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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 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.
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
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
--
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
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
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.
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
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
So, it works great, except to talk to your in-laws? What an AMAZING coincidence! :-D
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