Like ICQ, Skype primarily used word-of mouth to invigorate adoption, although they made a few minor investments into traditional marketing programs such as conference sponsorships. Skype, like other companies emulated ICQ tactics, to convert its user base to a global unpaid sales force. Skype uses tell-a-friend programs and distinctive sounds as well. The low-cost marketing strategy has been lethal against other Internet telephone players, such as Vonage who advertises on TV. But Skype has bigger plans. It hopes to unseat formidable traditional phone carrier incumbents. The challenger is adding low-price, paid services such as inbound and outbound calling to and from conventional phones. In that light, the upstart start-up faces a steep climb against entrenched bigger companies with far greater money, customers and brand recognition, not to mention friends in regulatory agencies.

Skype believes it has two competitive advantages. First, most customers love the service. Few people seem to express love for
Verizon, SBC or WorldCom. Second, tool lust . It has unleashed word-of-mouth efficiencies that give Skype a huge price-performance advantage in acquiring new customers. With a gaunt marketing budget Skype is acquiring each new customer for fractions of a penny. Analysts estimate a new customer costs a wireless carrier about $125. The Red Couch: Draft Chapter 3