Yesterday EBay reported their numbers. Skype's revenues grew by $11 million from Q1 to Q2 2007, from $79 to $90 million. Skype-out minute volume, however, was flat, at about 1.3 billion for the quarter. This morning Jim Courtney, and Om Malik are both asking how Skype manages to grow revenues without increasing minute volume.
The answer is pretty clear friends. Skype raised their prices in January.
- Skype Pro replaced their previous premium bundle of Skype-In and voicemail with an upgraded bundle. While Skype Pro includes a lot more, it also costs 24 euros per year rather than 15 euros.
- They added a connection charge of 3.9 euro cents per call, which previously didn't exist. The impact of this cannot be understated. Take the previous quarter, with 1.3 billion Skype-Out minutes used. VoIP service providers assume an average call duration of between 7 and 11 minutes, so let's say the average Skype-Out call is 10 minutes in duration. That's 130 million potential connection charges, and a cool 5 million euros (just shy of $7 million US) in revenue.
Om also notes that registrations were in a slight decline for the quarter too — down from 25 million to 24 million. Don't forget that Skype ran a campaign late last year, and into the early part of January offering unlimited calling to North American's for $15 annually, if customers signed up before the end of January. Now the price is $30. It's likely there was a rush to sign up before the end of that campaign.
Skype is an interesting company to watch because it's a hybrid blend of Voice 2.0 economics and old-style telco minute charges. The combination of flat rate economics and service charges plus the relatively low penetration rate into their install base would suggest that with clever marketing to the Skype install base, EBay can turn Skype into a money machine. With a 200 million strong install base, EBay is right to focus on making those loyal users more profitable, which is what this quarter's numbers are showing.