Non paying users on Skype will begin to be shown advertisements according to a release from the company. Skype is owned by Microsoft Corporation (NASDAQ:MSFT), and generates revenue by selling calling credit and subscriptions to users. Buying either of those is not a compulsory term of use however and so the company will begin to advertise to those users who do not generate revenue.
The beginnings of advertising on Skype cast an interesting light in the wake of Facebook Inc (NASDAQ:FB) problems with display ads. Skype was bought by Microsoft for $8.5 billion last year. At that interval the company had around 330 million registered users.
At its IPO in May Facebook was valued at over $100 billion. That has since fallen to around $60 billion. At today’s price, with a user base of 900 million Facebook values each user at around $67 each. At its buy price Skype valued each user at less than half that, around $25.
At that price many suggested that Microsoft was insane for purchasing Skype. The purchase has not been vindicated by the introduction of ads but the programs deep integration into Microsoft’s mobile operating system is probably enough to make it seem worthwhile in the eyes of Microsoft executives. At the time it was Microsoft’s biggest purchase of all time.
Skype has real potential to mine that user base for extra revenue with the new ads. Skype has said the advertisements will be silent and will not expand. They will only appear after the quality and bandwidth tests have been performed on the service and will only affect users with no Skype credit or subscription.
The ads will only appear on Windows versions of the program for the moment but there shouldn’t be much of an obstacle in moving in on OSX users as well. The company successfully started advertising on its home screen last year and is clearly pushing that strategy as a real driver of growth.
Skype is hoped to give Microsoft an edge in the mobile market, particularly with its full integration into Windows Phone 8. The fact that it is opening itself up to operate like an advertising company is an interesting one, particularly given the low value of each user according to Microsoft’s buy price.
Skype’s ads may alienate some users but it appears they’ve gone to great lengths to ensure they don’t get in the way of the service. This appears to be a direction which the company is set on following for the future. Users had better get used to it.