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eBay Buying Skype? I'm Scratching My Head


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September 08, 2005

eBay Buying Skype? I'm Scratching My Head

Rob Hof

Another day, another report about the Internet voice startup Skype maybe getting bought for billions of dollars. But eBay? It sure seems a stretch to me, as it does to other folks, like Om Malik and McGraw-Hill's own Scott Kessler of S&P. With eBay's business humming again, it's not as if it's desperate to get into an entirely new business, as some of the coverage suggests. eBay has been on a buying spree, but always pretty directly related to e-commerce.

Sure, there are some interesting possibilities to use Internet voice calls to connect buyers and sellers on eBay's marketplace more directly. But eBay doesn't need to spend $3 billion to do that. Otherwise, it's tough for me to see a strategic fit--certainly not anything like its last really big bet, the online payment service PayPal.

Of course, this business has endless surprises. So surprise me: Got a better idea why eBay would buy Skype?

UPDATE 2: John Battelle thinks it makes sense simply as a way for eBay to get new customers. Say what? It's hard to imagine any customer of Skype hasn't tried eBay yet--at least in the U.S. and probably in many places abroad as well--so what new customers is eBay going to get via Skype that it hasn't already? Then there's the math. Divide $3 billion by Skype's 52 million users (ALL of them, which would seem a big stretch for eBay to capture), and you get about $58 a customer. Doesn't sound like an eBay bargain to me. But I'm all ears....

UPDATE: Some interesting conjecture in the Comments, below. Also, a lot of smart people are opining on VC Fred Wilson's blog. Check out billg's, especially. No time right now to expound upon them, except this: Yes, Skype clearly could bring some interesting new capabilities to eBay that I hadn't thought of. But for $3 billion or anything close to it? There have got to be much cheaper ways for eBay to get to the same place, and quickly too.

11:51 AM

Skype, VOIP, eBay

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? Ebay To Buy Skype? from Simon's Blog

Not everyone shares my opinion, but I think this could just possibly be a good deal for both Ebay and Skype. Ebay is currently overvalued (unless you believe its 50% year on year earnings growth is going to continue without innovation in their service... [Read More]

Tracked on September 11, 2005 03:07 PM

? EBay and Skype from Edge Perspectives with John Hagel

I use and love both eBay and Skype. I admire their management. They are extraordinary businesses and epitomize the disruptive potential of the Internet and the creative potential of virtual communities. And yet I am struggling to make sense of [Read More]

Tracked on September 14, 2005 05:57 PM

Why would eBay buy SKYPE? Simple, to make it as screwed up and user UN-friendly as eBay itself. They did that to the otherwise perfectly innocent and harmless PayPal once they got their greedy hands on it, they'll do it to SKYPE, too.

Posted by: Adrian Kimberly (EclecticAdrian on eBay) at September 8, 2005 12:58 PM

If Ebay buys Skype, Ebay has a excellent chance of communicating to the mass audience of Ebayers. Ebay for a time now, has hardly been a user friendly platform of help professionals.

People would rather to talk to a human than look at endless amounts of written information that doesn't serve its purpose.

If Ebay buys Skype they will not appease ebayers by charging them amounts of money to talk to help professionals or other Ebayers.

Ebay has to provide all skype services for free and not for profit to grow their business and not provide ambiguous answers to ebayers. They do not want to pay any more fees according to current polls.

Posted by: Jonathan Glatt at September 8, 2005 01:44 PM

The purchase seems well outside eBay's core business competency. However, bringing Skype the current eBay user-base could automatically bring on millions of users, making it a prime choice for retail VOIP service.

With the importance of a network effect in the industry and eBay's established, trusted network of users, there seems to be potential along with many challenges.

Posted by: Adrian Y at September 8, 2005 02:07 PM

Why not? I think skype can be very profitable in the future, and even if it's outside of ebay's core business plan, I think it's a good way for ebay to get a piece of the voip pie.

Plus, I think a lot more people would feel safer about ebay if they could talk to people they buy things from when there is a problem. It can be pretty comforting to talk to a real person and hear their voice rather than communicate via email about a product that maybe you're spending a lot of money on.

Just my two cents.

Posted by: George I at September 8, 2005 02:53 PM

I think it's safer to look from a perspective of Skype becoming eBay-enabled, not eBay becoming Skype-enabled. This isn't an eBay service move, it's a market share acquisition one.

Posted by: Arly at September 8, 2005 03:36 PM

As a dedicated Skype user, I know that PayPal is the easiest way to subscribe to Skype services. EBay owns PayPal and probably knows better than any outsider how Skype's revenues have been shooting through the roof......simple maths not synergy

Posted by: adam at September 8, 2005 03:46 PM

Makes perfect sense to me.

a) the growing stature of Google (Google recently overtook Ebay as the largest pure play internet business) and Google's upcoming payment gateway makes Ebay insecure

c) the huge VoIP opportunity

More here.

Posted by: Manu Sharma at September 8, 2005 05:57 PM

yeah Skype can be profitable, the question is with its low cost structure and its inability to make money now, how can it be valued at $3B? Their costs can't be more then $20M a year with the employee base and the lack of infrastructure needed, so if their revenues are under $20M a year, how can you value it at $3B? It will take many years to make that up, in an industry that doesn't have barriers to entry.

Posted by: Ben at September 9, 2005 09:45 AM

Does anyone know the percentage of ownership the 2 founders of skype each have?

Posted by: young at September 12, 2005 12:03 PM

SKYPE rhymes with HYPE and in this case eBay has some back room dealings going on and is getting kick backs on this up the gazoo and some unknown tax benefits via international Swiss Krugerrand financing in anonymous SWISS bank accounts or they are really just plain dumb. I for one have NEVER EVER like ebay. They are arrogant, treat customers with disdain- then they buy PAYPAL and make it worse- a company that will NOT allow you to deal with them without a DIRECT LINE TO YOUR CHECKING ACCOUNT- WHOA NELLY- sorry I do not let anyone but my wife and me in my checking account except my employer to DEPOSIT not withdraw funds. That is like them asking for a lien on your house to have an account or you first born- sorry but with all the lists of stolen credit cards its bad enough imagine if checking accounts get floated around and so you HAVE to have a SPECIAL account just for EBAY that you ONLY put money in for transactions for EBAY/PAYPAL- that is only way I would do it and so I DO NOT DO EBAY. My loss- NO. I have found buying coins from dealers on EBAY are hardly reputable in spite of glowing reviews at 99.9% I get guys that wait a long time to send stuff- clothes that do not fit- lose money on shipping- Oh I did pick up a nice 7 wood for 2.99 now how does a guy make money selling clubs at 2.99 I dunno but that is all I found on ebay- I will not buy a CAR on ebay sorry- too risky.

And so I think EBAY is adding SKYPE on thought that a lot of people feel as I do that without talking to the seller you cannot tell how honest and get a FEEL for them. Well 3 billion heck they could have simply done what AOL did and add voice to their web and buy a few servers from SONS and have had CARRIER quality voice and become a seller of voice service, especially for ebay business shops if they could get an ebay number for 8 bucks a month fine- but not a crappy SKYPE number that works half the time. As the net gets more crowded SKYPE gets worse- and it has no way to guarantee quality its not like ATT Callvantage where you are shunted off the net at the cable or DSL head end router, no you go over the net like web pages and we all know how reliably fast that is. Just ask the MSFT download I have had going for an 8MB file all day- yes I have 3MB/sec service but their servers are hopelessly bogged down in the daytime- try at 3AM- that is when most eBay users will need to talk to not hear snap crackle pop....

Now talk about SONS, SBC/ATT VOIP even Vonage- that is a different VOIP- not hype but the holy grail...SBC will get there first with ATT and IPTV and converged wireless/wireline with SONS equipment running it all and GOOGLE apps coming in over the open API SIP interfaces, there are a few VOIP steals out there- but only one that I like...

(Please remove email and last name (you can put first name and last initial - for anonymity)

BP

Posted by: Bruce P. at September 14, 2005 01:02 PM

Hi Bruce,

though your complaints about e-bay and pay-pal services sound enough worrying to me, your assertion that Skype works over internet servers is simply wrong.

It does not, it works on a Peer-to Peer platform, and that means the more people are connected online, the better the service is.

I use skype for over a year, only pay one cent (why some reports say 2 cents and others go for 3 I don't know exactly, I guess it's only because the writers are not Skype users- one of the 52 million) and both on a dial-up and a DSL line Skype works perfectly, all the time, during, especially, peak hours. Of course if you are in a LAN, you get bottlenecks (and virus) for free, not phone calls. Try a DSL, you will be better off.

As for browsing the internet, you can change browser to a much faster and reliable one: The mozilla firefox.

I guarantee you that this one is for free.

And it is much safer to use your credit card, using the CLEAR ALL (cookies, passwords, cache, history and the likes) box in the Tools of the Browser each time you feel it is safe to erase your personal data (keep on an old fashion agenda your passwords and your logins details).

I feel that you use and invest seriously on the net, it is time for you to use other, much faster and secure, suites of programmes other than the ones that come, by standard, in your computer.

You have also described the symptoms of a computer that may well be infected by malicious software.

You better, if you want to take any of these comments in consideration, ask your money-back to the anti-virus vendor, disable it, and try the free-edition of grisoft, the avg Free Edition.

See, your web pages come for free, the www program is for free.

Your e-mail comes and goes for free, the e-mail program is for free.

Can your calls, your packetts of voice data, travel for free in the internet?

Avoiding all the big boys servers?

Yes, they can, with skype they can.

In IT, Bruce, what is difficult today will be easy tomorrow.

Best

Manuel Martins

Portugal

Posted by: Manuel Martins at September 18, 2005 08:32 PM

I'VE RECENTLY STARTED USING SKYPE. I FIRST INSTALLED A CREDIT VOUCHER THAT CAME WITH THE HEADPHONE SET I BOUGHT - STRAIGHT FORWARD. THAT KEPT ME GOING ON SKYPE OUT ( TO LAND LINES AND CELLS ETC ) FOR A COUPLE OF DAYS. I THEN RELOADED WITH A CREDIT CARD AND WAS SURPRISED THAT IT ONLY SEEMED TO GIVE ME THE OPTION TO LOAD EURO 10.00 ( I HAD IN MIND TO LOAD EURO 100.00 AS I'M A HEAVY PHONE USER )I LOOKED FOR SOME TIME FOR THE OPTION TO INCREASE THIS TO A HIGHER AMOUNT BUT WAS UNABLE TO FIND SUCH AN OPTION - IT DID CROSS MY MIND AT THE TIME THAT ANY COMMERCIAL ENTERPRISE WOULD BE INTERESTED IN GETTING AS MUCH CASH UP FRONT AS POSSIBLE... THREE DAYS LATER MY EURO 10.00 EXPIRED AND I SUCCESSFULLY TOPED UP AGAIN. TODAY WHEN I ATTEMPTED TO TOP UP I WAS DECLINED BECAUSE I WAS TOPPING UP TOO MUCH AND THIS WAS TO PREVENT CREDIT CARD FRAUD !!!

THE ONLY THING I CAN CONCLUDE IS THAT THEY ARE OFFERING A SERVICE THAT THEY DO NOT REALLY WANT THEIR CUSTOMERS TO UTILISE AND THEY ONLY REALLY WANT SKYPE TO SKYPE TRAFFIC. ANYBODY GOT ANOTHER SUGGESTION ?

PAUL FISHER.

Posted by: PAUL FISHER at January 30, 2006 04:12 PM

Let me tell you about EBay. It is the world's garbage place. There is so much garbage on t

there people will do anything to make a

buck.

The place is chock full of

con artists.

I would NEVER buy EBay shares.

I believe in investing in the

rock solid Canadian banks.

My RRSPs are there and doing very

well, thank you. NO EBAY, for me.

Posted by: sye at February 2, 2006 04:34 PM


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