Blog Post

SkypeOut…Is It Really Free?

At first blush, the big Skype announcement that it will be allow free calls to everyone in US and Canada is having a desired effect: one of glee and joy.

Someone did come-up with a nifty stunt to bring the focus back on Skype. Regardless, while it is certainly joyous event for some, it is prudent to point out that the deal is only valid up until end of 2006. Now this is a deal that is not available to Skype users outside of the US, where a large percentage of them reside.

Why this schism? Because in Canada and US, the termination costs are so low, that Skype, which continues to suck money like a certain SF slugger sucks at-bats, the overall costs of a marketing stunt like this aren’t high.

There is the unsaid reality of Skype in the US: it doesn’t nearly have the penetration, usage, or mind share as it has in Europe and Asia. The ultra-low cost calling plans on Mobile phones, and more recently on the landlines make it even less attractive. By offering free calling, they are desperately trying to get something going on this side of the pond.

Some folks think that this is a net negative for AOL’s AIMphone service. I don’t necessarily agree. I think AIMphone is basically giving away a free phone to exisiting AIM users – a much easier task than getting people to sign-up, and download a new software client, as Skype is trying to do.

Any way, if you want to marry you low cost phone plans from your Bell operating company, the better option is TelEvolution’s PhoneGnome, a small gizmo that meshes your VoIP, SIP, Skype and your regular phone line, always picking the lowest cost (or free) option to route the calls. Their new product, GnomeLink allows PhoneGnome users to call Skype users from their PhoneGnome-enabled home phone, and to answer Skype calls on their PhoneGnome-enabled home phone.

Nevertheless, the SkypeOut, AIMphone and GnomeLink announcements are only part of an ongoing trend – vanishing voice revenues.

PS: I wasn’t pressured into saying something about this deal by Valleywag. No seriously – I have been out of pocket at Mesh conference. And seriously, I don’t have a clue how Skype will make money off this … or!

33 Responses to “SkypeOut…Is It Really Free?”

  1. I did hear about the promotion and downloaded it. I have now talked to friends in Victoria from Surrey bc and got a skype call from Saudi Arabia, called my daughters in squamish bc for free. Since I had only a cell which I buy minutes for and which I cannot afford to call from outside my area bc Canada, I am pretty delighted. I did buy a telephone number in the US for $14 since they have none in Canada. I am hoping my American friends will get on skype and call me. It must be a good marketing ploy because it is working on me. The alternative is have a landline for thirty dollars a month and use phone cards or the cheap ld.
    I can see using this for a business especially one on the web, worldwide.

  2. Alright, thanks for deleting the plus sign, Digg. I guess I’ll spell it out:

    Enter in the dial string:
    PLUS SIGN 1 888 888 8888
    PLUS SIGN International code, area code, prefix, user.

  3. For those that are having trouble making calls to U.S. numbers (I did too before I looked up the dialing standard), enter in the dial string:

    1 888 888 8888

    International code, area code, prefix, user.

    The plus sign is the most important part.

    Now, what I really wanted to say is that I really appreciate the free long distance until the end of the year. I plan to use it as long as I am by my computer. Unfortunately, after the free trial runs out, I will switch back to using my 1-800->VoIP->Landline service at home and away.

    With major metropolitan areas, there are often many area codes, forcing you to call long distance for just a few miles away. For example, Los Angeles County, with 4,084 square miles and 14 area codes (Wikipedia).

    What might help Skype with customer retention is to provide free SkypeOut within the customer’s county (verified by credit card address), continue with SkypeIn’s current model, and charge the pre-trial minute rate for SkypeOut’s truly long-distance domestic calls. That would make it similar to, but have a drastic improvement over, the Baby Bells.

    What I have described is something that I would definitely participate in, because I’d like to move away from old-fashioned telephony.

    Anyway, hopefully they’ll figure something like this (or better) out. I just don’t see the optimism about customer retention post-trial being realistic.

  4. Jerod Attleby

    Remember this only applies to people LOCATED in the US and Canada. People outside N.A. cannot use the promotion to call the US and Canada. Or am I wrong on this?

  5. 2c US a minute is not much, at least not for me YET, ‘cos I’ve just recently come off being ripped off by Bell Canada at 10c CDN a minute (22c CDN with calling card)… my LD Skype calling-to-phone frequency is medium and it’s still nice to see how slowly my $14 CDN shrinks over the weeks…

    Bell offers 1.5c CDN a minute but you must buy a huge (for me) chunk of monthly time (1800 minutes, methinks)

    but FREE is better, of course…

    “a free ride when you’ve already paid” — A. Morrissette

  6. As I pointed out here:

    “What this announcement REALLY means, however, is that Skype has acknowledged that they have a cost to acquire customers, just like other players including Vonage (which, depending on whom you believe, pays between $250 to $500 to get a subscriber), AOL, and others. The cost of you making lots of SkypeOut calls over the next 7 months probably pales by comparison and is being written off as a marketing cost.”


  7. We need to move past thinking about Skype as only for cheap phone calls. Something like 80% of all communication between Ebay members is the last 2 hours of auctions. Now that Ebay integrated Paypal into Skype, sellers can use video to display products, the natural evolution of auctions. No more relying on simple static images. Think of voice auctions, in real time, with video, will be very exciting for some. Two cents a minute alone is not going to give Skype a sustainable revenue share, too much competition and the RBOC’s are going to get serious soon.

  8. jason

    they are having some trouble with some IP addresses, so it doesn’t work for everyone, yet. granted they should have made sure it would work, but i’m sure they’ll get the bugs worked out in no time. just give ’em a chance! :)

  9. PanMan

    This most likely has something to do with their deal with Ebay, and the bonuses linked to their market penetration in the US. Otherwise it would have been free for the whole world. For those in the US who it isn’t working for, I read they haven’t configured their filters proppely yet.
    Btw, overall this isn’t really news: Voipbuster and others offered free US (and other countries!) for some time now. (btw, voipbuster asks for credit these days, but doesn’t substract from it if you call a ‘free’ country.).

    1. “deal limited to users in US and Canada” — it is a deal for skype users worldwide who call to landline numbers in the US or Canada. I’ve a feeling a lot of people overseas call the US. I’d say US is probably the most popular phone call destination all over the world. So it does help quite a bit of people.

    2. about “inexpensive mobile rates in the US and Canada”, i don’t know about you, but i’ve been dinged by cellphone companies with huge per minute charget to Canada (15 cents a min) after carrying them free for months/years and then pointing to the fine print in their “free long distance”.

    Maybe Om’s family and friends in Delhi ought to discover free calls to him.. and he will change his mind :)

  10. jiombob

    Make up your mind. Is it:

    everyone in US and Canada

    ..or is it:

    this is a deal that is not available to Skype users outside of the US.

  11. It is a very significant move for Skype: at their recent analyst day Ebay/Skype gave the info that SkypeOout was generating over 90% of Skype revenue!

    If it is the 1st to a fully free SkypeOut, how are they going to generate money?

    The info about the 90% through SkypeOut is in this pdf at page 254 (!!) :

    If you want to read my thoughts in FR (use Google translate when needed), check

  12. …this is absolutely a customer acqusition gimmick. And, it’ll probably work. I received three emails from from friends today letting me know of the new deal.

    Whether the Skype business is sustainable, well…that’s a debate for another day.

  13. shiv c

    While Skype has offered this only for a limited time, it will be virtually impossible for them to go back to a higher price and still keep customers. Switching costs (from one messenger/phone provider to another) are non-existent now compared to pre-portability or when people just had one im on their desktop, and had to stick with AOL because “all their friends were there”.

    I think Ebay may have been motivated to buy skype because it was afraid of getting shut out of the desktop as people grow weary of installing software and Google and Yahoo have their respective messengers installed.

  14. 10012

    Clearly Skype is good at giving away things that cost money. Maybe it’s time to dump their bias to make you download the client and make it web based. Probably an offer that would attract more new users than this freebee that will simply be copied by others.

    btw..i’dlove to see them get cherry picked on non RBOC terminations here as those cost are closer to $.05 per minute. Time to call Kansas Dorthy!

  15. Tim Thein

    This news is false. I tried and I couldn’t make a free call. I checked skype’s forum and many people have complained that it doesn’t work. Someone at Skype is probably going to lose their job for this.

  16. Consider it marketing dollars. Vonage throw 150 dollars after each client in order to get them in their database – this is a lot cheaper. Now, Skype will get them in their database, but will they make any return on this marketing stunt? One thing they do get for sure is lots of publicity and branding, which is where 98% of the company value is right now – not in profits.

    It will be exciting to follow!


  17. I am not not exactly sure if it is free or not. Perhaps it is user error, but I downloaded the most recent rev of their software and followed all the instructions. They read as such:

    “Calling any phone within the US and Canada is free until the end of the year. To make a call to a landline or cell phone, click on the “Dial” tab, insert the country code 1 in front of the number and press the green call button.”

    That green call button is not active.

  18. It could easily backfire on them though… nothing pisses people off like having to pay for something once they’ve gotten used to getting it for free. Come next January they could see a user rebellion if they try to re-institute the old skype-out rates.

  19. I think this temp free SkypeOut skype hype is a marketing ploy to pump up its user base in N. America to a level comparable to the one it enjoys in Europe & Asia.

    Once it gets to that level, it will definitely make money as users would get hooked to Skype by the time this deal ends.

    Nag @