eBay today turned in a lukewarm performance for the fourth quarter of 2008, posting sales of $2.04 billion vs. an average forecast of $2.12 billion. Earnings per share were a penny better than expected, at 40 cents a share. Amidst all this doom and gloom, it was nice to see Skype, their communications division, show some signs of growth. The big question now is: How long can Skype continue to grow — and keep bringing in much-needed revenues for its parent?
For the quarter, Skype:
- had sales of $145 million for the quarter, up 26 percent year-over-year, but only $2 million higher than the prior quarter.
- added 35 million new users to stand at more than 405 million registered users.
- saw SkypeOut minutes go to 2.6 billion from 2.2 billion in the third quarter of 2008.
- saw Skype-to-Skype minutes go to 20.5 billion from 16.5 billion in the third quarter of 2008.
But Skype’s growth is clearly slowing: Even though it sold an additional 400 million more minutes, it was able to get a mere $2 million in additional sales, which is a ridiculously tiny amount. In other words, it doesn’t matter how many new people it signs up to the network, or how many more SkypeOut minutes it sells, the opportunity to goose up Skype revenues is virtually non-existent. Now juxtapose this to Skype’s full-year 2008 numbers and you start to see that the trajectory of Skype’s growth is flattening. For the year, Skype posted:
- sales of $546 million vs. $376.7 million.
- per-subscriber, per-year revenues that declined to $1.35 from $1.36.
- 8.4 billion SkypeOut minutes.
- 65 billion Skype-to-Skype minutes.
With over 405 million registered users, that works out to about 160 minutes per user, per year, of free calling, and 21 minutes (approx.) of SkypeOut minutes. For 2007, Skype had 276 million registered users who were talking for about 44 billion minutes with each other for free; and the company posted 5.7 billion SkypeOut minutes. In other words, a 47 percent rise in the number of users generated a roughly 47 percent increase in usage of its free service. In 2007, Skype logged 20.65 Skypeout minutes per user, roughly flat with 2008. To get more SkypeOut revenues, the company just needs to keep finding more and more users — not an easy task.
The only way they can overcome this flattening of the curve is by offering mobile Skype (Skype Lite), especially on fast-growing platforms such as the iPhone and the BlackBerry. But even that would be a temporary solution.
Skype grows because of its viral nature. Most people try and get their friends to download Skype so they can make free calls, a behavior unlikely to change. And once you have all your pals on the network, you don’t really need to use SkypeOut as much. Following my conversation with Josh Silverman, the scary-smart CEO of Skype, back in September 2008, I wondered if eBay should spin the company off into a standalone operator. Well, looks that that opportunity might have passed them by…at least for now.