Skype close to 25 million users in China

Skype has been signing up almost 100,000 new users a day in China over the past three months, according to the VoIP firm's local partner, Tom Online. 

Tom Online now has at least 23.5 million registered users in China, and these figures almost certainly underestimate the true size of the audience.

The figures suggest that almost one in five Skype users is Chinese. Skype claims 136 million registered users worldwide.

The rapid increase comes despite the censorship of text messages, and questions about the legality of some of Skype's VoIP services in China, which have prevented Tom Online from offering the Skype Out service.

Wang Lei Lei, chief executive at Tom Online, revealed the dramatic acceleration of Skype's Chinese audience in a conference call with analysts to discuss the Chinese company's third-quarter results.

The disclosure almost certainly does not reveal the full extent of Skype's popularity in China, because some users have signed up through overseas Skype websites, instead of using the Tom Online Skype site. 

Chinese telecoms regulations prevent Tom Online from offering Skype Out in its version of the software, prompting some subscribers to bypass it.

Tom Online has also blocked politically sensitive phrases in Chinese text messages to avoid upsetting the Chinese government. The two companies operate a joint venture in China which is 51 percent owned by Tom Online.

"During this quarter we have begun to see our Tom-Skype user base grow at a much faster pace as we have optimised our marketing programme," said Wang.

"But more importantly we believe that the Tom-Skype community is beginning to reach critical mass and achieve a positive network effect.

"At the end of October we had 23.5 million Tom-Skype registered users, an increase of more than eight million from the end of July."

Tom Online had originally hoped to begin generating revenue from its Skype users by the end of this year, but the company has now pushed that target date back.

"We believe it is more important to continue to focus on user acquisition in this early period for Tom-Skype, so our full strategy is user acquisition in the first half of 2007," said Wang.

"And we will try to monetise the Skype traffic and user base [with] advertising in the second half of 2007."

Skype Out, which is the most obvious path to profit for Skype in China, is a difficult one for Tom Online because of government regulations designed to protect local telecoms firms from competition.

Skype Out connects Skype users to the traditional phone network, providing long distance and international phone calls at rates which undercut traditional telcos.

"It is very difficult to say how we can cooperate with the carrier to launch the Skype Out value-added service because the policy is not very clear for this kind of service," said Wang.

Earlier this year, Skype chief executive Niklas Zennström told the Financial Times that it would be at least two years before the government allowed Skype Out to be used in China. 

Skype's marketing activities were listed among notable items on Tom Online's sales and marketing spending list for the quarter by chief financial officer Jay Chang.

Wang has admitted that Skype faces a costly battle against dominant local instant messaging player Tencent. 

"We will continue to do a lot of promotion to increase our Tom-Skype registered users. Compared with Tencent and the other major competitors in mainland China, Tom-Skype is still a small player in this area," he said.

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