Thursday, August 26, 2010

Google adds free outgoing phone calls to Gmail service; relying on ad models, Google drives the price down to $0

Late yesterday Google pulled a little surprise by rather quietly adding Google Voice services to its Gmail product. Now users of Gmail can make outgoing calls within the U.S. and Canada for free -- even to landlines -- and to international numbers for an additional fee.
The new service was introduced without the usual big special event and has led to speculation about Google's ultimate motivation. Some think the move is a direct attack on Skype, the hugely popular (especially in Europe) service that offers free Skype to Skype phone calls, but charges for calls to landlines. The new service is also strong competition for long distance carriers. A call to a landline in France, for instance, is only two cents per minute.

The service is easy enough to use: Gmail subscribers download a software package and once they have restarted their browser they sign into their Gmail accounts and will find that they can no make calls directly from the dialogue window (see above right).

If you are a Google Voice users, another free service, a call from your computer will show your Google Voice phone number when received on the other side of the call.

This move is another step towards services that are able to drive the price down to zero.

This is an area publishers must pay attention to. While there is increasing talk of the need to drive revenue through subscription models, the fact remains that new digital technologies -- and that old one, the Internet -- have driven prices for some services, including news and information, down to zero.

(Although it must be added that many, too many B2B media firms have degraded the quality of their content themselves that it is hard to say if the price of industry information is zero, or whether it is just true that the price of the information they provide is without value. How much, for instance, is a reader willing to spend for a service that essentially edits press releases for easy consumption?)

While many media commentators remain convinced that the new model for media is a return to subscription pricing, Google seems very content to continue to pursue their advertising strategies. As the world's foremost advocate for advertising, Google has been able to prove that users don't mind the introduction of ads into their services so long as the services themselves remain free.