How many people use Skype? How much? @Skype tweeted yesterday:
“Steve Ballmer announces new stat: Over 200 million avg. monthly connected #Skype users #CES”
“And a 2nd new #Skype stat: More than 300 billion total calling mins annually, with approximately 50% being video calling mins #CES”
The 200 million average monthly connected users for December 2011 is consistent with an end-of-year bump as people substitute Skype for travel. Skype has been running weekly highs of 30+ million and lows of 15+ million concurrently connected for the last six months, more consistently high than in previous seasons.
Skype’s 300+ billion minutes of live talk is a little less than half the time people spend on Facebook, if we go by the 53.5 billion monthly minutes reported by Nielsen for May 2011.
Meanwhile, Skype continues stealing cross-border-calling minutes and hard currency from international telecoms, per Telegeography. PSTN traffic was 438 billion minutes in 2011 compared to their estimate of Skype’s 145 billion minutes; about 1 in 4 cross-border minutes are on Skype. This is up from about 1 in 5 last year.
Roughly half of all Skype minutes cross a national border if we trust these figures.
For Skype management, more for the Skype everywhere strategy, it fills a gaping user interaction hole, and brings very active young users in many international markets. Skype’s owners don’t mind; this is equity neutral (Skype cash for GroupMe assets).
For GroupMe investors, this is their liquidity event when markets and economies are as uncertain in the long term as they are volatile day by day. For GroupMe management, they get Microskype marketing power and future replacement of Twilio SMS backend with a cheaper Skype texting/voice/video backend [take that, Twilio!]
Om, I disagree on Skype having a consumer vs. enterprise conflict. They believe technology consumerization will continue smuggling Skype into the workplace.
Skype’s does have two other identity crises. First, are Skype a communications company or will they take a leap into helping people be productive? I don’t think Skype can or will take that leap. The second crisis, are Skype willing to compete as a platform or must Skype control all elements of user experience? This struggle is in play now, as the new managers brought on by the Private Equity partners successfully contained and crippled SkypeKit, Skype’s first platform product in years.
Dear Dan Primack, thanks for further explaining how Skype employees and alumni can be screwed when it comes to the Microsoft payday. And your conclusion that “Skype and Silver Lake were petty and vindictive” would be on the mark except that is supposes emotional engagement.
Dear Brian, “You’ve got to be in it to win it.” A sports metaphor? A lottery tag-line? Really? That’s the best excuse Skype could gin up?
Dear Jackson Diamond, Are you hiring? Unionizing? You urged “The rest of the Skype employees who are about to get screwed out of their paychecks should leave and take the company with them. Anything short of unified action is a failure. Anybody that stays behind at Skype will never work at any business I run in the future, because they’re pretty much useless parasites if they don’t act.” via the BusinessWeek article.
These execs don’t want to work at Microsoft? Not true. Most of those laid off were taken by surprise, and assumed they were at least part of the Microskype transition. Those I’ve checked in with were ready to dive into partnering and integrating with Microsoft, taking Skype to a new level.
These execs wouldn’t fit in at Microsoft? No. Gurlé was a Microsoft alum. And they just need to fit in at Skype.
Performance below expectations? Possible in some cases but this didn’t apply to many. Some, like Americas GM Don Albert, were pulling enormous wins with few resources against strong adversaries. Others, like Skype for Enterprise GM David Gurlé, had only received their first real headcount in 2011Q1. Campa and Sunkara had just joined the company.
Tony wants his own team. These team members were at Skype before Tony Bates took the job last fall, with the exception of the Qik team. The Board and previous CEO Josh Silverman picked the newest; the rest came under earlier Skype leadership. Has Bates been recruiting leaders who fit better with his communication and leadership styles? Is there a long list of candidates from Microsoft’s bench?
Microsoft has better teams/talent in those departments. Imagine an IM backchannel at Microsoft where leaders question why Skype should have its own regional distribution channel, its own business account execs, its own telco relationship team. Imagine a conversation about leveraging large and proven Microsoft resources. Imagine a RIF list. This looks like the first serious reason. Let’s line up the jobs and see.
Gurlé. SMB and large enterprise products and sales. Microsoft’s enterprise teams sell Windows, Office, networking products, collaboration tools, phone systems, and accounting software. Their customer relationships took years to develop and bring in billions from around the world. Better, faster to add Skype’s products to their portfolio than to maintain a separate sales arm. Gaps to Fill: 1. Skype will need to set up corporate sales support (marketers, analysts, specialists) and large account customer service functions. 2. SMB self-service and channel-partner support. 3. Fearless product innovation to make Skype invaluable in the workplace and the muscle to move it through engineering.
Dean. Corporate development, partnerships, alliances. I really haven’t followed how Microsoft operates in this area. The overlap theory may not apply to Christopher Dean.
Shaw, Sunkara. Mobile telecom products and partnerships. Microsoft has its own phone company, selling the Phone operating system to handset makers and carriers. Their partner-relations team has a better history of getting cooperation from wireless operators than Skype, seen as a competitor until recently. Gaps: 1. Skype needs visionary and inspiring product leadership in mobile, Augmented Reality, and gestural interface apps. 2.
Albert, Bewsher, Campa. Distribution, marketing, and advertising. Whatever they accomplished at Skype or Qik, Microsoft has massive operations in place with one of the largest advertising and promotion budgets in the software industry.
Gillespie. Human resources. Gillespie completely rejuvenated Skype’s recruiting sites, advertising, promotions and put Skype Palo Alto on the path to add nearly 500 more employees this year. This in an intensely competitive climate for Silicon Valley engineering talent. Yet Microsoft has one of the largest HR organizations in all of IT.
These roles will shift from building and running Skype teams to persuading Microsoft’s other divisions and headquarters services to serve Skype’s mission.
This leaves us with…
Investors want their stock back.Bloomberg interviewed an analyst who speculated preemptive firing was motivated by Skype’s investors wanting to get stock back from employees before the deal goes through.
There’s a kind of employee stock purchase agreement loophole which permits company owners to buy back stock from non-executive employees at a low fixed price before a merger or acquisition. All the appreciation in company value moves back from employees to investors. This kind of buy-back was rumored (reported?) when Steve Jobs sold NeXT, Inc. to Apple in December 1996. It shocked and surprised NeXT’s hard working, sweat-equity employees.
That event is why nearly all Silicon Valley employment agreements comes with a clause protecting from take-backs, even when they fire you.
Did this happen here?
I haven’t checked the few executive agreements on file with the SEC but I recall several of the departing have clauses protecting them from missing out on the payout from fully vested stock and options. Those who don’t have strong contractual protection are negotiating. Pick your jurisdiction. Bring your lawyer.
Is it about to happen to other employees?
I’ve seen no evidence to support this at Skype. Yet. While Silver Lake’s self-interest remains, getting back the small stock and options issued to non-executive staff may be less of an issue to investors than avoiding new litigation, more bad press, the defection of key employees and endangering partner relationships. Again, stay tuned.
Would Skype’s investors really try to screw hardworking Skype employees?
In a heartbeat.
Why now?
The no-engineers-fired mix suggests pre-alignment. Timing favors the “Investors want their stock back” theory.
See also:
setteB.IT: “Strange coincidence when a new owner begins to take possession of his new conquest, and at the same time, some executives go away.”
Om Malik: “Skype cuts senior executives. Why?” (originally subtitled “Smart or just crazy?)
Electronista: “the cuts are unlikely to assuage fears that Microsoft may reshape Skype in a way that hurts non-Windows platforms or Skype itself. Losing Shaw may be one of the deeper hits as Microsoft has historically had difficulty making strong deals with carriers.”
Skype’s network crashed from 23.7 million active users to 1.8 today, more than a small number. It’s rebounding, now around 12.7 million people logged in. A spurt of software downloads came with the crash, although Skype blogs this is not necessary. Darned misconfigurations.
Customer attrition makes or breaks your business. Until recently, Skype never shared details on abandonment rates. But we know Skype has roughly 170 million active users and nearly 700 million user accounts. So where did those dormant 500+ million accounts go?
Skype users climb a ladder of engagement, and can fall off the ladder at any rung: Preview, download, install, first call, more calls, first video call, convincing someone to get Skype, buying Skype credits, first conference call, buying a Skype voice subscription, buying an add-on or premium Skype product.
Look at the chart below. See monthly sales by cohort, people who signed up in the same year.
Most who use SkypeOut for the first time, stick with it the next year. Second year spending drop-off varies between 9% and 20%, roughly. It’s been 20% for the last two years.
Later abandonment is offset by growth in SkypeOut revenue per user. Sometimes it is more than offset by spending growth.
Skype refers to this as loyalty, and they are right. Once a customer, your chances are 80% that you will not only stay a customer but that you will spend more on Skype services over time.
A rough chart of the same data, but by what happens in each year after you join the Skype network. The second year drop is followed by an increase for two years and slight fall off in year five.
More evidence that Skype is addictive. A relatively flat retention over three years?
What does this kind of loyalty mean to Skype’s managers?
Churn is not an immediate threat to revenue. Customers who stay spend more and more, offsetting those who leave the service.
Lowering early and ongoing abandonment should continue to be a priority. Perhaps more social proof that Skype is the network to use?
Improving existing user engagement and ARPU will come through two fronts.
Investing in R&D for new premium products (cloud services, enterprise products, ) so customers have more to buy.
Adding social network mechanisms will help people get more from the people they already know, like better relationship management for your Dunbar circle, and widen their social circles productively through better discovery for relevant strangers.
Many people try products before the products offer the right combination of convenience and value. Later, as both the market and the product matures, customer often return to the product category, if not to the specific brand. Skype is in a race to raise convenience and value – through pricing, design, availability, and the network effect of its membership – before other offer competitive choices.
Winning back those who tried Skype and left could change Skype’s messaging and design choices over the next few years. Yes, it’s a defensive strategy, but keeping and winning back former customers is cheaper than winning new ones. And much more satisfying.
Why would Skype request, last Thursday, to withdraw its pre-IPO filing of August 2010? Oh. Right. “The Company has determined not to pursue the sale of the securities covered by the Registration Statement. The Company confirms that the Registration Statement was not declared effective and no securities have been offered or sold pursuant to the Registration Statement.”
The last and first quarters of the year show seasonal growth spurts in the number of people signed in to Skype. Just marking when the number of concurrent users crosses a new high-water mark, like it did at 30 million users yesterday, you can see the growth slow as Spring comes to the northern hemisphere.
Concerned that seasonality may become more noticeable…
“Our rapid growth may have overshadowed whatever seasonal factors might have influenced our business to date.”
On seasonality’s effect on profits [emphasis is mine]:
“Our net revenues exhibits seasonality because many of our users reduce their use of our products with the onset of good weather during the Northern Hemisphere’s summer months and our users tend to use our products more in the fourth quarter during the holiday season resulting in weaker net revenue growth during the second and third quarter of the year. Furthermore, we experience significant spikes in the use of our products during significant world events, such as Christmas and the Chinese New Year, or regional events, such as the recent volcanic eruption in Iceland. Due to our high revenue growth rate, the timing of product launches and movements in foreign exchange rates, the seasonality trends are not substantial when reviewing our quarter over quarter results since January 2008.”
I’m only looking at Skype’s dialtone, the people who show to call or be called. Skype hasn’t said much more on other elements of seasonality affecting usage or income. I’m sure investors would want to know:
North/South. Is the seasonal behavior consistent between hemispheres? Does South America slow down as North America speeds up? Are there opportunities for offsetting some seasonality as Skype grows in Africa, southern Asia, and Oceania?
Are other indicators seasonal? Logging in and revenue seem to be seasonal. What about adding contacts, call frequency (do I call more often), call duration (are my calls longer or shorter), call size (are more people in my calls), call mode mix (are more of my calls video)?
Is workplace Skyping also seasonal? Does it vary by industry? By occupation? By country? Where is enterprise seasonality stronger or milder than consumer seasonality?
Does seasonality vary by age? Gender? Income?
Does product commitment moderate or accentuate seasonality? Do active users with many Skype contacts and many conversations demonstrate the same seasonal ups and downs as newbies with just a few close contacts?
Does Skype on mobile phones dampen seasonality? When you don’t need to go to a landline, are you more likely to stay connected to the network? Has Qik experienced the same seasonality over its last five years?
How similar are Skype’s patterns to seasonality experienced by other companies and industries?
Are you North Americans and Europeans slacking off on your Skyping as the weather clears up?
We have a new high: 30 million people logged into Skype at the same time. I’d guess this puts the number of active Skype users about 180 million, since most people turn off Skype at night and don’t log in every day.
Dialtone is one measure of the size and capacity of a network. Your chances of finding the people you want to talk or work with rise as more people join and use the network.
Checking just now, 29,527,474 accounts were connected to the Skype network. That will be close to today’s peak. That’s a lift of 12.8 million from 16.7 logged in last night. This suggests Skype is running at about 177 million active users. Skype’s dial tone is a measure of the value of the network to users; the ability to call and be called.
The last high-water-mark was 17 January 2011, with 28.2 million. That’s a 4.3% bump of 1.3 million in 35 days. This rate of growth seems to be seasonal, based on previous years. We should see growth slow to a crawl by April. Nevertheless, my prediction of reaching 30 million concurrent for this year seems awfully conservative.
Last week 28.2 million Skype users were online at the same time, setting a record high water mark for Skype dial tone. This week’s high was 28.4 million, a 0.7% growth in seven days. If this keeps up for half a year, dial tone will rise to 33 million and active users to 200 million. Dial tone is a measure of the capacity of Skype’s network to help people talk with each other.
Contrast this with Tencent QQ, the world’s largest IM network. At the end of September 2010, QQ had 118.7 million peak simultaneous online IM user accounts, chart on the right, about four times Skype’s current dialtone. QQ had 636.6 million active IM user accounts in September.
Two data points aren’t a trend, so let’s see if Skype keeps picking up more new users who sign in more days of the week, stay connected longer each day, and connect using more touch points (mobile phone, office computer, home PC, or home TV).
The number of Skype accounts concurrently logged in to the Skype network hit a new high of 28.2 million today, despite (because of?) this being a national holiday in the United States. Dial tone is a measure of Skype’s capacity: those logged in can use Skype’s services. More importantly, they increase the chances that someone you know is available IM or live voice or video chat.
The “Skype everywhere” product strategy makes this possible. Skypers are signed in from desktops and laptops where Skype is often preinstalled, mobile phones, and televisions.
The big red line shows billions of minutes of phone calls made the traditional way: phone to phone over the pubic phone networks. 413 billion minutes this year. The big blue line shows Skype-to-Skype and SkypeOut calls, 102 billion minutes this year.
Big deal? No and yes. No, since nearly all regular calls are domestic. In the 99% range. So while this does affect international divisions of phone companies, they are usually pretty small parts of a national phone company’s sales. Skype users spend about half of all their time calling across national borders.
It’s a big deal anyway. On the chart, you see Skype calling grow faster and faster even as other calling grows slower and slower. The conservative trendlines show Skype beating 140 in 2011, and other telcos just 425, giving Skype 25% share by year end.
You could blame Skype, like the telcos do, for extreme price competition. Or give credit to Skype for a superior user experience with convenience and features telcos can’t match, like video and IM. All true. I also credit Skype’s great timing: see Skype’s growth grow faster starting in 2007 with the Great Recession. Everyone becomes more price and cash sensitive and Skype’s looks like a network worth using.
As glorious as this growth is, it’s just one small niche in the $trillion world telephony market. It shows Skype can compete. It also shows Skype is building a brand not seen often in the world of telecom: a truly global telephone company.
Phil Wolff designs and positions realtime collaboration products for effective people. Phil advises the Personal Data Ecosystem Consortium and is a director of the DataPortability Project. Email editor@skypejournal.com, Skype evanwolf, tweet @evanwolf, G+ or call +1-510-444-8234 to talk with Phil. Skype Journal is independent of Skype.
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