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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.'"
SKYPE - 200 million+ users - Used, LIKE NEW! A++++ SELLER
Buy It Now: $2,000,000,000
Current Bid: $5.50
Hmmm... smells like the bubble could be collapsing.
Just out of interest: Of everybody you've ever hear talking about Skype, how many mentioned the free Skype-Skype calls and how many mentioned you can pay to call others, too? (It's about 50:1 with quite a lot of non-techies in the 50 and an ex-coworker in the 1 group...)
- 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.
If you really want your life to get more interesting, give us your husband's cell number.
To ebay – get your act together or you'll lose most of your current paying skype customers (and forget about growth)
The Raven
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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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
--
Why is it I can write insightful comments but can't come up with a clever signature?
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
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
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)
Who cares about Skype when we have iCall http://www.icall.com/ where one can make free (and I mean free) phone calls throughout the US and Canada, without dolling out dollars to Ebay? Skype executives should wake up and smell the coffee.
I am obviously in the minority of users who pay for Skype services. I live in the UK and my family is in Australia. Using Skype-Out at a rate of around £0.1/minute is significantly cheaper than any comparable Telecom or other "cheap calls" organisation. I know quite a few other people who use Skype in the same manner. I spend around £5 per month on Skype.
Now in comparison, I spend somewhere between £50-£90 per month on my mobile phone. The amount largely depends on whether I've traveled out of the UK that month. With wider adoption of VoIP services on mobile devices, for sure my cell phone bill would drop and a portion of the money would siphon across to my Skype account.
The final thing holding me back from spending more on Skype is the expense and poor quality of the "phone" devices available. I spent £100 about a year ago on a Skype Wi-Fi phone. No need to have anything connected to my computer, the phone's base unit was supposed to connect directly to my wireless router and behold, I have Skype calls very easily. Unfortunately, after waiting almost a month for my order to be fulfilled, within 3 weeks the phone unit died. I gave up trying to get a refund from Skype and trashed the thing. So far I've been reluctant to spend a similar amount on a device that may die again quickly and have to deal with Skype customer service.
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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!
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
Read the quote again:
"division also recorded its second quarterly profit in a row on July 18 on revenue of $90 million."
The $90 million is revenue, not profit. There is no indication of what the profis is.
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
After all, it is not impossible for ebay to use skype effectively even if skype is not profitable independently. Just imagine,
1) assign a free skype account for each buyer or seller (match skype id to ebay id?)
2) add a voice message feature to My Ebay (maybe, record conversations as well?)
3) associate voice messages/conversations to transactions
4) resolve disputes with voice messages/conversations
5) how about a little fee for such a convenient service in order to safe-guard the interests of both buyers' and sellers'.
Well, I may pay a few $$ for this additional 'insurance' for a transaction of a few hundred $$.
^(oo)^pig~
Though you made a huge mistake and ran with it. Google didn't buy skype, eBay bought skype.
And there is a reason that skype client advertises PayPal now. eBay owns PayPal as well.
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.
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.
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]
I almost put this exact recommendation in my post. Then I found it already exists:
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