How Skype Could Make the Mobile Video Market Explode

Skype appears poised to finally launch a new mobile video chat service that should shake up the space and help propel mobile video conferencing into the mainstream. The communications platform, still fresh off its 24-hour outage, is expected to unveil a mobile video offering next week at CES and has been recently teasing what the service could look like.

Indeed, over the last few days, Skype has been hinting on its Twitter account at what’s next, pointing to a page with videos entitled, “I wish I could share moments like these.” The videos are shot on what appear to be mobile devices and suggest that Skype is prepared to help people broadcast their lives remotely through video. This comes after Skype briefly released and then pulled a help document showing how users could make video calls with an iPhone (s aapl) — running iOS 4.0 or above — using Wi-Fi or 3G. Skype is also scheduled to participate in a CES panel called, “Video Calling Gets Ready for Primetime.”

So the pieces are falling into place for Skype to fully enter the mobile video chat space, which was catalyzed by the release of Apple’s FaceTime feature for the iPhone 4. This won’t be Skype’s first entry into mobile video, however; it released video chat support on the Nokia (s nok) N900, but this would appear to be Skype’s big launch on mainstream mobile devices. Though it’s behind in the mobile video game and will be chasing competitors like Fring, Qik, Tango and Yahoo (s yhoo), not to mention Apple, Skype has the tools in place to help kick mobile video chatting into high gear.

Skype had 560 million members at the end of last year when it was still reporting its user numbers and has been steadily growing, with video conferencing playing a larger role in communications. Now, 40 percent of Skype calls are conducted over video, and at peak times, there are 25 million people on Skype. That’s a huge network of users who are used to video chatting. If Skype can bring that functionality to a number of mobile platforms simultaneously or in quick succession, it could leverage its scale to become the go-to provider for mobile video chat.

While mobile video chatting has grown in popularity, it’s still mired in limitations that prevent it from being widely embraced, however. Apple’s FaceTime works on the iPhone 4, the latest iPod touch and is now available in beta on Macs. But despite Apple’s promise to open up the technology to other service providers, it remains a closed network and is limited to Wi-Fi only on mobile devices. Meanwhile, competitors like Qik and Tango are limited to mobile phones, and don’t communicate with PCs and Macs. Yahoo entered the race with its own cross-platform mobile chat offering, but so far it works only on a few Android (s goog) devices. Fring tried to leverage Skype’s network for video calls, but was shut down by Skype, which said Fring was not upholding its licensing agreement. The dust-up between Skype and Fring, which prompted accusations from both sides, illustrated the power of using Skype’s network for video calls: Fring’s capacity was overloaded with the addition of the iPhone 4.

The opportunity is still there for Skype to define this space, provided it nails the execution. It has a huge base of people who already video chat from their computers, and it’s pushing into enabling video chatting from TVs in the living room. Connecting its existing members to mobile phone users would illustrate the power of mobile video chat and help to convince computer-bound video conferencing users to splurge on one of the few but growing number of devices outfitted with cameras needed for two-way video chat. From the help document, Skype video chat can also work on phones with just one camera, allowing consumers to share the world around them on video. That is not the full experience of a face-to-face conversation, but providing support to those devices would also widen the number of phones that can use Skype video calls. A big push by Skype could help mobile video chatting exceed the modest forecast of 29 million users by 2015 by Juniper Research, which said interoperability issues would hamper wider adoption.

Even with Skype’s wide reach, Apple still has a chance to set the standard for mobile video calling. Steve Jobs said this past summer that Apple would publish open specifications for FaceTime, enabling other providers to build in FaceTime interoperability. But so far, that hasn’t happened. It’s unlikely that Skype’s distributed P2P network architecture would interoperate with FaceTime anyway. So this is Skype’s chance to lead on its own and help define what mobile video chatting can become.

I’m personally a fan of video chat services, but the fragmentation between providers limits its usefulness to me. If Skype goes big with a mobile video client on iOS and Android (s goog) and later other platforms, I could see myself relying on it primarily for video chats. With more phones and tablets expected to ship with two cameras next year and the option to connect to more TV-based Skype clients, 2011 may be the perfect time for Skype to finally get its mobile video chat business in order.