EBay

Skype sold: it’s all about risk mitigation.

by alec on September 1, 2009

The rumours have been flying for a week or so that Skype was to be sold.  Yesterday the rumour became fact, as eBay unloaded a 65% stake in Skype to a consortium of investors, including some of the original Skype investors like Index Ventures.  eBay gets to keep a 35% stake in Skype, and gets out of what was arguably a bad marriage from the beginning. Skype, on a path to do a cool billion in sales next year, gets to be an independent entity once more.

So why now?  Why not just wait it out until next year when the prospects of a Skype IPO might be better, and shoot for a public offering?

It’s all about risk mitigation.  Skype’s IPO could have been torpedoed by any number of factors including a downturn in the market, the failure to resolve the JoltID licensing dispute with Skype co-founders Zennstrom and Kase, or even the remote possibility of a new competitor devaluing Skype.  eBay’s management prudently took $2.1 billion off the table, but preserved their ability to participate in the upside of an IPO.

Should eBay shareholders be angry?  Perhaps some will be.  The more risk averse, however, are surely relieved.

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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.

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StreamCast complaint thrown out

January 25, 2007

One of the more lurid stories of the VoIP business has come to a close, as U.S. District Court Judge Florence-Marie Cooper has dismissed the $4.1 billion antitrust lawsuit filed by StreamCast Networks against VoIP service provider Skype, eBay and more than a dozen defendants.  It certainly made for great reading with allegations of racketeering, antitrust […]

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Henry Gomez: Skype President and Niklas Z's bitch?

December 15, 2006

Sometimes spin is pretty obvious, ain’t it? There’s been a bit of a management shakeup over at Skype.  The EBay crew is out, and Dr. Z (Niklas) is back in charge.  Om Malik has the inside story as, in true investigative reporter fashion, he’s been reporting the juicy tidbits as they leak out.  Jaanus has […]

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Four Reasons Google Wouldn't Give Up on Click-to-Call

October 8, 2006

Will Google really abandon Click-to-Call?  It’s doubtful. More likely is that the Google blog was hacked.  The hard part about click to call is not the telephony piece.  The technically hard piece is the advertising and targeting engine.  The hard business piece is building the relationships with the advertisers and the publishers. Google has already done […]

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Three Reasons Why Venice Is Already Sunk

October 5, 2006

Om Malik has a short interview with Skype co-founder Janus Friis talking about Janus and Niklas’ new peer-to-peer system, the Venice Project.  It’s a peer-to-peer system for sharing television.  With Skype and Kazaa, these guys disrupted whole industries.  This time around, they’re too late.  Here’s why: 1. The world already has more video sharing networks than you […]

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Skype and iotum

June 14, 2006

I have to admit to being underwhelmed by the EBay announcements of the last couple of days.  A teaser peek at the EBay / Paypal integration, and click to call in PayPal advertising.  As Luca Fillighedu pointed out, if all they wanted was click to call, then $4 billion was a little bit excessive. Both […]

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The BIG Skype Announcement is…?

June 12, 2006

Overheard at EBay Devcon: a pending, big Tuesday announcement at EBay Live.  Andy thinks they’re going to announce the worldwide integration of Skype Click to Call within the EBay portal.  It makes a ton of sense to do that, from a strategy perspective, but is it a big announcement?  Other possibilities: a big partnership announcement, […]

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Google testing Click-to-Call

November 23, 2005

Here’s a Google FAQ on the new Click-to-Call feature they’re testing.  (Thanks Randy).  It requires some artificial behaviour on the part of the user (filling in the call back number), but this could easily be automated using the Google Desktop form fill feature.  That would be a very nice experience then.  Click an ad, have […]

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Skype Reorg Rumblings…

November 22, 2005

The secondary organizational impacts of EBay’s acquisition of Skype are about to be felt, I’ve heard.  Following Rajiv Dutta’s appointment as President, three new senior VP level people will be coming into the organization:  Finance, US Operations, and API/Commerce solutions.  It seems that Skype’s culture is undergoing a swift change from being disruptive punks to a business oriented "show […]

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