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No Head-Scratching at eBay About Skype's Potential


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October 19, 2005

No Head-Scratching at eBay About Skype's Potential

Rob Hof

If up to $4.1 billion wasn't enough to prove eBay's serious about just-acquired Skype, executive comments Wednesday sure did. And executive moves: eBay Chief Financial Officer Rajiv Dutta soon will become the London-based president of the Internet communications upstart, partly to make sure the two companies are joined at the hip. "We believe that a large portion of Skype's potential relates to its integration with eBay," Dutta told me after eBay's third-quarter earnings call. Or, to translate: "No, you ignorant sluts, we sure as heck didn't pay $4 billion just to offer free phone service."

During the conference call with analysts, CEO Meg Whitman also provided a little more detail on what she has in mind for Skype, which has left me and no small number of other people wondering about the fit and the price. "We see incredible potential for its use in e-commerce," Whitman said.

First, eBay plans to integrate Skype not only into the main site, but its Rent.com, Shopping.com, its 150 Kijiji international classified-ad sites, and PayPal. Second, it's planning a PayPal Wallet for each Skype account, so people can use money in their PayPal accounts to pay for Skype's services, such as the ability to call regular phone numbers. Third, it has already started creating a pay-per-call advertising service that will use Skype. Fourth, Skype may provide a way to expand eBay's business in China and maybe even give PayPal a door into Japan, which eBay had to exit several years ago when Yahoo Japan's auctions crushed it. And fifth, well, there's Skype's own business, which includes additional services such as voicemail and who knows what-all.

Whitman admitted that rampant competition no doubt will drive what little Skype, or anyone else, can charge for Internet phone calls to zero within a few years. But despite that competition, she also noted that Skype is now adding 166,000 new customers a day, totaling 57 million. Some 4 million are on the service at any one time.

"Our belief is that the winners in this space will be the ones with the largest ecosystem" of users and developers, Whitman said. Sounds alarmingly like the tarnished "Get Big Fast" strategy of yore. But if Whitman can deliver on most of those plans, this may be one of those times that Get Big Fast actually works.

UPDATE: I removed a description of pay-per-call ads as "Google ads for phone calls" after my colleague Steve Baker understandably interpreted that as meaning something else than I intended. Pay-per-call involves clicking on a link that generates a phone call to a business, rather than sending you to another Web page. It doesn't mean you'll get spoken ads when you make a phone call. At least I hope not.

11:25 PM

Skype, eBay

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Great post today. I really find the potential of skype and ebay overwhelming. It will change the way use communicate for sure. I have been working with mvox to retail product. Do you think it's too soon to get started?

Posted by: Mark Keller at October 20, 2005 03:16 AM

Great post!

Pay-per-call ads will change the business model of lots of companies. especially the SMB.

Posted by: Eric Zhong at October 20, 2005 10:58 AM

I heard AOL is doing something like pay-per-call advertising already - I'd be surprised (and disappointed with them) if they didn't already file a business process patent on the idea, particularly with the recent elimination of the computer-based embodiment of business process patent apps.

IOW, I wonder if EBay will wind up being unable to execute on part of this strategy due to intellectual property considerations.

That said, I think it's a fantastic idea - Pay-per-click advertising is hugely effective for my business, with a lower customer acquisition cost than any other channel by far. It's a winner. If that translates to pay-per-call, that could be great as well.

Posted by: Steve Dispensa at October 20, 2005 01:30 PM

Steve, you're right, AOL is doing pay-per-call, but it's doing so with a partner, Ingenio. That company does have a trademark on the phrase "pay per call" but as far as I know, it's not a patented technology. So the challenge for eBay may be less intellectual property than simply the challenge of setting up a business that took Ingenio years to develop.

Posted by: Rob Hof at October 20, 2005 02:58 PM

Would not the eBay/Skype/Paypal "Ecosystem" include:

Offering professional services in an online trading platform; eg, bidding on the services of an attorney, translator, medical specialist, finacial advisor, etc, with the service sessions being offered via VoIP. Think of the magical possibilities: real estate agents, counselors, web designers - available for bidding and now available w/the Skype VoIP -- just think of the possibilities of bidding on services of professional providers in the eBay/Skype communities. What a coup! Now eBay will have a long and exciting run as the leader in electronic commerce and global communication. "Congratulations and Bravo, eBay & Skype, you just won the global jackpot!

Posted by: Robert O'Neil at October 20, 2005 05:16 PM

Allowing service businesses to get leads from eBay in a manner similar to how eBay improves e-commerce for businesses that sell goods will be huge for eBay. Other companies besides eBay and AOL are offering Pay Per Call. One company, Thinking Voice, has a pay per call offering where they drive the first 3 phone leads for free AND their service is already used in eBay to connect buyers with sellers.

Posted by: Shawn Doe at October 22, 2005 04:15 PM

It seems to me that the "Get Big Fast" scheme works better if the customer/user switching costs are higher. Regardless, a couple weeks ago I started collecting Skype usage statistics and I've been posting the daily results at www.skypestats.com.

Posted by: Kinergy at October 23, 2005 02:42 AM

As a result of the eBay/PayPal/Skype ecosystem, I see increasing demand for high-quality USB speaker phones. One of the top providers, MVOX (www.mvox.com) provides some sleek usb phones that integrate seamlessly into this system. I use their Mvox 100 to make Skype calls.

Posted by: Jackie at November 24, 2005 05:31 PM

good post

I am working in a Internet Application Service Provider company in china.The influences of the deal have been realized by chinese already.

Posted by: Li Dawei at January 12, 2006 06:56 AM


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