MySpace and Internet soft-phone provider Skype announced a partnership Tuesday that will make Skypes voice engine part of the social networking sites instant messaging service.
The deal will connect MySpaces 8 million active MySpaceIM users to Skypes 220 million registered users through a new messaging client.
Were announcing a global partnership that brings free, high-quality voice messaging to MySpace users, creating the worlds 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 MySpaces 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 Skypes premium servicescalling 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 deala 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 were both incentivized to sell premium services, he said.
Skype and MySpace will sell credits for Skypes 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 MySpaces 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 dont 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. Skypes co-founder Niklas Zennström stepped down from his CEO post earlier this month, and Skypes parent company, eBay, has been disappointed with the units 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 Skypes actual worth.
While the partnership will probably lead to more users of Skypes free services, its not clear that MySpace users will jump immediately on the premium services Skype hopes theyll be buying in volume.
We expect that theres 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 Skypes bottom line. Were reliably informed that Skype will not be getting a share of MySpaces 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. Its likely that the main benefit [is] brand exposure.
Jeff Kagan, an independent telecom market analyst, isnt sure theres 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.