Skype talks the talk with MySpace

17 Oct 2007

Rupert Murdoch’s social networking portal has entered into a partnership with voice over IP (VoIP) player Skype to give cheap calls to users of the popular social networking site.

The new service will be based on the Skype feature on eBay that allows prospective buyers of goods to talk with the seller.

Standard PC to PC calls will be free but users will have to pay for premium services such as having their own Skype number or making PC to phone calls.

While neither company would reveal the financial terms of the deal, it is understood that MySpace, which has now over 110 million users, and eBay will share revenue from the deal.

“It seems pretty clear what MySpace gets out of this deal: a competitive differentiator,” said John Delaney, principal analyst at Ovum. “MySpace is big and still fast-growing; but it has been feeling heat from the more rapid audience growth seen by rival Facebook in recent months.

“So MySpace needs to regain some of the initiative,” Delaney continued. “We think that incorporating Skype into its profile pages could prove an effective way of doing that. Communication is an essential element of what people do in social networks.”

Delaney said it is less clear what Skype will get out of the deal. “The terms of the deal were not disclosed, as usual, but we’re reliably informed that Skype will not be getting a share of MySpace’s advertising revenues. Nor do we believe that this is likely to drive very much revenue from usage of the Skype Out service.

“It’s likely, then, that the main benefit that Skype will get from this deal is not money, but brand exposure. Most of MySpace’s users are in the US, and Skype’s brand has not been as strong in that market as it is in Europe,” he said.

By John Kennedy