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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.'"
To ebay – get your act together or you'll lose most of your current paying skype customers (and forget about growth)
The Raven
I said this way before the dotcom ver1.0 bubble burst but here we go again:
1. a non paying customer base has little value - base a company value on revenue and operational margins
2. customers change services rapidly on the web
This announcement is a prelude to eBay shopping Skype to the highest bidder. Even though it is not a cash cow Google, Microsoft and possibly Yahoo will be falling over themselves to buy for it's strategic value.
Personally, I hope whomever buys it, they open up the protocol as, if it does open, it could be THE voice platform.
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I use SIP extensively, it's an open protocol, used by Asterisk and is implemented by a heap of companies, providing a range of services in a range of countries. Skype uses their own protocol, and has low call quality. This isn't what I want to be paying for when buying services such as Skype In or Skype out.
SIP allows me to connect to networks without hassle and without problem. Half of Skype's problems that I see is the fact that they are using a closed protocol, again, the call quality is too low to be considered acceptable as well.
If they managed to fix this, I would be a lot happier to move everything onto one provider. I currently have to subscribe to three different service providers to get what I want, this means three bills, three accounts (In different countries, so different currencies as well) to manage and three times the headaches.
If they started offering a decent solution, and I would be one of the first to jump ship.
Berny
Curiosity was framed; ignorance killed the cat. -- Author unknown
It was pretty obvious to a lot of seniors living in deep southern Texas. A lot of us have canceled our AT&T long distance and gone with the annual Skype premium service. The annual charge was about what we paid a month with AT&T and we now can chat without one eye on the clock. I don't know about the non-techies in the 50+ bracket that you know - but I can introduce you to hundreds in the 65+ that Skype out constantly.
However, from the article:
I'm very wary of what 'monetize' might mean. I'm surprised that they didn't plaster ads all over the application soon after eBay bought it to be honest.
I have used SkypeOut extensively, and SkypeIn to a lesser extent. Dealing with a cumbersome network of local telephone service providers, Skype has never been able to get these services working reliably. SkypeOut is good enough for personal use, but not reliable enough for business, and forget about conference calls - the connection would never stay up long enough for that. SkypeIn was much worse - I think most users had about a 50% success rate, assuming it was available in one of the regions that you could use it. Nevertheless I continued to use SkypeOut for convenience, until they decided earlier this year that adding a connection fee would be a really good way to boost the revenue. Now I can call cheaper using my home phone service. Goodbye SkypeOut. It sure looks to me like Skype is in the declining phase that you see when accountants take over - attempting to boost revenue from the existing customer base without innovating or expanding.
I use SkypeIn and SkypeOut, paid up for a year. For what my wife and I paid in cell phone bills for a month (2 phones), we now have home service for a year (we have a paid-by-the-minute phone for emergency purposes when traveling). Roughly $70 a year. I can't complain. We don't use free skype-to-skype calling because none of our friends/family use it yet.
Just wanted to let you know that we saved a ton of money on our phone bills by switching to Skype!
Skype can be used for business as well as home. I am a contractor for a company that has employees in 5 different time zones. We all work together on a daily basis, and I would LOVE to use a professional, secure, videoconferencing system with a white board. There is DEFINITELY a market.
The problem is that nothing has enough momentum for people to be willing to download it. It's like how everyone has 3 different instant-messaging applications. What we need are open standards.
Oh, but you and the summary are missing the many, subtler issues that suggest real, bottom-line trouble for ebay with the skype acquisition.
- About a half-billion dollars of the charge is for a payment to Zennström, Friis, and other early Skype investors. Cha-CHING! I've been on the wrong end of a couple of similar (smaller) acquisitions and what typically happens in a well-negotiated deal is ebay (in this case) doesn't pay them whatever they agreed to beyond a token up-front signing payment. Right or wrong, typically the founders don't have enough capital to drag it into court so they take their small pay-out with the original deal and that's the end of it. In this case, ebay negotiated so poorly they couldn't get out of their deal.
- Sure they value deals at Billions(!) but when it comes down to it, normally acquisitions are just not that cash-rich. Except in this case. If they had met their earnings targets, then the payout would have been double the charges they are taking.
- ebay's being very uncharacteristically up-front about the charges. Which suggests to me the damage is far worse that what's being reported. Look at all of the mortgage-backed securities that are still going from billions in valuation to zero overnight.
This suggests there's far more wrong at ebay than right.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
Part of it is proprietary nature. We use Asterisk at my office for our phone system. I would love it if we could pay a small fee and make calls too and from our phone system using skype. Sort of a Skype toll free number. Some of our overseas customers use Skype but there isn't any good way to integrate Skype with our current phone system.
A Skype module would also be nice to put into our software. Just click a button and call tech support over the Internet.
Skype has potential but not in it's current form.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
Did they? I think Google is just flailing around these days, trying to figure out what to do with all their money. Buying YouTube made no sense to me; basically YouTube is like Napster for videos, except that they have to pay for their own bandwidth. Google bought it because it was cool and popular, not because it made sense financially.
Have you read my blog lately?
The problem with skype is that their income is in inverse relation to their network size, making it a particularly poor "web 2.0" network-driven company. The more people who have skype (and a connection to support it), the fewer people will use skype(in|out) services. For example, my girlfriend lived in China over the summer. At first I called her using skypeout. When she finally got Internet, tho, we just used skype-to-skype, because of better call quality and video capabilities.
Skype has to find a way to increase their revenue as their network of users increases; probably through an ad-revenue stream to their in-calling services. Doing this the wrong way, though (pre-call audio ads, etc.) will just scare people off to IM services with voice chat capabilities, which is increasingly all of 'em.
Good luck to 'em. I like skype (except for the lack of "quit/exit" in their file menu!)
Returned Peace Corps IT Volunteer
Skype only really works for me to call other Skype users. I tried to use Skype as a regular phone, but dropped the account when it failed miserably. I had two problems:
I can't call the IBM pukes that I have working for me. That's because Skype doesn't allow Skype-out service to some area codes, and that includes the IBM conference calling center in Missouri.
And, the Skype client doesn't support DTMF tones properly. That pretty much eliminates Skype for everything except calling your mistress on her home phone. You can't get through any kind of voicemail or call answering touch tone menu without DTMF support.
No weapon in the arsenals of the world is so formidable as the will and moral courage of free men.-Ronald Reagan
"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."
Skype-in and Skype-out are currently their main revenue sources, and they both have horrible quality. I live in Brazil and have family in the USA and other states in Brazil that do _not_ have internet. I tried skype-out with them and the quality was atrocious. I could have saved about 50% and its just not there yet.
In short, I've bought a skype phone that plugs directly in to my router since I exclusively run linux and their linux client sucks - I already happily spent US $250. I and my wife talks to my family that has internet all the time via skype to skype. Want more money from me? Fix skype-in and skype-out to have universally the same quality as a land line for 50% less money than the outrageous brazil telco's change, and I'll gladly pay you. I doubt they can and that's what I think it would take for skype to have a valid business model. Vonage etc isn't global so its wide open for skype themselves to win or lose.
There are no surprises here. Everyone already knew this. Well, hmm, perhaps eBay for once in their corporate life admitting that they are complete fools, is actually surprising -- again, everyone has known that for sometime too.
Can anyone explain to me why that fat worthless saleswoman Meg Whitman is still employed?
I tried to use Skype in. The number they gave me wasn't in my LATA. I couldn't get anyone to respond at Skype to help resolve this issue, so I paid for a year of service that was useless to me. I use skype out on a regular basis, to talk to a friend who moved to Russia for a few years. On two occasions, my Skype Out credit, nearly $20 worth each time) vanished for no apparent reason (it doesn't seem to have been stolen, since there were no logged Skype Out calls using it up, it seems to have been a system glitch of some kind). I received responses from Skype email technical support, but they clearly didn't understand the problem and didn't care to resolve it.
At first this really annoyed me. Then I realized that if AT&T (or any regular telco) had done this to me, I could have complained to the public service commission and went several rounds with yet another front line support person who doesn't understand the problem and just replies with an email that says effectively, "AT&T says it didn't happen. Case closed." At least I would have had a reason to vote against an incumbent somewhere.
So, with Skype, the service quality is crap, the customer support is crap, there is no recourse, but it's cheaper than water. With AT&T the service quality is excellent, there appears to be functioning customer support which sometimes results in a problem resolution, there is recourse to a public oversight agency that is a useless pile of crap, but it's frightfully expensive.
Pick your poison. Six of one. *** Your favorite appropriate cliche here ***
If you mod me down, I shall become more powerful than you could possibly imagine.
I wonder if it would be feasible to run skype in a jail with it's audio redirected, it's display routed to a dummy xserver and the skype API controlling it.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
I'm in a distance relationship (yeah yeah, cue the lame jokes about slashdotters not having relationships. Oh, and yes we've met in person I just haven't yet found work in her area to move permanently). Both my GF and I have subscriptions to the skype PC->phone service, which means that we can call each other so long as one of us is near a PC. When we're both at home, we just use skype-to-skype since the audio quality is better (in fact, often better than phone-to-phone).
Since I bought into mine last year during the special, I think it was all of $15CAD to subscribe. Given the amount I use the service and the savings I've made on long-distance calling cards, as well as cellphone bills (free incoming, yay) I'd say that it's been a very worthwhile investment. I'm hoping they'll have another special offer around New Years for the same price, but if it were twice that it would still be a deal for me.
In line with other tools for geeks in relationships over distance, those interested might want to check out goodies like SNES9x (you can play old-school SNES games together), and VLC (with a good enough connection/PC, you can broadcast a movie over the 'net so you can watch shows together). It's not quite the same as being together and snuggling, but so far it's helped our relationship keep in touch and thus survive until I can find work and move to Toronto [shameless plug]Hire me[/shameless plug]