Slashdot Mirror
EBay Admits To Bad Call On Skype
MaineCoasts writes "The Times online reports that two years after buying Skype for 2.6 billion, Ebay yesterday warned shareholders that they may have made a mistake. In essence, they vastly overpaid for the company. ZDNet offers analysis of the announcement: 'Clearly, the current business model is not enough to satisfy eBay in light of how much the company spent on Skype. And the reason is simple. Even though Skype has done a very good job of getting users to download its software client, most people who use the service do so to make free Skype-to-Skype phone calls. The only way that Skype makes money from its subscribers is when people use its Skype-In or Skype-Out services. Skype-In allows users to pay to rent a phone number, which people on regular phones can call. Skype-Out allows users to call traditional phones or cell phones for a fee.'"
Hmmm... smells like the bubble could be collapsing.
- Just because a company has a huge and growing audience doesn't mean it can find a huge revenue source. Skype's appeal is that it offers services free or very cheap. That limits its ability to raise prices. And it turns out that there are limited opportunities for advertising or add-on services.
- It's almost impossible to pay for a deal through "synergies." EBay executives talked about how Skype would be useful to connect buyers and sellers in its marketplace. This always seemed to be hooey. The eBay market is already full of chatter, mainly by e-mail, and sometimes by phone. Sure, some of that might well be handled by Internet phone, but how much and what value was created by eBay owning its own voice chat system? Not much, it turns out.
I think the second point is the most important. This deal was easy to criticize because they didn't know what the hell they were going to do with it. They had no forward plan. Where were they taking Skype? What were they going to do with it? How was it going to make money? Nobody knew. And, most importantly, eBay didn't either.So why did they make the deal? Maybe they felt pressure. Maybe it looked like easy cash. One thing is for sure, it never came to fruition whatever they saw in the company. I personally liked the tool but once you start asking for cash, you can expect to see your user base taper off. You're competing with something that is already incredibly cheap in the states. If it ain't free, you're going to have problems operating in the black. If it is free, you better have some mad advertising revenue or market data stuff to sell
Google knew where they were going with the YouTube purchase. It's now pretty clear eBay didn't know exactly what they were going to do. But, hey, they could treat it like Microsoft's original Xbox venture, "We lost a lot of money but fsck it, we've got a ton to lose and I'm bored with being the top dog in a single market!"
My work here is dung.
Imagine that. You offer a free service to people and they use it. Seems a bit odd to now say you're not making money because people aren't willing to pay for one of your other services.
To top it off, a technology company now claims they paid too much for you.
Those who cannot remember the past and all that comes to mind.
We will bankrupt ourselves in the vain search for absolute security. -- Dwight D. Eisenhower
Honestly, this was another classic case of someone with money looking at a wildly successful and completely unprofitable business and snapping it up without some serious thought to how to make it profitable or more importantly if it was possible to make it profitable.
None of these businesses that provided expensive service for free and whose selling point was that it was free have ever managed to become profitable. eBay should've known better when buying a business in 2005.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
is that however ridiculous ebay's "future bizness model" will be, it will be forced down the throat of skype users due to closed source and the proprietary protocol.
In exactly the same way as the first. "Old money" companies (as 1st generation dotcom companies like eBay are now, in comparison) paying way too much money in speculation, for a piece of the "next big thing". Next Big Thing fails to materialise as a sustainable business enterprise, money is wasted.
3 years ago, it seemed like everyone and their mom was getting into VoIP. I remember asking someone writing one, how are they going to make any money? He answered, get bought out by a big corporation.
Well, it worked for Skype, I guess.
I personally use the Skype Out service. I have one contact in Skype that is a Skype user, and he uses it for work (that'd be my father). I paid $17.50 CAD for a year of unlimited long distance, and I tell everyone what a great deal it is and how they should sign up for the service. As of yet, not a single person I've told about Skype has even downloaded it, let alone used the service. Perhaps people are just afraid to try something new?
That said, there is one thing I have noticed. I get great call quality with Skype when I call my parents in Ottawa, or my friends nearby, but when I call my in-laws (up in the Northwest Territories), I have anywhere from 3-10 seconds lag, and the quality of service is poor. It would seem that the quality of service is limited by the available bandwidth - they just got 768K 'high speed' Internet there a few months ago! After all that, I plan to continue to use Skype Out, and when they finally start offering more Canadian phone numbers, I may even consider using Skype In.
.sig
Don't be too hasty. There are two avenues that open up huge potential for revenue:
In short, there is a HUGE untapped market out there. If EBay would stop trying to milk their investment and would start investing more into it, they could really get some substantial returns.
GreyPoopon
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Why is it I can write insightful comments but can't come up with a clever signature?
This just demonstrates that owning a connection or bit of network infrastructure isn't worth much because it's too easy to find an alternative connection. The same "route around damage" ethos of the internet makes it a "route around cost" mechanism too. Skype users, like all good internet routers, only pick the Skype connection when it's free. This is why we see such battles with the telcos trying to change the playing field (e.g., lobbying hard to prevent net neutrality and open access regs) so that they can charge more than the marginal price (which is near zero per added user) for use of their infrastructure (which costs millions or billions to build).
Two wrongs don't make a right, but three lefts do.
And I'll tell you another company that is waaay overvalued.....facebook. $10 billion? Even $1 billion is too much. There will always be hype and over priced companies in the technology industry......mainly because every once in a while a technology comes along that really is worth it. The question is how do you know?
Business people have trouble with this kind of thing because they don't understand the technology. As in this case, they thought 'skype will be super-popular' which may be true, but they didn't see that once everyone has Skype no one will need Skype out.
Tech people and engineers tend to have trouble with it because they tend not to understand marketing, business prospects, or what people want. They say things like, "Less space than a nomad, no wifi. Lame" or "This is the year of linux on the desktop" and don't understand why most people aren't interested in open-moko or the gimp.
If you DO happen to understand both of them, it will be a competitive advantage that can make you a killing in the stock market. As anyone who invested in nintendo a year ago knows.
Qxe4
When I was working in sweden for couple of months, I actually used both skyp-out and skype-in to call my relatives. The international call prices are ridiculous between Finland and Sweden, even when me and the other end are on the same companys network! (TeliaSonera)
Bot Assisted Blogging
Because if Skype started offering what you would consider a decent solution (open protocols, interoperability), then suddenly all other clients could/would support Skype, and nobody would use their client. This is the only piece they would control, and with fewer people using it means less control and less revenue.
Skype doesn't open everything up because they have MUCH more to lose than to gain. They have the userbase, and they have the lock-in, all they have to work out is how to "monetize" that (ugh, hate that word)
This IS 2000 all over again. Wait until the social networking sites that are being valued in the 2-10 billion dollar range yet only bring in a couple of mill a year in revenue start collapsing then it will really get ugly.
I think the invisible hand of the market has its middle finger extended
--A wise old fart named SC0RN
So why is eBay surprised?
I was at the talk he gave at VoN in Toronto... if I remember correctly, he said it would be about $10million/mo, which looks fairly accurate. His entire talk was a rant about people being ripped off by traditional Telcos. He announced he would take the $Billions made in Telecom, squeeze it down and turn it into just $Millions and then take it all for Skype.
He said that there was just no way to make huge profits off of Voice with a ubiquitous internet. It's in the VoN presentation he gave, I assume one can find the proceedings somewhere...
Now fast forward about a year... I was talking to VCs about my company. Some had invested in Skype, and now the story was different. Someone would want to leverage Skype's huge base of customers, making Skype worth $Billions. Leverage for what, they were sure someone would figure out (advertising maybe).
So. Now the question is did Zennstrom and Co. tell eBay these things. That is, "we don't know how to make a business model out of this that's worth $Billions, just $Millions" or did they lie? If he didn't tell them this, eBay didn't do their diligence given that both pieces of information were readily available from Zennstrom's and his VCs previous statements.
Google didn't make a mistake buying skype, it made a mistake in not using it. Google wields amazing power, and, properly leveraged, could create a huge and dominant market force.
.web TLD. Everyone who signs up gets their own gmail account, blog, skype account, gpay account, etc. all tied to their accountname.tld. Blogger becomes the hub for your digital presence, holding your contacts, meetings, calendar, digital storage, and well, everything else. Anywhere you go in the world, your new google-pda, which is an iPhone on crack, synchronizes your life. Need to make a phone call? Skype handles it. Even mobile to mobile, free, over the wifi infrastructure. Need to access spreadsheets, documents, important business functions? Google has you covered. Need to make a skypeout phone call? It comes straight from your gpay account. Need to buy something at the local store? You can g-pay right there, using your phone.
So far, Google has:
Dark Fiber
G-pay
G-mail
G-talk
Skype
Google
Blogger
YouTube
Metric assloads of cash
What Google needs
A TLD.
Wireless everywhere.
Here comes the evil...
Google champions the
Google licenses the skype protocol to Cisco, etc, so that businesses can buy a Skype PBX. Google markets their 'Google Business Application Server', which will synchronize spreadsheets, documents, mail, and pretty much everything else, including your digital life. Number portability is built right in. Authentication is built in. Using the google phone, you can even pop up the user on google maps, send directions, etc. Promotional videos, training videos, whatever, are all served up on YouTube, with the rights management tied into the 'Google Business Application Server'. Salespeople will love it, management will love it, and most of all investors will love it. The only ones who won't love it, are the telcos, and the companies that serve up office software and e-mail servers.
Those companies start bitching about Google becoming the next Microsoft. The big Telcos fight back, and start their tiered internet, limiting bandwidth to Google. Google lights up their own fiber like the fourth of July, and cuts the big Telcos out. They had their chance to play nice, and they didn't. Now it's hardball time. Google, in trying to provide everything to everyone at as small of a cost as possible, essentially usurped Microsoft, penis-whacked AT&T, and pwn3d the entire Internet, all in one brilliant strategy. With everyone having a G-pay account now, the banks either bend to Google's will, or get cut out like the telcos.
At least, that's what I'd do, and that's probably why they were so interested in the 700mHz spectrum.
(Sorry about the incoherent rambling, I'll take my pills now)
I was wondering if you had any advice towards getting a decent wireless SIP phone
Wait a year. Or go with whatever the US equivalent of a DECT base with SIP is, like the Siemens Gigaset 450. Don't be fooled into getting a WiFi phone -- the hardware is crap in most cases, and in the rest of the cases the software is crap.
Finally! A year of moderation! Ready for 2019?
Something similar happened to me, last year. A little after they made local SkypeIn phones available in Brazil, I got one. At first, it was great - quality was pretty close to a regular call, and sometimes better.
After a couple of months, the quality of the calls was awful, calls kept dropping or not connecting. So when it was time to renew, I didn't even consider it.
Now I just use SkypeOut occasionally and mostly Skype-to-Skype.
Skype blew quite a few opportunities.
Due to technical glitches (contact list lost, etc), it did not build customer confidence nearly as well as it could have. I am on my second Skype ID (the first one had its contact list erased twice), and as such, not willing to put up money up front on skype in/out.
Also, they did not go at all after corporate customers. I'd love my university to have Skype officialy, and just be able to type the name of the person I want and boom, I talk to them. But no, there has been NO marketing of this that I have been aware of. So in the end I can talk only to my friends, because no staff/etc has Skype IDs.
Basically, I think Skype had great potential, but I think that that potential has been in great part wasted by a lack of marketing push, lack of innovation, and lack of stability.
How can SIP have a lower call quality than Skype when SIP is only a signalling protocol and doesn't even carry the data streams? (RTP does). Seriously, your sound quality depends on many factors (cheap Grandstream handsets/headsets or ATAs using ultra compressed G.729a codec running on a cheap ADSL connection with high contention ratio and no QoS don't help, you know) but SIP itself, the signalling protocol, isn't one of them.
Any decent VoIP provider will offer you a quality which can never be matched by PSTN, and can only be rivalled by node-to-node ISDN/PRI. If your experience with VoIP has been so bad that you consider Skype to be high quality (and I do use Skype myself daily) then I strongly suggest you consider changing your provider.
It's sad to see that all these MCSA and CCNA people who have no telco background and don't know shit about the fundamentals of networking are installing Asterisk without understanding what they are doing, and are hence ruining the reputation of a fine, neat, simple, clean IETF standard called Session Initiation Protocol.
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