Skype To Roll Out Advertising In Bid For New Revenue Stream
1:14p ET March 7, 2011 (Dow Jones)
Skype To Roll Out Advertising In Bid For New Revenue Stream
By Scott Morrison
Of DOW JONES NEWSWIRES
SAN FRANCISCO (Dow Jones)--Internet telephony service Skype S.a r.l. plans to start rolling out ads to consumer users this week in a bid to develop a new revenue stream ahead of the company's anticipated $1 billion initial public offering.
Skype's IPO could be one of the biggest in the technology sector since Google Inc. (GOOG) raised $1.67 billion in 2004, but while hundreds of millions of people around the world use Skype, some investors remain concerned about its ability to profit from its huge user base.
The Luxembourg-based company had an average of 145 million monthly connected users at the end of 2010, but only 8.8 million monthly paying users, according to Skype's recently filed amended S-1. Last year, it generated $860 million of net revenues and had a net loss of about $7 million.
The new display ads, which will initially feature advertisers such as Groupon, Universal Pictures and Visa Inc. (V), will appear at the top of the service's main page in its Windows client, the company said in a blog post.
Skype said the ads, which will initially appear in the U.S., U.K. and Germany, may include audio or video. Advertisers can add a 'click to call" button in the ad and users will be able to share ads to their Facebook or Twitter accounts.
Skype said the ads would not interrupt users with annoying pop-up ads or flashy banner ads in the middle their conversations. Users will be able to close ads with the simple click of a button. Skype said it may experiment with other formats as well.
Skype has said its strategy is to continue developing free products while adding new paid products and promoting its subscription service to consumer users and large enterprise customers. The company said in its S-1 that advertising, gaming and the sale of virtual goods represent a "meaningful opportunity" to increase revenue.
The company did not immediately respond to requests for comment.
Like other Internet services, Skype is luring advertisers with its ability to target users based on non-personally identifiable demographic data, such as a person's location, gender and age. The company warned that it may use this data for ad targeting, but noted that users may opt out of targeting.
Skype filed pre-IPO documents in August and was expected to go public in the first half of this year. But people familiar with the situation have said Skype's hiring of a new chief executive in October and uncertainties in the IPO market and economy have slowed the offering process.
Skype's reputation took a hit last December when its service crashed, taking millions of users offline for a full day.
-By Scott Morrison; Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com
