Wednesday, October 17, 2007

eBay Skype over?

Following my post in 05 eBay announced a few days ago writing off their investment in Skype. I still don't understand why they bought it in the first place and even more surprised they didn't take advantage of its features. The only thing I saw was some buyer with a Skype-Me button. Why did eBay not use Skype for adverts. Why didn't eBay create live voice/skype based auctions. Any many other things they could have is very odd to me.

The real question here is the future of Skype. eBay writing it off is not only in order to establish a base line with share holders who had already wrote it off in their minds, it is also somewhat of a vote of no confidence in the product. This together with the fact that eBay hasn't used any skype related features and the exist of the founder of skype puts in questions in my eyes the future of skype. Yes it is hard to imagine a company with 220 million users and 7 million simultaneous ones fades away, but, it is possible, look at icq.

what are your thoughts?

here are some interesting ones

Skype Buy: A Mixed Bag for eBay

By John P. Mello Jr.E-Commerce Times Part of the ECT News Network 10/12/07 4:00 AM PT
eBay got several things right with its $2.6 billion buy of Skype, according to Gartner. One of them was the realization that communication applications could be used to reduce friction in online business transactions. Nonetheless, the Skype buy was premature, the research firm maintained.
What's Linux with a Lineage?Verio Linux VPS delivers root access, advanced FairShare technology for better performance, and support that's actually supportive. It’s all from Verio, the Virtual Private Server technology pioneer, with over 500,000 customers. Test-drive Linux VPS here.
Online marketplace eBay (Nasdaq: EBAY) paid too much for the Internet phone service Skype , but its head was in the right place when it made the buy, according to a report released Tuesday by a major technology research firm.
"eBay's September 2005 acquisition of telephony vendor Skype was overpriced by any direct measure: technology value, user base and revenue," writes David A. Willis for Gartner (NYSE: IT) , of Stamford, Conn.
"However," he adds, "eBay was correct in its vision of interconnecting the worlds of business applications and communications capabilities."
Hit to Bottom Line The Gartner report comes on the heels of eBay's announcement this month that its books will be taking a US$1.4 billion hit in its third quarter, most of it due to writing down the value of Skype, which made $90 million for eBay in the company's second quarter.
That write-down could be a positive thing for eBay, contends Tim Boyd, an analyst with American Technology Research in Greenwich, Conn.
"The market has been discounting the Skype acquisition ever since eBay made it," he told the E-Commerce Times. "It's been a negative overhang for the company."
With this write-down, he continued, eBay is finally admitting that they overpaid, cleaning up the remaining costs of the deal and moving on.
A phone call to eBay by the E-Commerce Times asking for comment on the Gartner report and the Skype write-down was not returned.
What eBay Got Right In its report, Gartner cites several things that eBay "got right" with the US$2.6 billion buy of Skype. One of them was the realization that communication applications could be used to reduce friction in online business transactions.
However, the expected synergies from the Skype buy never materialized, according to Boyd.
"Part of eBay's initial justification for the purchase was that it would reduce friction between buyers and sellers on the platform," he explained. "I don't think it's had much of an impact on that.
"Most of the sellers that I've spoken to have implied that they don't have time to talk to every buyer who's interested in their items so they don't offer a 'Skype-me' button on their listings," he added.
Indeed, Gartner maintained that the Skype buy was premature.
"The market was not ready to adopt Skype as a means to integrate commerce," it says. "Users see its service as an inexpensive or free calling option, not a means of accelerating their business as an eBay buyer or seller."
Growing Demand Another "got right" by eBay, according to Gartner, was its recognition of the growing popularity of integrated communications among Internet users.
Skype subscribers are doubling annually, Gartner reports, and the service claims 220 million subscribers with more than 7 million of them frequently on line at the same time.
"Many are attracted by cheap or free voice calling," the report observes, "but many also appreciate the convenience of instant messaging client integration, conferencing capabilities and other productivity applications."
Not Worth $2.6 Billion Gartner also points out where eBay went wrong with the Skype deal, such as what they paid for the technology.
"As similar acquisitions have proven, Skype's basic technology could be purchased elsewhere for 1/100th of the price," Gartner maintains.
"Is Skype a viable entity, is it a valuable?" asked Will Stofega, research manager for VoIP services at IDC in Framingham, Mass.
"Yes," he told the E-Commerce Times. "Is it worth $2.6 billion? Probably not."
Flat Support Nevertheless, he argued that eBay hasn't done much to build its value since it purchased the technology.
"There hasn't been any real effort to take control of this thing and put some wheels under it so it becomes a premiere piece of software," he said.
"That's what it really is," he continued. "You can talk about it being a service, but at the end of the day, it's a piece of software that resides on a client somewhere.
"Getting that client onto mobile phones, onto PCs and into the enterprise in a legitimate way is something that could really start to energize the product," he opined.