IHS Global Insight Perspective | |
Significance | Google's long-awaited entry into Skype's core revenue space has finally occurred. |
Implications | The entry will further enrich Google's unified communications and collaboration services rather than provide a rich source of revenues. |
Outlook | However, the entry will pose a competitive threat to Skype, which is planning an initial public offering. |
Google has announced that in the coming days its U.S. Gmail users will be able to make and receive calls to and from landlines and mobiles. To activate the service, Gmail users will need to install a voice and video plug-in. The move comes several months after the public launch of Google Voice (see United States: 24 June 2010: Google Voice Goes Public, Hit by Patent Suit). Google Voice is essentially a unifying and communications management platform, incorporating a call-management features such as "one number" to call all or selected phones that a user can be contacted on, blocking and screening callers as well as a number of advanced features such as conference calling, call recording, and cross-modality messaging with transcription of voicemails to be read as emails or SMS messages. In the latest development, Google will offer free calls to the United States and Canada until the end of the year. Other rates Google has specified include calls to U.K. landlines at US$0.02 per minute and U.K. mobiles at US$0.18 per minute, calls to French landlines at US$0.02 per minute and to French mobiles at US$0.15 per minute. The full list can be found here: https://www.google.com/voice/b/0/rates. Google says that its rates are price competitive with the leading internet telephony provider in a number of regular U.S. calling destinations, such as India, the United Kingdom, Mexico, and France.
Google has prepared itself for this launch, having piloted the Google Voice service for more than one year to late-June 2010. The Google Voice service had more than 1 million users by that time and these and existing Gmail users who are already peer-to-peer calling via Gmail will be the prime market for the additional calling services. In all, there are more than 200 million Gmail users. Google has also made a number of acquisitions that will help it to develop voice and video communication capabilities including San Francisco-based IP voice and video-processing technology company Global IP Solutions (GIPS) for around US$68.2 million (see World: 20 May 2010: Google to Acquire Voice and Video-Processing Company Global IP Solutions). Rian Liebenberg, engineering director at Google, noted: "GIPS's technology provides high quality, real-time audio and video over an IP network." The focus on real-time audio and video would specifically help with real-time communications services such as are being implemented in Google Voice. Real-time video-processing efforts may also be specifically targeted at helping to improve mobile video communications, which Apple brought back into the spotlight with the iPhone 4 and the Facetime video-calling functionality (see World: 8 June 2010: Apple Releases Fourth iPhone with Video Calling, Prepares to Launch iAds on 1 July).
Outlook and Implications
- Internet Telephony of Strategic Importance: Last December Telefónica, the Spanish incumbent, acquired the internet telephony provider Jajah (see World: 24 December 2009: Telefónica Agrees to Buy VoIP Platform Jajah for 145 mil. Euro). The move was partly defensive, to stave off competition in the international calling space, and partly to provide more integrated web-based services to its clients. Although coming from the direction of an online search and advertising provider, Google's move into internet telephony is also driven by the ambition to offer voice calls to landlines and mobiles in a way that encourages richer use of IM and other collaboration tools. Internet telephony, in terms of monetary value, is not a big market in itself, so Google is not going to make a fortune from it (see World: 25 October 2006: Analysing the Upstarts: Skype’s Threat).
- Talking of Skype: Talking of Skype, Google's move is not helpful one in light of Skype's upcoming initial public offering (IPO; see United States: 10 August 2010: Skype Files for IPO). Although Skype has itself diversified over the last few years, it remains at core at internet voice provider. In the period between 1 January 2009 and 18 November 2009, it generated US$101.9 million from U.S. operations and a further US$524.6 million from international operations. Skype estimated that it had 560 million registered users at the end of June 2010, of which 124 million were connected users (i.e., the average number of users connecting to the service between April and June 2010). However, the total paying customers were just 8.1 million. So although Skype popularity is deservedly down to its simplicity of use and enhanced functionality, only a small proportion of its users actually generate revenues for the company.