Skype’s Q3 Results Demonstrate Voice –> 0 But the Business Grows

Yesterday eBay announced their first quarter 2008 results, exceeding analyst expectations on both revenue and profit. As for the Skype business we see:

  • a 9% revenue increase quarter-to-quarter; 61% yr/yr.
  • over 360,000 new Skype accounts created daily
  • almost 20% increase in Skype-to-Skype minutes over the previous quarter (and 37% increase yr/yr)
  • small increases in SkypeOut minutes
  • probably a significant increase in U.S. user

Two factors probably contributing to the Skype-to-Skype minutes increase would be (i) widespread adoption of the 3 Skypehone in those countries served by 3 and (ii) new account signups on MySpace. This was the first quarter where they were a factor during the full quarter. At his eComm 2008 presentation, new iSkoot CEO Mark Jacobstein could not give out exact numbers but he did say that adoption has been beyond expectations and the Hutcheson accelerated launch of the Skypephone in 3’s other eight markets once they saw the uptake response in the U.K.

Another number that is interesting is the daily signup rate: how many other Internet services get over a quarter million signups daily — four-and-a-half years after the service launched?

And comparing Skype-to-Skype minutes growth to SkypeOut minutes growth is a clear demonstration of the race to zero revenue for "just plain voice" services. As stated in the Voice 2.0 Manifesto over two years ago, "the meter is off". Or, as Jonathan Christensen mentioned at his eComm 2008 keynote presentation, the march towards "the death of distance" continues.

Mentioned as Skype highlights by new eBay CEO John Donahoe:

  • passing over 100 Billion minutes of Skype-to-Skype calling
  • surveys have been done to find that Skype awareness has increased by over 100% during a recent 12-month period (does this include the Oprah factor?)
  • Skype’s ongoing partnership with Oprah
  • the appointment of Josh Silverman as President of Skype (the press release says CEO)

And one analyst asked a question about integrating Skype into eBay to which John Donahoe talked about

  • Skype as a great stand alone business that is experiencing explosive growth
  • testing and experiencing what synergies exist
  • exploring Skype and PayPal synergies

Maybe I can help John Donahoe here:

  • PayPal is already in the Skype client (is this Skype’s Western Union division?), is used to make payments for Skype Credits and to accept payments for partner products such as PamFax via the Skype Extras transaction engine.
  • And, as for practical eBay synergies: Skype and eBay: Auction Conversations

Om says eBay Snores; Skype Snores and includes some analyst comments.

  • Fact: eBay exceeded analyst expectations; I don’t call that snoring. They had to make some changes to the auction business model that appear to have helped build usage. And PayPal just continues to grow as the Internet’s "Western Union’.
  • Fact: let me help Mark Mahaney: SkypeOut growth was really marginal; the real story, as mentioned above — and especially important to analysts for the telecomm space — pure voice revenues continue to head towards zero.
  • Fact: let me help Ben Schachter at UBS; my figures above show that Skype’s user growth rate has been consistently at 12% quarter-to-quarter for the past four quarters and actual new user accounts has been growing quarter-by-quarter — not exactly what I would call "decelerating" (and I do have a Ph.D. in Physics where Newton clearly defined acceleration/deceleration).

Om sums it up nicely:

"Now these are two very fine analysts and I respect them quite a bit, but I think Skype has regained some momentum, despite eBay."

And on reading other so-called analysts’ comments I would suggest they go back and read Alec Saunders’ Voice 2.0 Manifesto (sorry for being repetitive) and it discussion of "Applications as the Value Creators". Then read my Skype Primer on Skype’s Partners. As mentioned in several previous posts there are some significant applications out there if Skype can pull their partner program together and get the business model right.

Tags: Skype, eBay, PayPal, Alec Saunders, Voice 2.0 Manifesto, Om Malik, GigaOm, Mark Mahaney, Ben Schachter, Western Union, PamFax, Jonathan Christensen, Mark Jacobstein, eComm 2008

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About Jim Courtney

Bringing over thirty years' experience in the sales, marketing and management of cutting edge technology businesses.
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