There’s been a lot of online discussion in the past two days about Yahoo’s move to upgrade the VoIP capabilities of its IM service, including low-priced dial-in and dial-out functionality (e.g., domestic U.S. calling at one cent per minute).
Michael Bazeley, Andy Abramson, Om Malik and John Paczkowski all see the news as potentially big trouble for Skype, which recently announced plans to market its service through Radio Shack.
Telephony’s Carol Wilson highlights the fact that Yahoo, unlike Skype, already has broadband partnerships with some of the nation’s leading pipe-owners, including AT&T/SBC, BellSouth and Verizon.
“We have been working with our broadband partners—AT&T, Verizon and BellSouth—and they are aware of this,” said Jeff Bonforte, product manager of voice for Yahoo! “They are both aware of and involved in this feature and functionality. They are encouraging Yahoo! to be aggressive and win in this space. Any market share gained by any other company in this space is not to their advantage.”…For Yahoo!’s part, the partnerships with the Bell companies “become more critical” as voice becomes a bigger piece of the Internet, Bonforte said. “It makes our partnerships tighter.”
Yahoo’s “tight” relationship with the dominant ILECs contrasts sharply with what Om Malik describes as “Skype’s risky retail strategy.” Bonforte’s comments suggest that Yahoo’s existing relationship with the RBOCs (which are believed to include some revenue sharing) could give it a significant advantage relative to Skype, especially if Congress does not impose strong and enforceable “net neutrality” requirements for access to local broadband networks.
Regarding the Yahoo VoIP announcement, Om says:
The ink on the $4.1 billion eBay-Skype deal is almost dry and already competitors are lining up to rain on Skype’s parade. If the regulatory/incumbent problems were not enough, here comes news that Yahoo will soon upgrade its Messenger’s dialout/dial in features to compete with SkypeIn/SkypeOut.
I am told it is a remarkable improvement over the previous version. While, the older Yahoo Messenger had dial-out/dial-in features through an arrangement with Net2Phone, the new messenger will be exclusively using the DialPad back-end to route calls to Yahoo partners such as SBC, Verizon and BellSouth. (That should keep them happy!) The prices of calls within US are almost half that of Skype, something to ponder about!
Yahoo is also planning to give away avatars and ringtones, which apparently were a big push for Skype in terms of monetizing its audience. Yahoo believes that it has a better profile of users - in US and Western Europe to monetize its efforts, in comparison to Skype, which is pretty strong in Asia and Eastern Europe.In a Mercury News piece, Bazely says “VoIP consultant Andy Abramson said that Yahoo’s deep pockets allow it to force Skype into a price war.” In his own blog post, Abramson elaborates on Yahoo’s advantages:
Yahoo is more of a progressive marketer than eBay. Yahoo has more content, greater service offerings and many more promotional partners. Their IM client also has lots more users on a daily basis and Yahoo Messenger is Enterprise friendly already. Skype isn’t. It will also take eBay 12-24 months to forge the kind of relationships Yahoo has in place today.
Directly related to this are Yahoo’s other assets-Groups, Music, Video, Messaging, Email, 360, Photos and More. Many are free services that convert to paying service offerings for Voice. They are all platforms Skype and eBay don’t have…What Skype will need to license (at a premium cost) Yahoo already has promotional rights to and can leverage those rights starting now. Yahoo’s Entertainment Group in L.A. is very savvy and as they expand their Hollywood content asset rights, the ability to blend them in to new voice service offerings are also something Skype doesn’t have and will have to spend time to acquire, if they want to match Yahoo stride for stride.Bazeley quotes Bonforte on Yahoo’s VoIP pricing and margins:
Bonforte, president of SIPphone before joining Yahoo earlier this year, said that even with the low pricing, Yahoo should enjoy a nice profit margin. Because of its size, Yahoo was able to negotiate appealing prices for the calling minutes it needs to buy from phone companies.Abramson also discusses network costs and their competitive implications:
Yahoo has very serious relationships with multiple carriers, telco partners and tons of inbound traffic that create a war chest of credits. I have discussed this point now twice with AOL’s Voice Team leadership as they too are in a position to wage price war based on OPM (other people’s money) as it’s the nature of the Internet. Get lots of inbound traffic because your a destination and have your own “network” and you have lots of credit. For PC-to-PC calling on net you can leverage a lot. Terminate via the Dialpad deals already in place and Yahoo takes a 1+1 = lots more approach that Skype can’t offer. They don’t have the other assets in place (yet).
Mitch Shapiro at 5:22 PM|Comments(0)
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