Thursday, August 12, 2010

Skype IPO

It's funny what you learn in business school. At Kellogg, I learned to love Skype.

My first exposure to Skype was one of the first days in school when my section was trying to choose an IM service to standardize on. All of the Americans wanted to use Yahoo or Microsoft, and said so. That's when all of the international students freaked out. People were going crazy. We were told in no uncertain words that the rest of the world used Skype and so would the Poet section.

Skype is one of the first Internet services I've ever heard of becoming a standard in the rest of the world before the U.S. Sure enough, when I got to London Business School for a quarter, everyone used Skype. I bought credits to call friends and family back home and used it all of the time.

Fast forward to today and it's clear those international students knew what they were talking about.

From the Skype S-1 Filing (you file an S-1 Registration disclosure when you are going public):

"“users made 95 billion minutes of voice and video calls” during the first half of 2010, with a full 40 percent of those minutes being video. Skype users also sent 84 million SMS text messages through Skype during the period."

Holy cow! Those are some crazy user numbers. It's an IPO I'll consider buying because of those adoption numbers. Yes, Skype generates revenue from only about 5% of it's user base, which is quite small. However, many Internet services today are adopting a business model that monetizes only a fraction of their user bases. More important than the short term monetization rate, is that Skype is rapidly becoming the communication tool of choice across the world. I heard a crazy stat last year that 8% of all phone calls worldwide travel across Skype. I'm not sure if that is true, but it seems reasonable given the user stats above. It's the phone system of the present and future, and I want to own a part of it.