Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Skype Updates Its Pre-IPO Numbers, Plans to Sell Display Ads

Skype has filed an amendment to its S1 filing for going public today, and there are a batch of new numbers to go through since its first filing in August.

The first improvement is in the subscriber numbers. Skype says it has 663 million subscribers, an improvement of more than 100 million from the original filing. It serves 145 million of those subscribers at least once a month–21 million more than in the August filing, and it has 8.8 million paid subscribers, up from 8.1 million previously. Skype users made 207 billion minutes of voice and video calls during 2010, and in the fourth quarter, video calls accounted for approximately 42 percent of all Skype-to-Skype minutes. Users sent more than 176 million text messages via Skype.

Revenues grew to $860 million for the year ended Dec. 31, up from $719 million in 2009 (combining the 2009 results of Skype pre-spinoff from eBay and post-spinoff). Operating profit for the year was just shy of $21 million, a significant turnaround from a $364 million combined operating loss the year before. The net loss was $6.9 million.

One new revenue source that’s coming: Advertising. “We have also enhanced the functionality on our Skype 5.1 client for Windows and Skype 5.0 client for Mac to enable them to feature display advertising,” the filing says. But there’s the classic problem of injecting advertising where there was none before: Users tend not to like it very much. Skype acknowledges as much elsewhere in the filing discussing risks: “Finally, our users may respond negatively to receiving advertisements through their Skype software client, which could negatively and materially affect user engagement, our Skype brand and our results of operations.”

Skype Chief marketing officer Doug Bewsher discusses the onset of ads in a blog posting here. He says initially, Skype will be starting slow. Ads will be targeted only in the U.S., the U.K. and Germany at first. “You may only see ads occasionally,” he writes. “Our initial plan is to show an ad from one brand per day in each of the markets where advertising is being sold.” The ads will start appearing in the Home Tab this week.

The filing also contains some disclosures on the system failure that hit Skype late last year, though no new color on exactly what happened. A software error in the Skype client for Windows caused 40 percent of users online at that time to fail, resulting in a loss of somewhere from 25 to 30 percent of the network’s super nodes. The increased demand load on the super nodes that remained online was too much and shortly the whole network went down. Skype admits that negative publicity might hurt its ability to introduce a product aimed at businesses: “As we increasingly introduce products particularly targeted at enterprise customers, for whom system stability is a critical factor, any system failures could have a significant impact on our ability to attract or maintain our relationships with enterprise customers.”


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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google