So I listened to the Skype-eBay conference call this
morning and talked to many people about the deal – and still can't quite get my
head around why eBay is so willing to spend $4.1-billion on a company that had
sales of $7-million last year (albeit a target of $60 million in 2005 and
$200-million in 2006) and doesn't seem to have a sustainable competitive
advantage. Here's my second take on how Skype fits into eBay's strategic
thinking:
1. Skype is integrated into eBay as a sales tool, particularly for categories
such as automobiles and B2B where eBay can score high margins and healthy
profits.
2. Skype is a play in the click-to-talk market, which may or may not
materialize as the Web's next killer business app.
3. Skype is a pure telecom investment play as it win more users and premium
customers at a time when Google and Yahoo have also set their sites on the
market.
The problem is I'm having difficult time seeing a single multi-billion
dollar slam-dunk component to the deal. Instead, there are several plays that could
work out. This isn't a sure-that-makes-sense deal like Paypal where the pieces
fit nicely together like a puzzle. Until someone convinces me otherwise, I think this
is a high-risk move that will takes a long time to properly assess. At the very least, it's an
ultra-aggresssive development, particularly given eBay's spending half of its
cash reserves to make it happen.
Among some of the other doubters out there are Oliver Starr, who questions eBay's move into the telecom industry, and Jeff Pulver, who mourns the end of Skype as a disruptive force while getting excited again about Free World Dialup. Om Malik
could also be thrown into the doubters pool given he doesn't see Skype
as the “white knight” for eBay's slowing growth while wondering why
eBay stepped up to the plate after Google and Yahoo passed. Fred Wilson thinks Skype is a bargain at $2.6-billion but he doesn't buy the “synergy stuff” many people are focused on.
For some interesting insight into Skype's early days, check out James Enck's blog.
-
Mark’s Blogs
Find ME Online
-
3 Comments
The deal just makes no sense for eBay. I see the deal as another sign that eBay has run out of runway on its existing business model and is losing focus. We'll remember this the way we remember Time Warner / AOL.
But on the bright side, it's an opportunity for the Skype wannabes, because now we need another Skype …
In some of the circles I've been privy to apparantly Ebay was afraid of a Telco-Celco firm getting the nod on Skype, so Ebay overbid from the start to avoid a bidding war.
I'm actually surprised no Telco firm tried to take over Skype earlier. 55 million users is a lot of people, especially for a competing start-up VOIP firm.
I wasn't getting this either. I couldn't imagine where the synergy was…it only seemed to fit into eBay's Google-like desire for world domination. And even then, not in a sensible sort of way.
But the pay-per-call aspect seems like a reasonable one. I imagine higher-end eBay vendors will be happy to pay for customers to call them with auction questions if it means closing the deal. This will be a useful tool for vendors.
Thanks for the great insight. Really glad I found your blog!
One Trackback
[...] be an easier sale, although eBay will take a financial bath given it will get nowhere near the $4.1-billion that it wildly overpaid to steal Skype away from Google. It’s hard to tell how much [...]