Beyond VoIP TMC

Ebay's Year-End Earnings Report

January 31, 2007

I had to chuckle -- and scratch my head -- when I heard about the "glum" news regarding the financial performance of Ebay's VoIP operation, a.k.a. Skype. According to Ebay CEO Meg Whitman, "The monetization efforts we outlined at the time of the acquisition are not developing as quickly as we had hoped." During 2006, Skype generated $195 million in revenue -- after Ebay laid out $2.6 billion for the company in 2005.

Am I missing something here? A lackluster "monetization" result was basically guaranteed given the decision to give away free Skype Out calls for the entire 2006 calendar year for North American subscribers. But what this announcement implies is that Meg or the Ebay staff in charge of overseeing Skype's bottom line either were not included in the initial decision to provide free calling (which I have a hard time believing), weren't exactly completely in agreement with the strategy (a distinct possibility given the recent management shake ups at the company), or were completely clueless about the net results of such a strategy (which I also have a hard time believing.)

I always believed that the Free Year was a shrewd strategy to boost Skype's subscriber count, and based on the disclosure that Skype managed to triple the number of registered users to 171 million over the course of the year, it seemed to work as planned. I also believed that Ebay was willing to forgo short-term profits in order to grow market share (given Ebay's deep pockets, not an unreasonable strategy.)

Now that Skype has announced a variety of new plans -- most notably a $29.95 all you can eat annual package for U.S and Canadian customers -- revenues are picking up. Apparently, Skype generated $66 million in the fourth quarter of 2006 -- up a whopping 164% from the year-ago -- so it seems as if Skype has some opportunity to mine its installed and growing base of customers to generate some good revenue numbers in the near future.
In fact, I expect the company will accelerate the introduction of new "for pay" features, functions and associated plans to goose cash flow in the months ahead.

Tags: , ,

Search Technorati: , ,

Listed below are links to sites that reference Ebay's Year-End Earnings Report:

Trackback Pings

TrackBack URL for Ebay's Year-End Earnings Report:

Comments to Ebay's Year-End Earnings Report

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)