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Business Models Business Operations

How Does Skype Make Money (Business and Revenue Model)

The Skype business model

Skype logo
Here’s what you should know:
  • What is Skype, and how does Skype work?
  • How does Skype make money?
  • Charing for International Calls (Skype to Phone Plans)
  • Skype “pay-as-you-go” Credits
  • Skype subsidiaries, acquisitions, and exits
  • Skype profit and revenue
  • What is the Skype business and revenue model?
  • Skype funding, net worth, and valuation

How does Skype make money and how is it really free to use? Well, here is a full, in depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the Skype business and revenue model, how much Skype makes per year, and how Skype works.

What is Skype, and how does Skype work?

Skype is a telecommunications platform that allows users to video chat, message, and make voice calls to internet-connected devices for free.

Developed and released in 2003 by Jaan Tallinn, Janus Friis, Niklas Zennström, and Toivo Annus, Skype went on first to get acquired by eBay in September 2005, for $2.6 billion USD and then later again acquired by Microsoft on May 10, 2011, for $8.5 billion USD.

Since that time, Skype now has more than 100 million users on its platform.

So, how does Skype work? To use Skype, you need to first download it through either their mobile app on the Apple App Store or Google Play store; or their desktop version from their website (available for Mac and Windows).

Once you’ve downloaded it, create an account and username and start receiving and sending calls and messages – for free, as long as the receiving user also has a Skype account.

Some of Skype’s competitors include Zoom, WhatsApp, Telegram, Signal, Viber, and other video chat software.

Skype App in Apple App Store | Skype Business Model | How Does Skype Make Money? | How Does Skype Work?
Source: Apple App Store | Skype

How does Skype make money?

According to Skype, Skype has more than 100 million users on its platform. So how does Skype make money off of all these users?

Below is a breakdown of how much money Skype makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 2 ways of how Skype makes money in 2022

Skype has a revenue model that makes money in two (2) ways; from subscription revenue for calling non-Skype users internationally and “pay-as-you-go” credits.

#1. Charing for International Calls (Skype to Phone Plans)

One of the ways Skype makes money is by charging subscription plans for users who want to make international calls to individuals who do not have a Skype account.

Skype is free for Skype to Skype calls, but if a user wants to make calls, send texts, or voicemails to a landline or mobile number outside of Skype – that is where the costs come in.

And depending on the users’ needs (what country they are calling, how many minutes they need), users have the choice of paying for a monthly subscription or for pay-as-you-go credits.

Below, you can see how much a Skype monthly subscription plans cost. Pricing varies based on the country or countries the user is calling. The “World Subscription” plan allows users to call up to 63 countries for $13.99 USD per month, or a user can decide to get a monthly plan for only the country they want to call.

For example, a user who wants to call someone in the UK can purchase a “United Kingdom Subscription” plan for $6.99 USD per month, while an “India Subscription” plan will cost that user $7.99 USD per month.

How much does Skype cost? (Skype subscription price)

  • $13.99 USD per month for a World plan, or
  • $2.99 to $11.99+ USD per month depending on the country
Skype to Phone Plans | Skype Business Model | How Does Skype Make Money? | How Does Skype Work?
Source: Skype

Note: Skype is free for Skype to Skype calls, including international calls.

#2. Skype “pay-as-you-go” Credits

Alternatively, Skype also makes money from the users who choose the “pay-as-you-go” credits instead of the monthly subscription.

Skype offers three (3) pay-as-you-go options worth of credits that users can purchase; $5, $10, and $25. Which come bundled with 165 to 830+ minutes, although certain countries will cost more or less than others – which will cost a user to go through the minutes quicker.

Because pricing for international calls via Skype varies based on things like which country they are calling, if they are calling a landline or mobile number, and what phone carrier the receiving number has – where they are charged by the minute (USD).

For example, a Skype user in the U.S who wants to call someone in Poland will cost them roughly 2.3¢ per minute or 7.5¢ per text message, while a call to Ireland will cost that user anywhere between 2.3¢ to 27¢ per minute or 7.5¢ per text message.

You can see the full list of “cost-per-minute” rates by country here. You can also see how much Skype credit bundles cost below.

How much are Skype credit rates? (Skype international call rates)

  • $5, $10, and $25 depending on how many credits a user wants

Skype subsidiaries, acquisitions, and exits

Aside from Skype being acquired by Microsoft for $8.5 billion, Skype has also had its own fair share of acquisitions.

To date, Skype has made a total of 3 acquisitions, 3 investments, and 3 exits.

Mergers and acquisitions business model
Source: Crunchbase | Skype

Skype profit and revenue

Skype’s last reported earnings came back in 2010 when they brought in $859.82 million in revenue. But since the Microsoft acquisition, Microsoft has not released any official reports in regards to Skype’s earnings.

Note: Because the Microsoft Corporation, the parent company of Skype, is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Microsoft’s publicly released financial reports, including annual reports, through Microsoft’s investor section on their website.

What is the Skype business and revenue model?

Skype makes money through a few revenue models that they combine within their company, they are:

  • Freemium business model
  • Subscription business model
  • À la carte business model
  • Fee for service (FFS) business model
  • Transaction based business model
  • Business to business (B2B) business model
  • B2B2C (partnerships) business model
  • Mergers and acquisitions (M&A) business model

Skype funding, net worth, and valuation

Skype’s Crunchbase profile shows Skype has raised $76.8 million over 5 rounds.

In September 2005, Skype was acquired by eBay for $2.6 billion USD and then later again acquired by Microsoft on May 10, 2011, for $8.5 billion USD.