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eBay To Buy Skype For $2.6 Billion
rfunches writes "It's not a rumour anymore. BBC News online reports that eBay will pay 'half the amount in cash and the other half in stocks to create an unparalleled e-commerce and communications engine'." The $2.6 billion purchase would give eBay access to the VoIP market, of which Skype claims it has 2 million users online at any given time. BBC speculates that eBay will use Skype to allow sellers and bidders to communicate via voice; I have also heard that live auctions a la Sothebys might also be a possibility. Also reported at Wall Street Journal (registration), New York Times."
Skype is not built on open standards like SIP and remains isolated to its own so-called "Peer to Peer" network. It is to the Gizmo Project as AIM is to Jabber.
Furthermore, eBay has a history of poor human rights concerns and owns PayPal, probably the worst on-line payment site ever created.
I predict more consumer-hostile behavior from eBay and will continue to boycott all of its products.
I'm not Seth Finkelstein. I still speak the truth.
From the article :
.... eBay is also attracted by the idea of letting its buyers and sellers talk to each other via their computers ...
Personally, I'm not sure that I would want eBay buyers and sellers to contact me by voice. For a start, it means that to buy or sell effectively, you would need to be online a lot of the time.
Plus, once they have your Skype address, it would open up the system to SPAM voice calls pestering you to buy more things that you don't want or need.
Yet another company purchasing another completely unrelated company simply because they feel the need to dump their cash somewhere. In te end, one company always ends up dragging the other down.
Paypal's Micropayments and Skype? Probably convenient for quick overseas calls to POTS lines...
Alright -- first off, Ebay's gotta be out of their mind if they think Skype can somehow help as a "Convergent" technology. It probably can't. Just glance through this -- VoIP auctions combine the best of all worlds: the incomprehensibility of people who don't share a native tongue, the time constraints of a live auction, and the anonymity and uncertainty of the internet.
So why buy skype? Why shell out 1.3 billion bucks for a piece of software, especially one so commonplace as Skype?
Skype is a great piece of software, but no doubt better can be made. But Skype has other things going for it: A) It's got reasonably secure encryption -- unlike practically every other chat and VoIP client out there. B) It's great at getting around firewalls C) As decentralized as it is, it requires minimal resources -- it hits one IP in Denmark and it's on its way. D) It has 40+ million users, of which 3 million are online at any given time, and the numbers are growing.
So skype delivers a lot of regular users at minimal cost. Heck, you don't even need to run adds on the Skype client itself, if you control the help, community and download pages. Controlling the #1 PC-to-PC VoIP client out there gives access to all kinds of non-obvious revenue streams, very few of which have anything to do with auctions.
There is other software out there. Some can do some of what Skype does, other software can do other parts of what Skype does. But can it do all of it?
- Skype has little or no problems with firewalls. Most workplaces wouldn't be able to use Skype if it wasn't for this.
- It's not only PC-to-PC, which indeed is a dime a dozen. It's also PC-to-phone and even phone-to-PC. You can get your own phone number(s) in some countries, e.g. get yourself a phone number in some other country and your friends there can phone you at local rates instead of international.
- With the latest version and its forwarding feature (still only in the Windows version) it's even phone-to-phone as well.
- Skype's PC-to-phone is cheap. I can go to the other side of the world and phone my mum or anyone at home for close to nothing, with a USB stick w/Skype and an Internet cafe.
There are other applications out there that can do part of what Skype can do, but it's either
- missing some features, or
- not as good PC-to-phone country coverage, or
- more expensive PC-to-phone rates, or
- none or extremely (even more than Skype) limited availability of phone numbers (what Skype calls SkypeIn).
- a smaller user base (which is a self-strengthening point)
In other words, a lot of stuff come together in Skype. The only point against I can think of is the missing interoperability with other software because of the proprietary protocols.
I suspect that part of the confusion is that we think of ebay as an acution company, just like we used to think of google as a search company or Microsoft as a PC OS company.
It sounds to me like ebay is trying to transform itself into a "business solutions provider" company. Starting a small business? Sell your stuff using ebay with "buy it now". Want to accept credit cards and do other business banking? We can do that. Want to offer a toll-free (or non-toll-free) number to your customers? We can do that, too.
I would not be overly surprised if they went after Quicken or a competitor next. Possibly even a shipping or storage company, too (but less likely since those aren't virtual).
Ebay's interest in Skype has nothing to do with augmenting their auctions with calls between buyers and sellers. This is about taking those (alleged) 50 million non-paying Skypers and giving them an easy, more attractive way of paying for individual calls rather then stumping up $5. Pretty much everyone has a Paypal account and this sort of tie-up would get them using both Paypal and Skype more, with people more willing to leave cash sitting in their Paypal accounts because "I might need it for calls". This would consolidate Paypal's dominant position, something Ebay are probably anxious to do in the wake of rumours of a Google e-payment service - most people will only really bother with one payment service and, if it covers their phone calls too, sticking with Paypal will be a no-brainer.
The real killer argument for the Paypal/Skype tie-up is, however, the possibilities it opens up for a whole new generation of premium phone services and the recent repositioning of PayPal, missed by many, strongly suggests that Whitman et al realize this - after years of holding back the whole idea of micro-payments, they finally decided to granularize Paypal's fee scale, making smaller transactions viable. Before, you had to pay 30c + 3% of every transaction, leaving you with 67c from a dollar sale. Now, they are willing to take 5c + 5% instead, leaving you with 90c.
This is huge news because it makes viable a whole new layer of services. I don't think the timing of that introduction is a coincidence. I believe that Paypal are preparing the ground so that anyone who wants to set up a premium number can do so via Skype - if someone fancies themselves as a fortune teller, a Windows guru, a phone psychologist, a language translator, anything at all that can be conveyed over the phone, Skype will allow them to receive calls for which they can charge whatever they want per minute, taken directly from the customers Paypal account.
The rakes that the traditional telcos cream from premium calls are obscene, resulting in unattractive overall rates, crippling a potentially huge homebrew industry before it even began. Seriously, how many of you regularly turn to premium phone-lines when you have a problem? I can definitely understand how talking to another human being, one expert at tackling my particular problem, could be useful - the current cost, however, takes that option right out of contention. Generally, too, a premium service can only serve one country, barely giving it room to breathe market-wise.
A Skype/Paypal solution would be international, meaning a techie in Bombay could build a reputation for solving computer problems for customers in Baltimore, more easily than getting the kid down the road to drop by and certainly more cheaply than phoning Compuworld or Apple. It would also allow that kid in Bombay to keep a meaningful percentage of his per-minute fee, allowing him to keep it low. You would soon have a massive market of providers, ranging from amateurs to highly experienced professionals, all promoting their services via websites and forums, all adapting their charges and services to market conditions. By building the charging mechanism right into Skype, Paypal would find itself sitting happily in the middle of a new explosion of cash transactions.
Just like Ebay did.
But why buy into it at all? Skype isn't a natural extension of eBay's business strategy; it's not even related to what they do. It's sorta like Pizza Hut coming out and announcing they're going to buy Lockheed Martin and build fighter jets. The general tone of the NY Times article is bafflement. Generally speaking, businesses do best when they stick to their core business- when they stick to one thing that they know how to do.