How Google Gmail Calling Affects Skype

By Clint Boulton  |  Posted 2010-08-28

How Google Gmail Calling Affects Skype

When Google launched its Gmail calling service Aug. 25, the top question was how the VOIP service would impact Skype.

Gmail calling threatens Skype because it copies its service for initiating and receiving free or cheap calls over IP. However, Gmail and Skype offer trade-offs, and analysts and industry experts have different takes on how these services match up.

More than 560 million Skype users worldwide make voice and video calls from computers to computers, or from computers to other phones.

Like Skype, Google's new service lets users make free calls to the United States and Canada by downloading a voice and video chat plug-in. International calls through Gmail start at 2 cents a minute. The New York Times detailed how it works here.

Gmail users quickly took to the service, ringing more than 1 million calls through Gmail in the first 24 hours. Some thinks the service is immediately a challenger to Skype.

Siva Sanmuga, who as vice president of retail services for Callture helps sell telecom services such as VOIP to clients, said he uses both Gmail calling and Skype.

"Both are going after the tech-savvy clients, so it will definitely affect Skype," Sanmuga told eWEEK. "Most of Skype revenue comes from Skypeout, and Google offering it for free will have an effect."

IDC analyst Irene Berlinsky noted that Google's Gmail calling service leapfrogs Skype by offering free calls to U.S. mobile phones and landlines. Skype currently charges for any calls not made to or from a computer.

However, unlike Skype, Google's phone service does not work from mobile phones, which means users must use their computer to place a call through Gmail.

The Gmail-Skype Debate


Also, as Berlinsky noted, Google does not guarantee the freebie will be around forever because Google has to pay interconnection fees to U.S. telecom carriers to route the calls.

"It may have to start charging unless it finds other ways to monetize VOIP," Berlinsky said. "By way of comparison, Skype reports that termination costs make up the largest portion of its cost of net revenues-65 percent in 2009."

Berlinsky also noted that Google's international rates are not always lower than Skype's prices. International calling is Skype's bread and butter.

Forrester Research analyst Charles Golvin noted that much of Skype's initial adoption and usage was driven by cost avoidance, especially for international calls. As such, he doesn't see Gmail luring many users from Skype.

"The equivalent opportunity that Gmail offers is much smaller, since switching pays dividends for domestic calling to phones (displacing the cost of SkypeOut), and a very small savings for international," Golvin added.

"So I don't expect a big impact on Skype usage from this."

Google's Gmail calling capabilities build on existing voice communications products such as Google Chat with video calling and the Google Voice call management service, which boasts more than 1.4 million users.

Gmail itself has around 180 million users, making its potential calling network substantially smaller than Skype's user base.

Ultimately, Google is a strong player in the VOIP game that includes VoxOx, BT's Ribbit and capabilities within several collaboration platforms. But Google is still just another player.

Rocket Fuel