Enterprise Connect served as something of a coming-out party for Skype as an enterprise-focused company; the head of Skype for Business, David Gurlé, delivered a keynote address (as shown at right), and Skype also had a presence on the show floor in the Avaya booth (both companies are owned by private equity firm Silver Lake, and they have a partnership as well).
And events at Enterprise Connect, and since that time, are showing Skype making a significant move toward successfully IPO-ing later this year, and potentially making good on its promise to succeed in the enterprise. But the challenges to Skype are also clear.
Updated Filing
The biggest news since Enterprise Connect was the release of Skype's year-end 2010 financials, in an amendment to the company's IPO filing from last August. The news was good in some important ways: For the calendar year 2010, net revenues grew almost 20%, from $719 million to $860 million; and operating income pushed into positive territory, $20.6 million for CY2010, versus an operating loss of $365 million in CY2009. Overall net loss narrowed from $369 million in CY2009 to just under $7 million for CY2010. So things are looking up for Skype as it seeks to strengthen its appeal for a 2011 IPO.
Skype also continues to increase the amount of money it makes from paid services. It increased its number of paying users from 7.3 million in 2009 to 8.8 million in 2010, and almost halted a downward slide in average revenue per paying user; that figure had been as high as $102, fell to $98 in 2009, and to $97 in 2010:
However, free Skype-to-Skype usage continues to be the company's bread-and-butter--if you can call something your bread and butter when you give it away for free. Two metrics show that the free services are growing much faster than paid services, despite growing off of a much larger base than the paid offerings:
One other noteworthy table on billings, this one taken directly from the Skype IPO filing amendment: This chart tracks growth in monthly SkypeOut, and the overall numbers are stepping up nicely. But there's a clear trend from 2008 on: Those newest to the service tend to decrease their usage over time:
Skype's most valuable asset continues to be its overall customer base, which continues to grow steadily:
It's these folks that Skype is trying to monetize with its announcement from last week that Skype will begin selling advertising on its Home tab. We noted when Skype first filed for the IPO that Skype had cited adversiting sales as a significant potential revenue source. So the move to sell advertising was expected, even as it puts Skype into more direct competition with Google, whose revenue train is still driven overwhelmingly by ads.
If you go back to that blog I wrote right after the IPO filing, you see four bullet points that Skype used to support their projections of being able to grow revenue. The first is a general prediction of user growth, then the next three represent specific areas of opportunity:
* Grow paid services;
* Monetize the overall customer base;
* Grow business user base.
So this latest SEC filing confirms that Skype is growing its revenue from paid "consumer"-level offerings, like SkypeOut, at a respectable if not barn-burning rate (first bullet). In the meantime, Skype continues to see strong growth in the free-riders who represent Skype's best bet for building a business in ad sales (second bullet).
As for that final bullet--the point that David Gurlé came to Enterprise Connect to talk about--it's still too soon to tell. In its financial reporting, Skype doesn't yet provide details about any revenues it's already started earning from Skype Connect or Skype Manager, its two business products; certainly they can't account for much of the overall total yet.
And though Skype began to sketch out its vision for the enterprise at Enterprise Connect earlier this month, the vision was still a little, well, sketchy. In covering the keynote, I wrote:
Gurlé didn't offer up a lot of specifics on how it [Skype] would use Enterprise services to help in this effort [i.e., growing revenues], and when pressed by Enterprise Connect GM Fred Knight during the Q&A period, Gurlé alluded to the potential for introducing unspecified "subscription services."
Still, every indication is that Skype intends to make a serious play in the enterprise market, and I think the rest of 2011 and 2012 will see some significant moves by them to translate their phenomenal consumer-level success to something the enterprise can leverage as well. They're at the beginning of a long road. We'll see how they progress.
