In this topsy-turvy world, Skype represents the competitive extreme, wielding a weapon that few others are willing or able to match: Using peer-to-peer architecture, it claims it can offer its software service for free to tens of millions of people, and still make boatloads of profits by persuading only a fraction of its users to upgrade to paid premium services.
For those unfamiliar with Skype, it is a peer-to-peer software program that enables users to use existing landlines and computers to make phone calls for next to nothing, using Voice-over-IP technology. Skype offers the software for free yet makes money off of additional services; just as King C. Gillette did by offering safety razor’s at reduced prices and profit off of the replaceable blades (a ‘loss-leader‘).
Note: Robert X. Cringely suggests that it may or may not be the same case for Apple and iPod/iTunes.
