Business VoIP

MySpace this week announced a partnership with Skype (News - Alert) to create an online community offering users free communications services.

The deal puts lots of pressure on many telecom companies that are already struggling to compete with various VoIP service providers, Times Online said in a report. The deal also signifies that MySpace and Skype, both the biggest players in their own domains, can successfully face competition in the field.

Skype, which is owned by online auction company eBay (News - Alert), allows its 220 million current users to call each other for free through their computers, but charges a fee for extra services such as voice mail and calls to mobile phones, Times Online said. Although the financial aspects of the deal were not disclosed yet, it is believed that MySpace will get a part of the money charged to MySpace users for making calls to mobiles or phones outside the Skype members’ network.

“Skype has ... an enormous international user base that we’re thrilled to connect with our existing community,” the Times Online report quoted Chris DeWolfe, MySpace co-found and CEO, as saying. According to the agreement, MySpace’s 110 million users will be able to access the Skype telephony service through the instant messaging (IM) tools already embedded in MySpace profile pages. It is estimated that less than six percent of Skype and MySpace users overlap as Skype’s main strength is in Europe and Asia, while MySpace’s main market is the US, Times Online said.  

Lately, Times Online noted, social networking companies have faced lots of pressure to prove that they are able to generate enough revenues to justify the coverage given to them. Sites like Facebook have already entered into agreements with other companies like Skype and it is possible to make Skype calls through Facebook through software widgets. The company has taken over MySpace as the number one social networking site in the world.

Although analysts claim that MySpace is not able to generate enough revenue, the company claims that Fox Interactive Media, its parent company, is on its way to posting revenues of more than $1 billion this year with the lion’s share coming from the social network, Times Online said.