UPDATED 10:55 EDT / MARCH 07 2011

Skype Revenue Up 20% in 2010; Now Looking to Advertising on Road to Next Year’s IPO

windows-skypeIt’s been news for a while that Skype intends to make their initial public offering soon. Until recently, “soon” meant this year, but the company’s newly appointed CEO, Tony Bates, would like to wait a little longer for them to be in better shape. And they look like they’re in pretty good shape with an increase of 20% in net revenue in 2010 from $719 million to $860 million —and a boost in paying consumer base to about 19%.

TechCrunch has the nitty-gritty details laid out for us,

Net revenues increased by 20% from $719 million in pro forma 2009 to $860 million in 2010, and Adjusted EBITDA increased by 43% from $185 million in pro forma 2009 to $264 million in 2010. Skype’s net loss in 2010 was $7 million, compared to a net loss of $418 million on a pro forma basis in 2009 (which includes a $344 million charge incurred the settlement in the Joltid Transaction).

Skype ended 2010 with 911 employees, up from 733 in December 2009. Skype acquired mobile video startup Qik in January for $121 million in cash with $29 million in additional payments. As part of the acquisition, Skype added 63 employees from Qik.

In 2010, Skype users made 207 billion minutes of voice and video calls. In the fourth quarter alone, video calls accounted for approximately 42% of all Skype-to-Skype minutes, and in 2010, users sent over 176 million SMS text messages through Skype.

Looks like Skype is sitting pretty—and for some interesting trivia, it looks like their biggest revenue contender is a service that allows users to use their service to call to landlines and mobile phones. When it comes to replacing a potentially expensive telephone system for a business with Skype (say, for the purpose of outgoing calls from a brick-and-mortar location) they seem to be on top of the market.

Not to leave the 177 million active customers untapped, Skype is also looking to add advertisements to their Windows client. According to the available data, provided in an article on ReadWriteWeb on the upcoming change, only 8.1 million of those are paying—but that still leaves a hefty chunk of eyeballs that Skype could be leveraging for another revenue stream.

“We think this is an interesting opportunity for advertisers,” says Doug Bewsher, Skype’s Chief Marketing Office in an interview in Ad Age. “This is a premium placement to engage with our users.” Indeed, people spend a lot of time on sites like Skype, and while Bewsher notes that ads on other social networking sites like Facebook can be small and unobtrusive, ads in Skype may offer more user engagement – “click to call,” perhaps.

Currently, the advertising is set to only appear in the Home tab in Skype for Windows, although the company says it might experiment with ads in other areas and with other clients eventually. The ads won’t interrupt your VOIP experience – no “annoying pop-up ads or flashy banner ads in middle of conversations,” insists Skype. Skype says the ads will only appear occasionally, and the initial plan is to show one ad from one brand per day. Ads are rolling out in the U.S., U.K., and German markets first.

The article mentions that the ads will use non-identifying data given by the users to better target advertisements (namely age, gender, location, etc.) but that users will be able to opt out of it should they choose. Sending the data, that is, not the advertisements. Here I was expecting that they might start tossing up advertisements at the bottom of video calls like those horrible cable-TV advertisements on top of TV shows.

The idea of putting advertisements in Skype may actually be a good way for the company to begin their own sort of commercial catalog “phonebook” service with premium listings. In fact, with so many companies using Skype in order to keep up with customers, provide service, and take in new orders—the idea of a “click to call” advertisement or directory of advertisements could net the company an extremely loyal revenue stream. John Furrier of SiliconANGLE has mentioned in the past that Skype could own the social web, if they used their sheer popularity to build a new enterprise around voice communications and how that affects connectivity between customers. The wait to go to IPO, plus the advertising, could be their bid for smarter market supremacy.

While people don’t really like being bombarded by advertisements when they go about their daily routine and use tools such as Skype, people do like to know what’s out there and how they can get at it.

We’ll have to see how the advertising gambit goes over with users when it happens. According to sources, it begins this week.


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