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Google, Skype rachet up VoIP competition

The battle of the Web titans has begun – and where the fallout lands is still uncertain.

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A day after Yahoo! nailed down another 4.1 million potential DSL customers from its portal via a deal with Verizon, Google said it will enter the Voice over IP and instant messaging business. That announcement was quickly countered by Skype, which said its instant messaging and presence platform is now available for integration into the other Web-based applications such as online gaming sites.

It is “Google Talk” that has most analysts talking today, however, as the Internet’s favorite search engine, now buoyed by $4 billion in new stock offerings, positions itself to compete in the communications industry.

“This first offering is limited but it is a beachhead into further offerings,” said Bryan Weiner, president and COO of 360i, a leading online performance and search marketing firm. “Right now, it’s based on Gmail and it’s really about PC to PC phone calls, which is nothing new. But the integration within Gmail of Google’s wider offerings and their planned future media offering is an indication that they plan to offer tight integration between both text and voice messaging, and news, entertainment and video service.”

Initially, Google Talk challenges Yahoo!, MSN and AOL, each of which offering their own instant messaging service, but it poses a broader challenge for telephone companies and cable companies, Weiner maintains.

“The key is the integration of services,” he said. “Most of the companies in this space have a similar broad vision, but it comes down to how do you bring it together. Consumers don’t think in terms of strategy – they think in terms of whether something is available, easy to use and provides value to them.”

Google and Yahoo! have an advantage in the integration race because they are experts in making things easy to use, Weiner added.

Yankee Group analyst Kate Griffin doesn’t see Google as a threat to traditional voice services, however.

“Voice is becoming more pervasive in the sense that more devices offer voice,” she said. “Some of your minutes will edge over onto IM chats, but this isn’t going to displace core phone services. I think this just brings them up with Yahoo!, MSN and AOL. It fills a gap.”

Mike Paxton, VoIP analyst at InStat, sees Google Talk as more of a niche play.

“With the service bundling that the cable companies and the telephone companies are looking at doing or are already doing, that is a much stronger attraction to consumers than a one-off Skype or Google Voice service that would be tied to your broadband service or a search engine like Google,” he said. “It could pose a longer term threat but we are talking about a generational shift that is more than a decade away.”

Yahoo!’s relationships with both SBC and now Verizon also put that company immediately in front of DSL users in 41 out of 50 U.S. states, and open up the wireless market for integration as well, said Allen Weiner, Gartner Group analyst, in his analysis of the Yahoo!-Verizon deal.

“Being in front of the lion’s share of DSL customers affords Yahoo! a major opportunity to be the de facto portal for searching, accessing and interacting with rich media content, such as music, TV programs and movies,” he said, before the Google deal was announced.

Particularly under pressure is AOL, which launched its VoIP service last spring, but has not yet had a noticeable impact on the market. AOL uses Google as its search engine.

In its initial iteration, Google Talk is available through its e-mail service, called Gmail. Google makes its money from advertising that runs within the Gmail accounts. The messaging service works in a pop-up box from Gmail and uses an open protocol called XMPP, which enables Google Talk users to chat with users of Apple’s iChat, Gaim and Trillian, among others. ISP Earthlink is also expected to become part of the Google Talk network.

Initially, the chat part of Google Talk is proprietary but the company is saying that it will soon provide an open platform, available for outside developers.

To connect to the VoIP service, consumers send a text message from their mobile phone, provide the phone number and receive a code that allows them to create an account for the free VoIP service.

“This is mobile instant messaging, from your phone, with your voice, “ said Jacob Guedalia, CEO of iSkoot, which sells gateways that connect mobile phones to VoIP calls. “You can see who’s available online and call them. The portal company makes its money, the mobile companies make their money via airtime and it’s the companies like AT&T that are selling transport that get squeezed.”

Skype’s announcement of an open platform is intended to boost that company’s member base, which it says has already passed 51 million. The VoIP player has been the subject of its own industry rumors over whether Skype is for sale, and at what price.

The new integration strategy will mean that Skype users can make VoIP calls without opening up a separate window.

Skype co-founder Janus Friis told Reuters Tuesday that the company will very shortly announce the first Web companies to integrate Skype’s IM capabilities. He also discounted the sale rumors saying Skype is happy to continue operating on its own.

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© 2014 Penton Media Inc.

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