Facebook and Telephony: A Natural

There’s lots of talk this morning about Facebook’s reportedly impending partnership with Spotify and the launch of a broad Facebook music service. Business Insider goes so far as the characterize this as “Facebook’s next billion dollar business.”

While there are obvious ways in which Facebook could create a powerful music discovery and sharing service (possibly leading to commerce) the “billion dollar” part is not a foregone conclusion in my mind. Facebook enables lots of things that it doesn’t make money from.

What the company is not currently doing but it should consider is become a telephony platform. There was lots of buzz that Facebook was in talks to buy Skype before Microsoft actually did for $8.5 billion. So clearly there’s some thinking about it going on in Palo Alto.

Zuckerberg talks about disrupting every established industry. While that’s a bit grandiose and not going to play out across the board telephony is an area that Facebook could disrupt and make money on at the same time. Provided that it bought the right company and offered calling with reasonable levels of quality — not always true of Google voice — Facebook could be the new landline.

As a frame of reference, Skype offers a number of subscription-based calling plans:

The company generated an estimated $800 million in revenue in 2010, but with relatively high costs. There were 125 million active monthly users of Skype but only a little over 8 million paying users in mid-2010. Accordingly roughly 6.5% of the active user base paid for Skype in mid-2010.

Think about what Facebook would potentially be able to do if it offered a Skype-like service (of decent quality). It could instantly have a global telephony platform that would be used by millions and perhaps generate hundreds of millions — or billions — in revenue.

For example, if 6.5% of Facebook’s 700 million users (45.5 million) subscribed and paid $5.00 per month for a Facebook phone number, voice mail and some calling package, that would generate annual revenues of $2.73 billion.

I can’t speak about the infrastructure demands and challenges of setting up a global telephony system. But I can say that there is a significant revenue opportunity here that would be a natural fit with existing Facebook “culture” and user behavior. VoIP calling on Facebook could also be tied into ads as well.

Do you believe that Facebook could generate billions in calling fees as I’ve speculated above?

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4 Responses to “Facebook and Telephony: A Natural”

  1. Mike Byrne says at

    Greg,

    I agree with your view on Facebook and telephony, especially in international markets. I spent a lot in Asia in the last four years and my friends use Skype to Skype, texting and Facebook to communicate. Cost is a big issue for many people in Asia and anything that enhances communication at a low price point should be a winner.

    I wouldn’t take a large percentage of Asians at a low price point to generate billions in revenue.

  2. Greg Sterling says at

    Perhaps we’ll see a Skype-like service from FB in the next year or two. 

  3. Gjpenn says at

    If big services keep on doing mergers with small internet telephone companies i wonder what would happen to market players like vonage, packet 8, axvoice and others.

  4. Max says at

    It’s amazing to me that Facebook hasn’t embraced voice and video to date. I know you can make video calls by installing plugins and everything, but it’s a pain, not emphasized at all, and not great quality. To that end, I live in Argentina currently and rely on Skype-like services frequently. Not at all impressed with their quality. Were I FB, I would be eyeing viber (great quality), or would be focused intently on integrating WebRTC into their existing platform. Just my opinions, but again, great post!

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