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Why Skype Can't Make A Profit

Two developments in the last day show why Skype can't make a profit. First, in an eBay earnings conference call, eBay execs clearly were trying to hide Skype's real performance. And then today, the Gizmo Project announced that all VoIP calls to landlines throughout most of the world will be free -- forever.
As Om Malik points out in his blog, the eBay conference call provided only "meaningless statistics...Skype???s performance is a riddle wrapped in an enigma."

For example, CEO Meg Whitman claimed on the call that Skype added "nearly 19 million users for a total of 113 million users worldwide." But how many of those users are in the U.S., where Skype is weakest and where it desperately needs to grow? And how many are active users, not just people who downloaded the app, then never used it again?

We simply don't know, because eBay wasn't talking.

Whitman also proudly said that Skype users spent almost 7.1 billion minutes talking with each other via Skype in the second quarter of this year.

My response -- so what? If those minutes don't translate into revenue, it doesn't matter if they spent 7.1 trillion minutes talking.

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