Wednesday, January 09, 2013

Facebook launches telephony - Microsoft may write off its $ 8.5 billion investment in Skype


Written for Start2Cloud.com.
Since last Thursday, Canadian users of smartphones running iOS and Android can use Facebook for voice calls directly from Facebook. The call is routed through VoIP, so it uses existing data plans, not a voice plan of the user. Facebook thus started to offer - so far only in Canada and so far without video - the same service as Skype. For Microsoft, which bought Skype in May 2011 for $ 8.5 billion, it's a bad news.
Above all, we must say that the voice communication is a logical function of social networks and it was only a matter of time when it becomes their natural part. The primary aim of social networks is to connect people through various forms of communication: short messaging, photo sharing, video sharing, and also the voice and video telephony. This is well understood not only by Facebook, but also by its main competitor, social network Google+. Google+ is in this direction significantly ahead of its competitor offering video calls (via its custom function Hangouts) since its launch in June 2011, and continuously improving its VoIP functionality. Since September 2011 it is possible to use Hangouts directly from the Google+ app for mobile smart phones and tablets, and since March 2012 it is possible to make calls from Google+ on ordinary telephone numbers; moreover, calls to numbers in the U.S. and Canada are even free. While Facebook already offers voice calls as well, from April 2011, it is not via its own service, but via a service called Bobsled provided by a partner company T-Mobile. Since June 2011 Facebook offers also video calling, but again through technological partner, which is in this case just Skype. In both cases, users must however download a separate application and switch to this application to start the call; calls directly from Facebook are not yet possible - unlike calls in Google+. Facebook is thus clearly under pressure of its biggest competitor, and has to react.
Fortunately for Facebook, Facebook has all the potential to succeed, and not only that, it is even probable that it can completely dominate this market. In telephony, like in social networks, the so-called network effect takes place. Telephone service is the more useful, the more users we are able to reach through it. And here comes Facebook with its claimed billion of users on the top, without serious competition. For the user it does not make sense to have a green phone on the table from which he is able to reach a billion users, and next to it still a yellow phone from which he can reach 600 million users, who significantly overlaps with the first group. Users will retain only one service, and it is that one which is most universal.
As a result, there is no bright future for once famous and successful company Skype. The VoIP technology is now so mature that it is itself no  differentiator from the user’s perspective. What matters is number of other users available through this service, and a seamless interconnection with other useful services – namely with other ways to communicate with our friends, such as sharing of photos, videos, and of course contacts. To sum up, at the same time when Facebook launches its global telephony, Microsoft may write off its 8.5 billion dollar investment in Skype, because Facebook users will no more need Skype as a separate application.
Anyway, history is only repeating itself. Microsoft itself could tell - for example, how did browser in the 1996 became an integral part of the functionality of the Windows operating system, which caused current leader in browsers, Netscape, to lose its market. That time the problem was that Netscape users were also users of Windows which brought them the browsing functionality they needed, so they had no reason to buy another product with the same functionality. Today, therefore, this story will play again, albeit with a slightly different cast. Facebook will beat Skype simply by expanding its functionality to the field of its opponent. Unfortunately for Skype, also in this case, its users are also users of Facebook.

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