Search giant Google (Nasdaq: GOOG) has integrated Gmail and Google Voice, allowing free phone calls, including international calls, a service similar to the one offered by Skype.
So, the obvious question is if Google can make consumers abandon Skype and migrate to its Gmail calling.
Let us see what Gmail calling has in store.
In a blog post, Google said that the service allows users make voice calls to a wireless or landline phone using a computer.
Through their Gmail account, callers in the U.S. and Canada can make free calls, and Google said the feature will be available for free for at least a year.
Users can also make international calls for a small fee, starting from $0.02 per minute, to landlines in the U.K., France, Germany, China, or Japan.
"Over 1,000,000 calls placed from Gmail in just 24 hours! Thanks to everyone using this new feature," said the company in a tweet.
All is fine, but can Google justify its new venture and become a tough competitor for Skype, which is planning to go public this year? The answer will probably be yes.
The online telephony market could be a big money spinner for Google as it allows the search giant to keep its cash register flowing in a couple of ways. At the outset, Google could sell phone subscriptions and compete with Skype.
Indirectly, the new voice calling feature could attract more users to Gmail, thereby boosting its ad revenue -- a major source of revenue generation for Google.
"Overall, we see a potential 3% upside to our $643 stock price estimate for Google," stock analysis firm Trefis said.
Gmail vs. Skype -- An Interesting Battle
Google has various advantages over Skype, with the first being its user base.
Gmail, the world's third-largest e-mail site, boasts 186 million users a month, while Skype has only over 100 million active users.
Trefis expects the Gmail user base to reach 225 million by the end of this year and rise to around 520 million by the end of its forecast period.
Another factor working in Google's favor is that it provides multiple services under one roof, including e-mail, chat, calendar and productivity applications.
With the addition of phone service, these apps give Skype users a strong incentive to migrate to Gmail.
In an interview with Bloomberg, Jayanth Angl, an analyst at Info-Tech Research Group, said that the service lacks features that would ensure a strong challenge in a market dominated by Skype. The feature is yet to be made available via Google's package of business software. Also, users cannot access the feature from mobile phones.
"Given the momentum they've had with Android and the growth of that operating system, it's a pretty clear opportunity, and I would expect that's something we'll see in the future," Angl said.
"We do not offer this feature on mobile browsers, and right now we have no plans to do so," said Randall Sarafa, a spokesman for Google.
Google's reluctance in not offering its phone service on mobile could be a drawback for the company -- especially at a time when smartphones rule the U.S. market, thanks to the iPhone and Android-powered devices.
Skype also has the advantage of early entry into the market.
Pricing
Google's pricing strategy could be a potential threat not only for Skype, but also for leading U.S. telecom operators like AT&T, Verizon (NYSE: VZ) and Sprint Nextel.
Initially, Google will charge two cents a minute for calls to international landline numbers. Calls to international mobile numbers will be more expensive, costing 18 cents a minute for U.K. mobile numbers and 6 cents a minute for Indian mobile numbers.
On the other hand, Skype charges 2.1 cents a minute for calls to landline and mobile numbers in the U.S. and many other countries, according to a recent Wall Street Journal report.
This year, Skype has forged agreements with Verizon Wireless for the installation of its Web-calling software on Verizon phones. For instance, calls on phones such the as enV Touch from LG Electronics can be made without using wireless minutes.
Whatever may be the case, the market is set to watch the latest internet telephony battle.
International Business Times, The Global Business News Leader
