9 Comments

Summary:

Skype told potential investors in its first IPO filing today that it plans to grow its business by adding users, offering premium features like group video chat, increasing the number of business users that log in to its service, and adding new monetization models, such as ads.

Skype told potential investors in its first IPO filing today that it plans to grow its business by adding users, offering premium features like group video chat, increasing the number of business users that log in to its service, and adding new monetization models, such as ads.

Already, Skype has grown substantially over the last year, reporting in its S-1 that its user base increased to 560 million at the end of June from 397 million a year earlier. The number of users that connect has increased substantially as well, with average monthly connected users increasing to 124 million from 91 million in the past year. While paying customers represent a small percentage of its overall user base, that number has grown as well, to 8.1 million at the end of June from 6.6 million a year ago.

All this growth has led to a pretty substantial increase in revenues. Skype pulled in $406.2 million in the first six months of this year, up 25 percent from $324.8 million in the first half of 2009.

But where does Skype go next? The company of course plans to grow its user base, including free and paid customers. But according to the S-1, it’s also looking to move upmarket to business users to capture some of the low-hanging fruit from small and medium-sized businesses that need video chat and collaboration tools but can’t afford high-end video conferencing or telepresence equipment.

Skype also says it plans to grow the number of consumers paying for its voice calling and video chat by adding more premium features, such as group video chat. Skype is testing the multi-user video chat feature in the latest beta version of its client, and plans to begin charging for the ability — along with other premium features — in future versions of its software. In the filing, Skype says it “can generate more communications revenue from our users by improving awareness and adoption of [its] paid products and introducing premium products such as group video calling.”

Finally, the company also hopes to find ways to better monetize free calling and video chats, adding new models such as advertising to do so. From the filing: “We currently generate a small portion of our net revenues through marketing services (such as advertising) and licensing, which we expect will grow as a percentage of our net revenues over time.” As a result, users that don’t pay for any premium features can probably expect to see more ads shown alongside their video chats.

While Skype has shown significant growth in revenues over the past year, it will be necessary for the company to make some cash off its video chat platform. Already, video chat accounts for 40 percent of all calls made through its software, but the vast majority of revenues come from its SkypeOut landline and mobile calling business. Unless Skype can find a way to monetize its large and growing base of video chat users, it could be doomed as the number of landline and mobile calls made become a smaller portion of its overall income. With more of an emphasis on business users, as well as the addition of premium features, it could reverse this trend.

Related content on GigaOM Pro: Report: The Consumer Video Chat Market, 2010-2015 (subscription required)

You’re subscribed! If you like, you can update your settings

  1. Skype to go public « Ongoing Issues Monday, August 9, 2010

    [...] How Skype Plans to Grow Its Business: http://gigaom.com/2010/08/09/how-skype-plans-to-grow-its-business/ [...]

  2. Skype is making a mistake by going after enterprise communications before building small hosted PBX services for businesses with 5-50 employees.

    Enterprise looks juicy, but requires a longer sales cycle, has much higher security requirements, and has more power to negotiate price. Small businesses can make firm-wide decisions much more quickly, their owners are already using Skype and the fact that they don’t have IT staffs means they won’t want to deal with the industrial-strength providers. Plus, small business has little bargaining power w/telcos.

    It is beyond me why Skype hasn’t build or bought the capability to offer virtual PBX and own-domain Skype namespaces to small business.

  3. Skype IPO Confirms: There’s No Money to Be Made in Video Chat Monday, August 9, 2010

    [...] monetization of Skype’s video chat users could ramp up soon. In its S-1 filing, it said it planned to diversify its revenue by adding new [...]

  4. Open Thread: What New Business Products Should Skype Roll Out? Monday, August 9, 2010

    [...] — a more full-featured, robust web conferencing offering could be on the cards. As Ryan pointed out, Skype needs to find a way to monetize the video calls made through its service, and getting [...]

  5. Skype Files for IPO Monday, August 9, 2010

    [...] How Skype Plans to Grow Its Business August 9, 2010Tracked on [...]

  6. Lukas Gärtner Tuesday, August 10, 2010

    Cool would be livestreams of events like concerts or webinars and lectures (like of Ted) which connect many interested people with the lecturer and offer the possibility to state questions and polls.

  7. Skype really grows fast. It would be a good way for businesses, especially for small ones to have wide extent of coverage in the business world using Skype. And also good thing for Skype, increase revenues are coming their way.

    I look forward for better features and add-ons. I love using Skype; hope for free calling.

  8. FriendCaller: Das deutsche Skype » netzwertig.com Tuesday, August 17, 2010

    [...] Es gehört schon eine gewisse Portion Mut dazu, einen auf private Nutzer abzielenden VoIP-Service zu starten, mit dem vom heimischen Computer aus sowohl kostenlose Gespräche mit Freunden als auch günstige Anrufe in internationale Fest- und Mobilfunknetze möglich sind. Denn genau das macht Skype, der globale Marktführer unter den VoIP-Diensten mit 560 Millionen registrierten Konten und 124 Millionen aktiven Anwendern monatlich. [...]

  9. Is Mobile Video Chat Ready for Business Use? Tuesday, October 12, 2010

    [...] level desktop video chat clients. Skype has grown considerably in the past year, according to a recent report on GigaOM, and one of its growth strategies is to sign up small to medium sized businesses that [...]

Comments have been disabled for this post