Skype delays IPO - The Real Reason

Skype's new CEO, Tony Bates, has delayed its planned IPO (initial public offering). As he puts it, the reason is that they want " to make sure the company is up to scratch." So let's look at the situation. The following figures come from my own measurements of Skype's "real users" as recorded from their own servers (exact methodology further explained at our Statistics page) and with their own reported revenues.

Skype's year/year growth rate in both "real users" and revenue has been slipping for 3 years. Moreover, the revenue per average user is also slipping. This is not the sort of statistics that one usually wants to show to investors when trying to sell them stock.

That being said, it is a real possibility that 2011 is a turnaround year for Skype.  Increasingly, Skype offers a realistic alternative to a landline or mobile line for the average user.  Skype now also reports (not verified here) that some 42% of Skype-to-Skype minutes are video, of which some percentage (group video) have a fee.  Finally, Skype has recently started to experiment with selling advertisements. As a result, Skype should now be seeing new revenue streams from SkypeIn (a.k.a "Online") numbers, SkypeOut minutes, group video subscriptions, and advertising.  

It remains to be seen whether Skype is coming "up to scratch" in 2011.  The growth rate in "real users" does in fact appear to be much improved over 2010.  It may well even exceed the growth rate of 2008. It will not be a surprise to see the growth rate of revenue also bounce back up. The real question however, at least in my mind, is whether the revenue per "real user" is going to hold or improve. This will be the mark of whether Skype has a sustainable business model that justifies the price Skype hopes to get in the pending IPO.  

Let's not be surprised if the IPO is delayed until 2012. My bet is on a merger or a buyout before it ever happens. Who will it be? Definitely somebody that wants to become the world's #1 force in communication... and that has compatible businesses. I have a hunch, and it's not one that other pundits usually mention.  

• 9 March 2011
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