Skype is slowly moving into the mainstream. The service, which enables users to make free phone and video calls over the internet, has grown rapidly since it was bought by eBay for $2.6bn in 2005. Last week, the auction site announced it is to float Skype as a standalone company next year, leading to speculation over the direction of the service.
From 55m early-adopters four years ago, the number of registered users has grown to more than 405m - mostly by word-of-mouth. It expects to pull in $1bn (£700m) of revenue in 2011, from paid-for calls to people who are not on Skype.
At the time of its purchase, eBay said it had acquired Skype to boost trade on its auction site. It wanted to let buyers talk directly to sellers about products that can be tricky to buy online, such as used cars or antiques. Then, the site said the deal offered ‘significant new monetisation opportunities'; last week, however, it admitted that Skype ‘has limited synergies with eBay'.
The price of eBay shares rose on the announcement; investors had seen Skype as an unnecessary distraction that was tying up the auction site's cash. Analysts expect a private deal with Google or Microsoft to emerge before an IPO, and Skype's Scandinavian founders are also rumoured to be trying to buy back the business with private equity.
A change in ownership does not mark the beginning of the end for Skype, however. As broadband internet grows yet further in popularity, online telephony has a rosy future. Skype is also looking at recruiting new mobile users - its new iPhone application was downloaded more than 1m times in the first 36 hours after it became available. Skype will soon be coming to BlackBerry devices, too.
‘A kick-arse iPhone application has been a big investment,' says Jason Goodman, managing director of Skype's ad agency, Albion London. ‘They have been developing Skype on the move for some years now. While only some people are willing to talk via their PCs, a lot of people use mobile phones.'
Dominic Stinton, partner at VCCP and former marketing director at TalkTalk, agrees. ‘When I was at TalkTalk I was surprised how many ethnic groups used Skype to call families abroad,' he says. ‘But there are so many free call packages from companies like TalkTalk, how does it compete? The opportunity for Skype has got to be free calls on mobile.'
The fundamental goal for the business is to push the average PC-user to sign up to the service. While many have heard of Skype, lingering perceptions of the brand as ‘techie' are holding it back from mass take-up.
The brand is taking steps to change this image. This month Skype launched its first TV campaign, featuring a happy couple showing off their new baby to proud grandparents via their computer screens. The work is intended to demonstrate how simple the free video-calling service can be for the whole family to use.
Previously, Skype has carried out some low-budget marketing activity, most notably a charity campaign featuring ‘Skype Nomad' Rebecca. She travelled around the world for
33 days sharing her experiences via Skype, Twitter, Flickr and YouTube. The campaign pulled in 760,000 visits to the blog, 140,000 unique page views on Flickr and 300,000 total video views on YouTube during the 33 days.
Mainstream audience
More recently, Skype tasked Albion with the creation of an online Christmas ad banner campaign, featuring blue Fimo characters in stop-frame animations, intended to promote the service's usefulness for keeping in touch with family and friends over
the festive period. The move to TV ads is a bold step forward in Skype's revenue-building strategy.
‘Skype is a very successful internet business that does not rely on massive broadcast marketing, but it now has to convince people who aren't so drawn to new technologies into the service,' says Goodman. ‘Now, as the business has got bigger and broken through the early-adopter audience, the TV campaign is about taking the message to a mainstream audience, and educating mums and dads about
the benefits of the service, too.'
Skype
Founded in 2002 by Scandinavian entrepreneurs Niklas Zennström and Janus Friis
Revenue in 2008 was $551m (£370m), up 44% from 2007
The service had 405m registered users by the end of 2008, up 47% from 2007