How far will Skype be able to go?

How do companies make money off a free instant messaging application?

That question was posed several years ago, as AIM, Yahoo and MSN Messenger launched, and later Google Talk, to attract millions of users in anticipation of an advertising-supported revenue stream.

What if that was not the best plan? What if the "free IM" model could have resulted in the total overthrow of the established telecom industry?

What if Skype is able to do just that?

Skype, an Ebay company, is a communications application which allows for free phone calls over the internet using VoIP. At first you could only make Skype-to-Skype calls to other computers that had Skype installed.

Last year the innovative company allowed free calls to land lines domestically for approximately a year. It worked pretty well, although you still occassionally had the VoIP hiccups.

When Ebay purchased Skype, the thought was they would integrate it into their auctions to allow people to conduct transactions in real time as they communicated using the Instant Messenger-like tool. Ebay has gone as far as to let Skype continue to develop its' own business and revenue streams. Like with Ebay itself, The API is open and stimulates innovation from developers and entrepreneurs. Third party companies are emerging that simply support Ebay and Skype (see the Isoldit company).

Skype has since added wireless connectivity, skype phones, video, and much more. Soon they are adding their own TV Channels in order to compete with cable tv and the networks. It will undoubtedly offer Tivo-like functionality.

Some businesses have begun to adopt Skype as a communications tool, and once security, reliability and trust is established, more will use it to communicate with vendors, employees, prospects and customers. It can reduce expenses dramatically and offers the instant gratification fix that so many of today's generations crave.

Students expect IM in their everyday communications - it's how they talk to their peers and it's how they'll conduct business in the future. The communications application that attracts the most users will ultimately win and gain leverage and power across the board.