Recently on a party we started chatting about Skype. But nobody was able give a precise answer to the question how Skype makes money.

It’s a free-to-use service with more than 220 million users – where does the cash come from? To forestall this: Skype does make money, but yet no profit.

Skype Technologies do not need to provide an expensive server infrastructure because Skype is based on Peer-to-Peer technology.

Let’s look at some facts:

• Skype was founded and created by Niklas Zennström who is also responsible for Kazaa and Joost. These programs also base on Peer2Peer principles
• Skype was launched in August 2003 in an open beta version
• Skype is available free for all major platforms (Windows, Mac, Linux, mobile devices)
• Ebay aquired Skype in September 2005 for 2.6 billion Dollars
• In the beginning of 2008, Skype has more than 220 million users

Now, more than two years after the deal, Ebay had to admit that this was far too much: They had to take an impairment write-down of 900 million $, which means that they have taken a loss on its original investment.
To present, Skype earns money only when people use its Skype-In or Skype-Out services:

• Skype-In allows users be called from regular phones
• Skype-Out allows users to call outwards to regular phones or cell phones

And this is charged.
[News.com]

There were plans to integrate Skype into Ebay accounts. By that, buyers and sellers micght simply click a button on the screen to talk to each other, for example when a buyer has a lot of questions about pricy products or when an auction is only minutes from closing. So far, this did not work out. [USAToday]

As a conclusion, Ebay will start rebuilding th whole service:

The Skype service has been tremendously popular as a free service. But at some point, free doesn’t work anymore. It’s not a management problem. It’s a business model issue

[Jordan Rohan, RBC Capital Markets]

With an revenue of only 90 million in the 2nd quarter of 2007, we can’t talk of profit. Ebay is now desperately searching for new possibilities, as Hani Durzy utters:

Skype has been focused on user acquisition, and it’s done a great job. But we also feel like we can find new ways to monetize those users

Some ideas on that:

• Skype can start parsing voice conversations, like Google does by parsing email content with GMail [via]
• They can deliver advertisements on the program’s interface or during phone calls. That might leed to a loss of users who prefer ad-free services.
• Also, Skype might transform the software to open source and develop an additional charged version [A 2nd version of Skype Plus?] with extended VOIP options for companies, such as improved security, intranet functions etc.

Let’s observe it! I want to know how I will be monetized.