Last quarter 2008 results

Skype revenue growth is flattening: it increased only by 1.2% in US$, and about 3.7% in €. In the eBay slides they say: “On an fx neutral basis Skype revenue accelerated 5 pts(fx neutral means “foreign currency neutral basis”). Considering the economical crisis, this isn’t too bad.I am however surprised about the weak revenue increase, because SkypeOut minutes rose by 18%. And SkypeOut minutes means revenue. If most people were still calling (like I do) on a “per minute” cost, revenue should have risen proportionally. Therefore, this probably means that most people call through a fixed price “calling plan”. Could it be that, from an economical point of view, this is a "too low" margin product?More spectacular is the growth of the Skype to Skype minutes: this rose by 28%. The economical crisis could have helped to obtain this, because … this is completely free, inclusive webcam calling! One could however expect some revenue increase from Skype certified products (headphones, webcams, etc.). Personally I think this is dying revenue stream, because certified or not, most webcams and headphones and other devices work with Skype! Why should a manufacturer therefore transfer part of its income to Skype?
User accounts continue to show a quite linear growth. I would have expected a stronger growth last quarter, for the same “economical crisis” reason.

Revenue per user account (or should I say username?) show a decaying tendency. But, as I said in the past, this is a very misleading metric, because it includes all usernames created from the beginning, including “dead” accounts and multiple accounts of one user. Pity that Skype doesn’t publish the number of active accounts!Next quarter could be better, because I see a quite spectacular increase of concurrent users online, and this will for sure influence indirectly the revenue stream.


Hudson said...

It is good to see you pointing out Skype deteriorating margins, Jean. It's a pity nobody else seems to understand what is going on.

I do have one criticism however. We do have a measure of "active" accounts. It is called "real users" and it measures, appropriately, Skype activity. See http://glimfeather.com/borderless/

Also, the recent increase in concurrent users is happening only in the Americas. In Asia especially, the growth is very slow.

Jean Mercier said...


You criticism isn't right: your measure of active accounts isn't a measure, but a very good approximation or estimate or whatever you want to call it.

Skype has certainly quite exact numbers about real active users, and for reasons of their own they don't publicise it!

Your geographic analysis is also interesting, but also very approximate: no way to make a difference between Africa and Europe, or between North America and South America, or between Asia and Oceania.

I recogfnize however that you analysis is very worthfull, while Skype doesn't provide any detailed information!

Anonymous said...

Hi Jean,

Skype's complaint about the impact of exchange rate fluctuations on their revenues is actually pretty credible. I participated last week in a big international carrier conference (http://www.ptc.org/ptc/). I heard from a few of the world's biggest international voice carriers that they, too, have had a really hard time dealing with the wild exchange rate fluctuations of the past few months, and that these currency swings hurt their net revenues in Q4.

Skype Out volume growth was solid in Q4 2008 (18%—the biggest increase in a few years), and I am not aware of any major adjustments to Skype's prices. Unless the mix of calling destinations has suddenly shifted towards lower-cost destinations, it seems to me that revenues should have grown in line with volume. Consequently, I would expect revenue growth to resume once exchange rate volatility decreases (or once Skype implements more sophisticated exchange rate hedging strategies).

I don't think one quarter of weak revenue growth is cause for alarm. I'm curious to see their earnings growth over the next quarter or two. If they continue to be this slow, then we've got cause for concern...

Keep up the good work, Jean—I'm a big fan of your blog.


Anonymous said...


If you must complain that "real users" is not a measurement, then you must also provide a definition of "active user". Again, you have never defined "active", and if you did have such a definition it would be different from everyone else's definition.

The fact is that "real user" does not "approximate" active users because nobody has defined what an active user is. So there is nothing to approximate. It is a calibrated measuring device for usage. The calibration is based on survey results of "active users" from several years ago, but even those surveys had no definition of "active".


Jean Mercier said...

Well Hudson, i said that your "real users" is approximate and worthfull.

OK, let we call it a measurement anyway!

And i also agree that there isn't a definition of "active users".