Blog Post

eBay Snoring, Skype Roaring

eBay reported its first-quarter earnings today, and there was nothing impressive about the results, especially their core auction-related business. On the other hand, Skype seems to be doing pretty well.

Skype continued its strong growth trajectory, reporting $126 million in revenue for the quarter, representing 61% year-over-year growth. Skype added 33 million registered users in the quarter, ending the period with more than 309 million registered users around the world. Skype now has the largest registered user base within eBay Inc.’s portfolio of businesses.

Those are impressive numbers. For the fourth quarter of 2007, Skype revenues were $115 million and there were more than 276 million registered Skype users around the world. No wonder Skype Journal’s Jim Courtney is able to make the argument: Skype is thriving. What do you guys think?

This morning a lot of analysts are weighing in on eBay’s earnings. I culled out the bits about Skype to share with you folks.

Mark Mahaney of Citi Research writes:

While its Transactions revenue growth rate slowed to 62% Y/Y — down from 80% Y/Y in Q4 — the segment’s usage metrics improved. Key was the acceleration in Skype Out minutes to 1.7B, up 33% Y/Y, vs. up 10% Y/Y in Q4.

And from Ben Schachter at UBS:

And although user growth at Skype is still solid (though decelerating), eBay has yet to drive any meaningful synergies between stand-alone Skype and its core business. Management does plan to test possible synergies more aggressively this year, but time will tell (we are dubious).

Now these are two very fine analysts and I respect them quite a bit, but I think Skype has regained some momentum, despite eBay. (My big piece on what eBay should do with Skype is going to be published over the weekend. Watch out for it. )

19 Responses to “eBay Snoring, Skype Roaring”

  1. Martin Kuhn

    Om – An important factor to consider is that 90% of Skype revenue comes from outside the US

    As the dollar declines against nearly all global currencies, Skype’s revenues are boosted ‘artificially’ by this dollar devaluation.

  2. The real value in Skype will become apparent when we have nationwide wimax. Cell phones (and networks) will become obsolete. The only other winners will be perhaps Sprint and Clearwire – if they can manage to build-out the wimax infrastructure.

  3. Andreas

    Skype is a great working service. All those other voice services are still just protocol standards that work horrible for the average user.

    If Skype doesn’t fit Ebay, I wouldn’t mind if Google picked it up and integrated it with their other services.

  4. I think the future for Skype is fantastic, if it is doing well in the current market conditions, things can only get better for it. It is a great product and the user base deserves to and will, keep on growing.

  5. DevlinD

    Can anyone here really be surprised? Have you seen the coverage Skype has been getting lately, especially with their new video feature? Both CNN and Oprah (the woman can make or break almost any product) have been highlighting the app by using it on their shows to conduct interviews and the quality was really impressive.

    Not sure if Skype paid for either of those spots in any way but even if they did it was certainly money well spent. Nothing helps web services cross over into the mainstream better than practical exposure to a very mainstream audience.

  6. I was quite impressed with Skype growth when I saw the numbers. But they didn’t tell the story. Skype’s margins are razor thin. If they are on the high side at 10%, then net income less than $13M for a annual run rate of say $75M. That doesn’t put a dent into just the first year’s opportunity cost of their initial investment.

  7. Love the title of this article! Good job Om! Way to wait it out until the next day as well, unlike similar road hogs in the business :-) You have a much classier site here.

  8. It looks like the investment is paying dividends after all. Those are incredible user numbers, particularly the growth rate. And given the current financial conditions, a service that offers free/ultra low priced calls and allows consumers and businesses to cut their own costs will only keep growing.

  9. Skype is the best VOIP app in the market.

    easy to run, excelent voice, cheap international calls.

    the only VOIP app in the market (all the rest is waist of time!!!)