Skype Dials in to Local Search

After months of speculation around eBay’s divestiture of Skype, the announcement came this week that it will spin off the subsidiary in an IPO next year. This culminates more than three years of media conjecture around eBay’s inability to find synergies with the $4.1 billion acquisition.

As an independent company, Skype could have a greater impetus (and ability) to redefine itself — a need driven further by the flattening growth that comes naturally with such high subscriber volumes.

Local search could be one way to do this, according to Nick Corr, Skype senior product manager of e-commerce. A former yellow pages guy, Corr has spent most of the last year working with a visionary at an undisclosed (NDA-protected) European yellow pages publisher to get his idea materialized.

Redefining Moment

The idea is based on the notion that Skype’s 405 million global subscribers use it to make free or cheap calls. Why not bolt it to a local search engine that’s core use is finding phone numbers for local businesses?

This is the same idea behind the SkypeFind feature built into its desktop client, but Corr proposes that this be broadened to the Web where the majority of local search is happening. This calls for any phone number that shows up in search results be linked to a Skype call.

This is already the case for Skype users, by virtue of the automatic browser plug-in in Skype 4.0, which hyperlinks phone numbers appearing anywhere on the screen. But its use is limited to the smaller subset of SkypeOut subscribers who pay to call landline phones. So the thought is to make calls to local businesses free for everyone.

This is where the yellow pages — and revenue model — come in. The $32 billion global industry is built on businesses paying to have their phone numbers placed in front of ready-to-buy consumers. The past few years have brought a greater need to provide measurable value (À la paid search) to their advertisers.

After purchasing discounted wholesale calls from Skype, yellow pages can essentially own these links and drive calls — and performance metrics — to their advertisers. In some cases, this will be used simply as a retention tool to prove value to advertisers. But calls will come at a premium in high-value categories (e.g., lawyers or auto dealers).

“We’re currently identifying high-value categories and advertisers,” said Chintaka Ranatunga, business development manager at Yellow Pages Group New Zealand, which is in trials with Skype. “Based on the trial data, we’ll be able to decide whether to offer this free to advertisers to show ROI, or on a pay-per-call basis to drive incremental revenue.”

Local Trojan Horse

This general concept is nothing new for yellow pages, having already integrated print and online call tracking. But what’s different from past efforts is that Skype links will be shown wherever their advertisers’ phone numbers show up in online search — not just on publishers’ own sites.

In other words, this extends the reach of Internet yellow pages (IYP) to include Google results, where lots of local search is happening (about 11 percent of Google’s 8.5 billion monthly searches according to The Kelsey Group). This figure will grow with Google’s recent move to have the local “10 pack” appear in more searches.

The 10 pack is where the opportunity lies, because phone numbers are shown in these search results. So instead of jockeying for top rankings, yellow pages companies working with Skype can drive calls to their advertisers directly from the 10 pack.

Google 10 Pack Results

The genius of this plan can be seen in light of the many IYPs and local search sites who have been pushed down (or off) the page by the 10 pack (see Citysearch and Yelp in the screen shot). This has impacted many companies.

It’s also been fodder for hours of punditry throughout the blogosphere and search conference circuits. Who knew that it would be someone from the yellow pages industry to figure out a way to fashion Skype’s browser plug-in as a Trojan horse to reclaim some of this prime SERP inventory?

Calls, Clicks, and Currency

To give credit where it’s due, the idea was born with Corr and first got going in conversations with his yellow pages partner in Europe. This company and Yellow Pages New Zealand are the only two publishers in trials with Skype. But more could follow if early trial results are any indication.

Though he can’t yet discuss specifics, Corr tells me there is a clear increase in calls to businesses they’ve marked as free for users. There’s also an increase in domestic calls — supporting the potential for local search to join Skype’s longstanding status as an international calling tool.

Beyond status, it can be a revenue diversification play for Skype — and just at the right time. Deals with yellow pages publishers will mostly involve a revenue share, meaning a large opportunity awaits if this can become a viable way for mass audiences to Skype local businesses just as easily as they currently Google them.

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