Skype, however, thinks it can change that dependence by monetizing other new services, including its new multi-party video chat. Although video chat already tantalizingly accounts for 40% of all Skype calls, some pundits -- including Ryan Lawler of NewTeeVee -- doubt that money can ever be made in video chat.
To those doubters, I can tell you "Yes We Can!" How can I be so sure? Because we at my former company, SightSpeed (widely recognized as being the video chat leader and later acquired by Logitech), proved it. We made money solely on video chat -- in fact, we became profitable solely on video chat.
How did we do it? With multiple revenue streams, that's how.
First, we -- like Skype plans to do -- offered both free and paid upgraded video chat services. A primary driver for purchasing the paid upgrade was, in fact, multi-party video chat. Multi-party video chat is essential for many small-to-medium business users for purposes of collaboration. Second, for those users who did not upgrade to the paid service, we monetized with a combination of advertising and paid search via an installable tool bar -- specifically, via our partnership was with Ask.com, we received a portion of revenues generated by any web searches using that toolbar. Third, we developed customized video chat applications for strategic partners -- including Dell -- and monetized those accordingly.
And, this all happened before Logitech acquired SightSpeed.
Logitech subsequently bundled our video chat services (now called "Vid") with every webcam it sold -- the goal of which was to offer a seamless customer experience out of the box and, hence, increase customer satisfaction and word-of-mouth. In other words, to sell more webcams. Logitech's strategy in this regard borrowed a page from Apple, which has proven time and time again that seamless integrated software services generate more hardware sales (case in point -- iPod/iTunes). And, has Logitech been successful to monetize video chat in this way? Absolutely. Logitech's webcam numbers have grown materially since the SightSpeed acquisition.
Bottom line -- yes Virgina, money can be made in video chat. And, the utility of -- and demand for -- high quality and affordable video chat is only growing.
Does that mean I would invest in Skype's IPO?