Now that eBay’s Skype write-down has caused it to take a $936 million loss last quarter and founder Niklas Zennstrom is out, the question is what will eBay do with Skype. According to one source, the remaining Skype/eBay management team is holing up in London this week to try to figure out how to actually make money from Skype. (While the business is on track to pull in just over $400 million in revenues this year, expectations were higher).
The problem with the $3.1 billion Skype acquisition from the start is that it never really made much sense for eBay. Unlike Paypal, which accounted for about 15 percent of payments on eBay when it was purchased five years ago, nobody uses Skype to close deals on eBay. In fact, one of the original justifications of the deal was that it would help “increase the velocity” of transactions on eBay by allowing buyers and sellers to actually speak to one another for bigger items where more communication might be necessary. But Skype has yet to be implemented on eBay itself (someone please correct me if I’m wrong). The reason for that is because if buyers and sellers could call each other, that would effectively allow them to go around the eBay marketplace. You and I could close a deal on an old camera or bicycle without paying eBay its cut.
Meg Whitman, who just left the stage at the Web 2.0 conference, admits: “We weren’t quite dead-on with the strategy that we thought was the strategy.” Yet she says she remains bullish on Skype’s potential, and defends the acquisition, reasoning that, “In this business the cost of inaction is far greater than the cost of making a mistake.”
The best bet for Skype right now is to expand into other areas of voice communications like mobile, and make more deals to embed Skype into big Websites like MySpace. Just don’t expect to see a lot of integration into eBay itself.
(A bit off topic, Whitman also hinted on-stage that eBay is thinking about how to blow out Paypal into a full-fledged identity and reputation system that you can take with you all across the Web. The Web needs a reputation system and a way to authenticate people’s true identities. This is right in eBay’s sweet spot. People already trust PayPal.)
Skype had the buzz going for it last year around this time. My company was using it to talk to the UK office, but most people just pick up the phone and dial instead of using skype. If it wants to get better acceptance and use, it needs to be more accessible for the non-tech crowd.
Skype has changed the way I do business. I have Skype numbers for East and West Coast clients, and add international numbers for those special cases. I also use Skype-Skype calling to work with my subcontractors, which must have saved me a fortune over the years.
I was worried that ebay might harm Skype by trying to make it into something it was not, but the interference via acquisition seems to have been benign to all, except for ebay - who grossly overpaid.
Skype is a cool business. No doubt about it.
eBay is a cool business too.
eBay buying skype, however, was a DUMB move. Suck it up, move on.
When will eBay bring widespread integration of skype into their auctions? That’s just beyond me.
- Jessica
It will be interesting to see exactly what eBay meant in reference to PayPal for reputations. (BTW, I don’t think people “trust” PayPal at all… I think they just use it because eBay doesn’t give them much of a choice.)
eBay’s reputation system is almost completely useless. I could list all the reasons why, but I think anyone that uses eBay more than a few times already knows them. So it will be interesting to see if eBay is going to try to redo their system using PayPal, or not.
Full disclosure: I am working on a web app to compete with eBay. The primary advantage is my answer to eBay’s broken reputation system.
MGZ
You know what they need? A PLATFORM! DAMN SKIPPY
Skype is a great example of a company who came in and crushed the competition, all but killed off many other forms of calling (esp. in other countries) and now is faced with the issue of attempting to create revenue generating opportunities.
Skype could easily charge a fee for use of the tool and I bet most would still remain a user. That of course is the easy answer.
I used Skype for my new business line because they were super cheap but lately the voice quality has been horrible. Does anybody have any alternatives?
http://lennpryor.blogs.com/len.....ype_h.html
Here was the big indicator for those who are technology betters. Lenn Pryor, former Microsoft goon, jumped ship before it sank into the ocean.
Why don’t turn Skype into a social network? It would be the largest one..
On the off beat note about PayPal…
I don’t trust PayPal. I’ve lost money even when I bought thier purchaser gaurantee. I keep PayPal account with expired CC so I’ve an account and use PaySafe (temporary credit card numbers from master card) to use it on PayPal. Their customer service is horrible and their user interface sucks. They will trick you in using your bank account (if you made the mistake to set one up).
Good luck with PayPal. GogglePay is not bad so is using PaySafe or services directly from credit card company…
I agree with MGZ, people do not “trust” paypal. They use it because they don’t have much alternative when using ebay. How can you trust something that routinely gets hacked? I mean, come on, they are essentially a bank still using username/password.
What a joke.
when eBay purchased SKYPE, the first thing that came to my mind was that they’re going to implement it into ebya’s auction system for sellers and buyers to interact.
To this day it troubles me why they have not made such move. It just makes sense. you can make money off the calls, or the voice interaction alone will drive up the sales for ebay. either way, that would have been great use of the technology.
Yeah right, Paypal as a reputation system. Paypal is like the mafia of payment system. Just pay them more money and you are good to go.
How can a payment system that does not protect a seller be a reputation system. Paypal will not even pass their own reputation test within their industry. First they should fix their customer support or start one. And then they can talk about reputation system.
Integrating Skype into eBay is nice……….
…. but integrating eBay into Skype is bringing more benefit for eBay I am sure.
Egbert
I rather use email when conducting business on eBay, but it’s just me.
I is always good to expand into market that is similar or familiar to a companies existing model. I think that ebay could use Skype for advertising their items. I think the folks over at eBay are very bright and they have something up their sleeves. I guess they have just have been busy fixing the recent bugs.
Now that the impairment charge is on the books, the future looks pretty bright. I agree that the eBay/Skype integration is a non event (as a top powerseller, we have all resisted the ability for buyers to easily ask questions without economic consequences - because buyers tend to ramble on about their cat’s digestive problems if they are not paying for minutes). In high value categories, people just pick up the phone - you can’t be purchasing a car or $20,000 diamond, and be too cheap to pay the $0.30 for a call. Skype can win in three different arenas:
1. It is a conduit to China and emerging markets - many of the 250M users are Chinese, or live in emerging markets (the uptake in the US is very little, about 20-30 million, a reason that eBay paid such a premium because there was little overlap of membership). How to convert the conduit to actual dollars is beyond me - but I don’t make the big bucks
2. Wi-Fi calling - it is no surprise that within 5-10 years, the internet will be available everywhere via WiMax or other similar technology, and the cell phone will just be another Wi-Fi device. The company that can place their software on mobile phones will be able to actually charge for call minutes made on broadband “unlimited” minute plans - skype is best poised for this IF they can get their client on as many phones as possible.
3. Business PBX replacement. It is no surprise that skype probably will make most of its dime from businesses that use the platform rather than purchasing expensive PBX call systems. These companies will be calling out to non-skype users (Skype OUT) and getting calls from people outside skype (Skype In) - both of these are revenue generating actions, and it is critical to the future of skype that it get itself embedded into as many SMB as possible - the value proposition is there, they just need a good sales team and business relevent hardware and support.
Like a lot of M&A’s, this probably wasn’t so much that ebay desperately wanted skype or had a compelling business model lined up, but they didn’t want anyone else to have it. At least they haven’t screwed skype up (yet?).
Actually eBay does use Skype. Auction sellers have a button where people can contact them right away through skype to chat about the product … it’s been there for a while now.
“Yet Meg she says she remains bullish on Skype’s potential”
LOL, I read that as:
“Yet she says she remains bullshit on Skype’s potential”
Meg is NUTS.
Exactly WHAT does she think “Skype” would do for a cell phone? Data usage costs even more than voice! And public WiFi is spotty and unreliable.
Cell: [$] [:-)]
You pay AT&T, but you call anybody, anywhere, anytime. And anybody calls you anytime, anywhere.
Cell data: [$$$$] [;-|]
You pay AT&T and Skype, but at least you’re still in touch.
Public WiFi: [$$] [;-0]
You’re mostly OUT OF TOUCH, you pay Skype, AND you pay your bandwidth provider (indirectly, or directly if it’s private WiFi). When you’re willing to suffer the aggravation, that is.
So Meg must be smoking marijuana or something. Sure, everybody’s sick of dropped calls, and some people are SO sick of dropped calls they’d drop their service and buy Skype-capable cell phone just to punish the cell-Cos for their willful negligence in providing people with reliable service. And I guess there are others upset because they’re poor, but don’t have the discipline to stay under 1200 minutes /mo.
Everybody else is just better off sticking with their cell phone that works pretty much anywhere.
eBay has got the talent and the experience http://www.newsvisual.com/news.....-allo.html in order to improve Skype and make revenue off of it. Until eBay bought Skype, eBay posted positive results EVERY quarter since 1999. How many companies, let alone internet companies, can make that claim? If eBay says it can figure out what to do with Skype, I am willing to give them the benefit of the doubt.
Integrating Skype into eBay = new social networking site
http://vidsonly.blogspot.com
A lot of you guy are negative on Paypal as a reputation system. I disagree.
Paypal’s “we’ll send you 2 transactions for under a dollar” is a GREAT way to verify someone’s identity. It’s enough of a pain that you typically can’t do it instantly, and don’t want to do it multiple times. They confirmed that they can track me down if they want to.
Imagine if every blog, chat board and voting site could make sure they knew who their clients were, and insure that people only vote once, don’t scam or spam the system, etc.
Perfect, no. Waaaaaaaaay better than anything else? yes. I’m just wondering why it’s taken 5 years for eBay to get it!
I agree with the last guy. See, you don’t know who I am.. i may really be the same guy!
if you look at the sum total of Skype’s contribution since acquisition, it came to around $400 million. I think that is pretty good story, which bulk of the analysts are missing. It is not a loss making unit, but having $100 million per quarter business is a pretty good deal.
Think of it: who doesn’t want something as good as ebay + payapl + sykpe as a whole deal. I agree with Meg that “the cost of inaction is far greater than the cost of making a mistake”
Come on, it wasn’t even close to be considered as a mistake!
eBay never took it seriously, that is the problem, as soon as it bought it, skype should have been plastered EVERYWHERE in eBay… why it wasn’t is beyond me.
Jon
many of the places i travel there is wifi EVERYWHERE. A little skype phone would be awesome if you could just roll up somewhere, place a call, and somehow skype bills you.
It’s not the perfect solution for everybody, but when you consider there are some places in SAN JOSE !!! where high speed internet is still not available it looks pretty good.
Auction sellers have a button where people can contact them right away through skype to chat about the product … it’s been there for a while now.
If eBay was smart about it - they would build a Skype application on something platform agnostic like Adobe FLEX (i.e. similar to what TokBox.com is currently doing). They have the marketing and the user base already. If people had a choice of app or website or both, it would be an incredible social revolution on the internet because of the sheer international force that shapes Skype.
I personally love Skype and use it more than any other client (sans GChat maybe). It’s just a really clean and simple client for OS X and does everything so well. Kudos to the Skype UI team.
Another reason why you can’t rush to implement voice into transaction deals is that you want such things to be documented and to ensure fairness to people. Skype would only be useful to eBay auctions in asking sellers questions - but most serious sellers can be contacted via phone or email very easily…
I think that Skype’s network should be independent of eBay (or about 99% so)… Most people don’t know that eBay and Skype are one - most people don’t care.
“But Skype has yet to be implemented on eBay itself (someone please correct me if I’m wrong).”
Speaking of eBay UK at least, sellers have been able to add a button saying “chat” (text) or call (voice) for a while now.
See here:
http://pages.ebay.co.uk/help/account/skype-ov.html
To me it seems like a natural progression to have this feature available, although most sellers (myself included) don’t use it because it is far more time-consuming than using email.
What about rapleaf.com for seller reputations?