Did Microsoft Just Create Real-Time Translation Software for Skype?

Microsoft may finally deliver on an idea that has long been part of science fiction.

May 29, 2014 at 12:28PM

On science fiction shows technology has eliminated the language barrier. Whether it's a Star Trek-style translator, an earpiece that flawlessly translates, or some other method, speaking different languages in the future is no longer an obstacle to communication.

In real life, we have semi-successfully automated the translation of websites and documents (if nuance and subtlety are not important), but spoken-word translation remains a challenge. Yes, there are handheld devices and apps that can help but none offer true, reliable real-time translation.

Microsoft (NASDAQ:MSFT) has plans to change that. The company demonstrated a version of Skype featuring real-time language translation at ReCode.net's first annual Code Conference on Tuesday. Though the product is only in the beta phase, Microsoft CEO Satya Nadella has big plans for the technology. 

"We'll put it on all devices," Nadella said. However, it will start with devices with better sound and may work more easily on devices it has control over, so it may show up earlier on Microsoft devices, Re/Code reported.

What does the Skype translator do?

The Skype translator tool may feel like something out of the distant future, but Microsoft has been working on it for a while, even showing a demo of it a few years ago. That demo just presented the idea. Now the company is ready to roll out a functioning version when it updates Skype later this year. The feature currently supports translation for about 40 languages.

"This is about creating a learning system that improves with data," Nadella said. Microsoft posted to a company blog about the new software:

Skype Translator results from decades of work by the industry, years of work by our researchers, and now is being developed jointly by the Skype and Microsoft Translator teams. The demo showed near real-time audio translation from English to German and vice versa, combining Skype voice and IM technologies with Microsoft Translator, and neural network-based speech recognition. Skype Translator is a great example of why Microsoft invests in basic research. We've invested in speech recognition, automatic translation, and machine learning technologies for more than a decade, and now they're emerging as important components in this more personal computing era.

In the demo Tuesday, Microsoft VP Gurdeep Singh Pall spoke with another Microsoft employee, Diana Heinrichs, who spoke German. The two discussed Singh Pall's plans to move to London to join the Skype team, Re/Code reported.

"London is so international, you are going to love it," Heinrichs said in German, which a female voice translated into English. "The Indian food is great."

The conversation was simple but the translation was accurate. If the service works as advertised it could eventually make the need for translators obsolete. That could make doing business easier on a global level.

How big a business is this?

It's hard to pin an exact figure on the size of the translation market -- some companies directly hire translators while others simply hire bilingual workers. It's also impossible to break out real-time translation from delayed translation. But Common Sense Advisory looked at the 100 leading providers of translation, localization, and interpreting services for 2011; the top company on the list was Mission Essential Personnel, which did over $725 million in business. Combined, the top five companies did around $2.1 billion, with the rest of the list combined bringing in around the same. That make translation -- as of 2011 -- very roughly a $4 billion field.

The size of the market was likely limited by the expense and difficulty in using actual people to translate. Having real-time translation incorporated into Skype -- a product available to anyone with a decent computer, tablet, or smartphone -- should cause an explosion in the use of translation services.

Is this a business?

Microsoft has not commented on whether it will charge for the translation service separately or roll it into Skype as an additional feature designed to increase minutes spent on the service. 

Skype currently handles more than three quarters of a trillion minutes of conversations annually, according to Pall. Skype has a free service but charges by the minute for its phone call-based service. Skype-to-Skype calls are always free so it's a little unclear how Microsoft would profit from adding translation.

It seems reasonable that the company could -- after the beta period -- charge for translation services or make it part of a premium package. Or Microsoft could just make it widely available and use it as a way to get more users into its ecosystem. 

Microsoft has not specifically broken out Skype data in its financials since buying the company for $8.5 billion in cash in May of 2011, lumping its results in with Xbox and Windows Phone. Still it's hard to imagine that the user base for the product would not explode if real-time translation actually works. Imagine global businesses being able to hold meetings where language is not a concern. The potential for selling products in new markets for any company grows because language will no longer be a barrier.

It may take Microsoft time to monetize but if the company can truly deliver on a promise that seemed only slightly less likely than teleportation, it should be able to figure out how to make money with it. Giving people globally the ability to easily communicate should dramatically enhance the Skype user base and be an important tool for Microsoft going forward.

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Daniel Kline is long Microsoft. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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