided what it will do with the program after the end of the year, though:

The only condition is that we have said free SkypeOut within the US and Canada is guaranteed to last until the end of this year - that is, until December 31, 2006. We're not quite sure yet what we will do after that. Maybe we extend the free period, maybe not. You'll hear more about this towards the end of the year.

Until then, happy calling.

A number of companies like Vonage, Yahoo, and AOL have launched various VoIP services, with exceptionally low prices. None of them are free as Skype is now. They need to hope Skype does not build up a substantial mass of new or converted frequent VoIP users for its service, because no one likes to compete with a price of free in the marketplace.

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About the Author:
David Utter is a staff writer for WebProNews covering technology and business.

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