Skype Gives MySpace Users A Voice

MySpace and Internet soft-phone provider Skype announced a partnership Tuesday that will make Skype’s voice engine part of the social networking site’s instant messaging service.

The deal will connect MySpace’s 8 million active MySpaceIM users to Skype’s 220 million registered users through a new messaging client.

“We’re announcing a global partnership that brings free, high-quality voice messaging to MySpace users, creating the world’s largest voice messaging community,” said Jin Kim, senior business development manager for Skype.

MySpaceIM with Skype, due to be released in early November, embeds the Skype voice engine into MySpace’s proprietary instant messaging client. It will provide MySpace users with free voice messaging across both the existing MySpace and Skype communities, as well as access to Skype’s premium services—calling to and from standard phone numbers, voice mail and forwarding of voice calls to a phone number when a user is offline.

MySpace, still the dominant force in the social networking market, claims more than 70 million unique active users. But the service is facing increasing pressure from competitors such as Facebook and other niche networking sites. The partnership with Skype may help pull more users into MySpace.

“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. We think that incorporating Skype into its profile pages could prove an effective way of doing that.”

It also creates a new revenue stream for both companies, according to Kim. While he would not discuss the financial details of the deal, “we will say that it is a revenue-share deal, so we’re both incentivized to sell premium services,” he said.

Skype and MySpace will sell credits for Skype’s services through a co-branded Web store, advertised both on MySpace.com and within the client itself.

The discussions between Skype and MySpace about ways to deliver voice messaging to MySpace’s user base “predate the acquisition of both companies,” Kim said. “It just took us a while to get to the point where both sides were ready.”

The partnership also extends MySpace into the Skype universe. Users can link their MySpace profile to their Skype account and pull content from their MySpace page into their Skype profile.

“If they don’t have a MySpace profile yet,” Kim said, “there will be a button that allows them to go set one up.”

Once connected, users can pull photos from their MySpace page into Skype to use as their avatar and provide links within their Skype profile to their MySpace page.

In addition to being able to initiate calls from within Skype or MySpaceIM with Skype to other users, MySpace.com profiles will include a link within the “Contacting” box to instant message or call the user that launches an IM or voice session. Users can also restrict incoming calls to users on their MySpace friends list and screen calls just as they can in the standard Skype client.

The deal comes at a time when the company clearly needs good news. Skype’s co-founder Niklas Zennström stepped down from his CEO post earlier this month, and Skype’s parent company, eBay, has been disappointed with the unit’s performance.

In its filing with the SEC, eBay wrote off $1.4 billion for the third quarter, due to final payouts to Skype shareholders and a $900 million “impairment” charge based on a re-evaluation of Skype’s actual worth.

While the partnership will probably lead to more users of Skype’s free services, it’s not clear that MySpace users will jump immediately on the premium services Skype hopes they’ll be buying in volume.

“We expect that there’s going to be a natural progression of usage for a user from free [to premium services], once they get comfortable with [the technology],” said Kim. He points out that services such as the voice mail feature would appeal to many MySpace users in the younger demographic. “I can leave a contact a voicemail at any time,” he said.

But some analysts are skeptical about the impact on Skype’s bottom line. “We’re reliably informed that Skype will not be getting a share of MySpace’s advertising revenues,” said Ovum's Delaney. “Nor do we believe that this is likely to drive very much revenue from usage of the Skype Out service. It’s likely that the main benefit [is] brand exposure.”

Jeff Kagan, an independent telecom market analyst, isn’t sure there’s any real upside.

“Is the marketplace ready for that kind of service today? We'll just have to watch and see. But I don't get too excited about this yet.”