Is E-Bay spinning off negative PR?

WSJ columnist and writer of Loosewire Andy Wagstaff questions the number of users E-bay-owned VOIP mega-brand Skype claims to have signed up:

Internet telephony folks Skype today says that it now has 100 million registered users. A press release (free registration required) says that this was achieved in “just two-and-a-half year's time [sic], and has nearly doubled in size from September 2005 when it had 54 million registered users.” This is truly impressive. But if this is the case, where the hell is everyone?

My Skype currently shows 3,633,607 users online. Admittedly this is during the Asian day, when traffic is not as high as when the Europeans and Americans wake up. But that’s less than 4% of registered users actually online ... I can’t help wondering whether the 100 million figure is a) a wild exaggeration, down to people registering twice, b) people registering and then ditching it or c) the number of users that appears in the Skype program is just not reflecting reality.

This sounds like a classic dot-com era piece of PR hardball: not exactly fictitious, but a little misleading. Considering that, according to parent company E-Bay's website, E-Bay's total number of customers is only 181 million, the likelihood of 100 million regular Skype users certainly sounds like an exaggeration. Those figures, put in perspective, mean that more than a third of E-Bay's customer base is not from their own sui-generic brand, but from that of a recent private acquisition. If this was the case then Skype executives would surely be playing a much more prominent role in the E-Bay boardroom than they do now, and it's unlikely VOIP would have come as such an easy acquisition. Butthen  the question begs: why the need to exaggerate? Skype was an impressive purchase, is an impressive brand in a disruptive industry: why imply that 100 million people are regularly using Skype?

A quick glance at the Reuters newswire might help to explain a few things. First of all, E-Bay's just gone and spent 365 million Swedish Kroner - about $60 million - on Tradera.com, a Swedish online auction site. In other words, E-Bay, despite its enormous global customer base, is having trouble cracking the Scandinavian marketplace and needs to acquire a competitor in order to establish market entry. Then one sees that E-Bay might "increase ad spending with (a) chosen partner (such as Yahoo! or Microsoft in a collaborative effort against Google) and provide access to the data it has collected about its consumers". Translate this piece of flamboyant PR into "E-Bay wants to justify more advertising to it's shareholders" and it makes more sense. To cap it all off, however, not only is E-Bay increasing it's spending on advertising and buying new competitors because it's brand isn't strong enough to penetrate certain regional markets, but it's second quarter earnings are expected to be below analyst's expectations this year. The press release even goes as far as to cite non-GAAP (generally accepted accounting principles) figures in the statement, an inclusion that quite frankly begs disbelief  as it tells investors nothing meaningful about the financial state of the company.

E-Bay's conundrum then is how to sell what by all accounts could be quite reasonably construed as negative PR by shareholders and the market as positive signals of growth. Boasting about extensive customer bases is an obvious way to do that.

Comments

[David Foster]

"But that’s less than 4% of registered users actually online"...what percentage of telephone subscribers are typically "online" at any one time? This information is necessary for traffic planning, and could surely be found without much difficulty. A better comparison would probably be: what percentage of telco subscribers are online for *long distance calls* at any one time?

It's not obvious to me that 4% is an improbably low number.

[Daniel M. Harrison]

David - sorry to take so long to reply. That's an interesting point but I don't think it's really comparable since someone using a Skype phone would have to be online to receive calls. It's more like saying how often do you have the telephone cord plugged in so that you can make and receive calls, or how often do you have your mobile/cell phone turned on? The answer I suspect is that probably more than 4% of those who use a cell phone have it switched on at any one time.

The fact is that IF 100 million Skype users were REGULAR users there would surely be more than 4% who would have their device activated at any one time in order to receive calls (they're active users and therefore willing to receive calls, remember).

I would assume Skype must realise the misleading nature of this announcement.

[Charles Punt]

I'm not sure what the press release is intended. One can assume it is to boost the attractiveness of the brand. In other word, by attempting to convince the general public that Skype has a wide user base, hovping that the press release would grab the public attention and turn the cynics and the hesitents into users.

Lastly, from purely psychological point on view. The press release serves as self-fulfillment prophecy and an attemp to justify their purchase of the company.

Anyway, this is just speculative. Who really know what's their real situation. But I agree with DMH that the figure is unlikely. If they are playing that kind of ball, one that I'm thinking, then they are walking a dangerous path.