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April 1, 2008

Google/Skype Acquisition or Partnership Imminent?

Michael Arrington

83 comments »

Something big is brewing between Google and Ebay’s Skype, we’ve heard from multiple sources. Actually, for weeks now there have been low level rumors of the two companies talking, but nailing down any details was difficult. New information, however, suggests that they are in current talks and that a partnership or outright acquisition may be announced in the near future.

Skype, acquired in late 2005 for $3.1 billion, has been a financial albatross around Ebay’s neck. eBay removed Skype co-founder and CEO Niklas Zennstrom in October 2007, reportedly due to frustration at the financial performance of Skype. Ebay also negotiated down the huge earnout due to Skype stockholders and took a $936 million one-time loss around the transaction.

It’s clear that eBay wants to either unload Skype, or significantly drive performance.

Google, by contrast, is just beginning to think about how to dominate the voice space. They have a VOIP service through GTalk, a free 411 service and GrandCentral, a telephone management service they acquired last year for $50 million.

All of these products reside under VP Product Management Salar Kamangar and his new right hand guy, Bradley Horowitz. Other key players in the group are Wesley Chen, the product manager who championed the GrandCentral acquisition, and GrandCentral founders Craig Walker and Vincent Paquet.

That core team should be at the CTIA Wireless Conference in Las Vegas, but we’ve heard that they either aren’t there or at the very least aren’t showing up for scheduled meetings (if anyone at the event sees them, let me know). That doesn’t mean the team is busy working on a partnership or acquisition of Skype instead of attending the conference. But given that we’ve heard from sources close to the deal that something is happening between the companies, it’s not a stretch, either.

What does Skype bring to the table? Scalable technology and a proven platform in the VOIP, VOIP2POTS and P2P Video, to start - 100 billion VOIP minutes have been logged on Skype to date. At any given time there are 10 million simultaneous users on Skype. Skype is the glue that can pull all the nascent Google products together.

  • Sphere It

This entry was posted on Tuesday, April 1st, 2008 at 6:22 pm and is filed under Company & Product Profiles. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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Comments

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  1. Nicholas Kreidberg

    April 1st, 2008 at 6:38 pm

    I couldn’t agree more with the statement “Skype is the glue that can pull all the nascent Google products together.” — seems like a perfect partnership. Skype is a decent product and in different hands (namely Google’s) I think it evolve into something even better.

    Good post Mike.

    - Nick

  2. Michael Bakovic

    April 1st, 2008 at 6:38 pm

    Lets see how this turns out.

    -Michael B, check out my site for ways to make money online http://www.mikesmoneyclub.blogspot.com

  3. Metal Glass

    April 1st, 2008 at 6:40 pm

    http://www.metalglassfurniture.com
    Google and SKYPE ,I like doing them,ah…

  4. Jase

    April 1st, 2008 at 6:41 pm

    I’m not going to believe anything until April 2nd.

  5. MikeT

    April 1st, 2008 at 6:43 pm

    Jase - you are right.

    No posts are taken seriously until we get the tesimony from TC about the fake and real posts.

  6. BA

    April 1st, 2008 at 6:45 pm

    Very interesting. Lets hope so…

  7. Sunil

    April 1st, 2008 at 6:46 pm

    Big News

  8. andrew k

    April 1st, 2008 at 6:46 pm

    you are missing google’s acquisition of the amazingly tight jott.com makes sense skype/jott/grandcentral/android that’s some heavy guns man. i personally love jott - voice to text.

  9. Rob Abbott

    April 1st, 2008 at 6:49 pm

    Not an April Fool’s joke.

    This partnership (or acquisition) will accelerate growth for both Skype and Google. Everyone left with a question mark lingering over their heads since eBay acquired Skype, should understand this move.

    eBay and Skype failed each other, no solid PayPal integration and the executive leadership circus that last for more than a year between the two left the strategy in shambles.

    Skype needs a strong partner or a warm home. Google can be that.

  10. Ryan

    April 1st, 2008 at 6:50 pm

    Yeah is this a joke? Im not even bothering going to Digg today it’s pointless to read or believe much today?

    This is what should have happened rather then Ebay. I want to Skype right thru my Gmail account.

  11. jenkins

    April 1st, 2008 at 6:54 pm

    Michael,

    How incredibly insightful for you to believe that eBay would like to “either unload Skype, or significantly drive performance”.

    What’s the alternative? Drive the company into the ground? Try to get weak performance out of Skype?

    Sometimes you sound like someone that knows very little about business IMHO. Not sure how that can be true.

  12. Affiliate Confession

    April 1st, 2008 at 6:55 pm

    So Google thinks they can turn around the albatross that eBay couldn’t? What, do they just want the challenge?

  13. Mike

    April 1st, 2008 at 7:17 pm

    I’d be using Skype more today if the damn fools would just get skype in numbers in my area code!

  14. Fabian Schonholz

    April 1st, 2008 at 7:22 pm

    April’s fool or not. Google + Skype not entirely a bad idea.

  15. Carter F. Smith

    April 1st, 2008 at 7:32 pm

    as above - great merger idea, assuming it’s not a prank . . . how many tech communications plus firms can boast dual-verb status.

    I see a Skypecast on Google Calendar and Goggle docs presentation over Skype in the future!

  16. Arc Tangent

    April 1st, 2008 at 7:33 pm

    Considering how some of TechCrunch’s jokes today are just unsophisticated lies (twatr?), I wouldn’t put it beyond TechCrunch to lie about this thing. I mean, come on, I get it: April 1 is a prank day. So do your *one* hilarious prank. Regardless of whether this and other stories were a prank, you should *hint* as to whether or not it is a prank in the story itself. Otherwise it’s not a joke, it’s just lying and not having literary sense. The goal with April 1 is not to just…lie, it’s to tell a clever (untrue) story. Just because you can lie doesn’t mean you can say Gotcha! and call your reader a fool–you’re missing the narrative spirit. It’s funny to see how poor TechCrunch is at understanding this annual humor device.

  17. Arc Tangent

    April 1st, 2008 at 7:37 pm

    Guess we’ll just have to wait and send TechCrunch more clicks tomorrow in order to find out if we are fools. Confusion != funny.

  18. Larry Larrikin

    April 1st, 2008 at 7:39 pm

    And they’re going to convert the Skype platform to use SIP.

  19. Arc Tangent

    April 1st, 2008 at 7:39 pm

    If this *is* true, and you want readers to consider it as true, you really should make it a little more obvious in the story that you’re not jerking our collective chain.

  20. SciFiDrive

    April 1st, 2008 at 7:44 pm

    google expanding to communications aside internet advertising and search engine marketing.

    microsoft/msn is still playing catchup.

    http://scifidrive.com

  21. Albert K

    April 1st, 2008 at 7:47 pm

    I hope this is true. Google needs to figure out another method of revenue. Stockholders aren’t happy right now. I hope this ain’t an April Fools’ joke!

    -Albert

  22. Anonymous

    April 1st, 2008 at 7:49 pm

    PS - For fuck’s sake, will you do something about the SEOtards who keep posting generic comments with links to their pages?

    Case in point #2, #3, #6, and #19.

  23. abdi

    April 1st, 2008 at 8:16 pm

    Why not just spin it off? :/

  24. MrCashyCash

    April 1st, 2008 at 8:16 pm

    I don’t know what to believe now…

  25. Fabian Schonholz

    April 1st, 2008 at 8:28 pm

    @17 - Larry … that was funny!!! :D

  26. Arc Tangent

    April 1st, 2008 at 8:32 pm

    @Anonymous getting awfully grumpy about comment spam. Mobilize forces! @Anonymous needs comment purity pronto.

  27. NickeyD

    April 1st, 2008 at 8:33 pm

    If they integrate Skype with Android, that would be something.

  28. Alex

    April 1st, 2008 at 8:34 pm

    OK. I’ll keep this short and sweet.

    1) In the past I’ve bashed GrandCentral as pulling the wool over GOOG. Yes, I think GrandCentral got the better part of the deal by a mile. However, were GOOG did well was bringing on Vinnie and Craigy. They actually do understand VoIP.

    2) Skype is the standard as far as VoIP. The voice quality is excellent for the most part + they have that huge customer base.

    What’s missing from GOOG’s perspective.

    1) MSFT bought the best voice technology company in the market. That was TellMe Networks - Hosted IVR

    2) GOOG should buy J2 Global aka eFAx

    3) GOOG should most definetly buy Skype given the opportunity. They could and should build out a virtual PBX platform using Skype’s Network (which of course extends to mobile).

    4) GOOG should buy ZOHO

    5) The ONLY question mark is can GOOG build a Hosted IVR platform on par with TellMe. I’m not sure they can….

    6) Collaboration (WebEx) - build it out.

    Acquiring the companies mentioned above gives GOOG instant overnight 600lb status (minus hosted IVR).

    Losers in this scenario;
    ALL companies related to - virtual pbx, voice conferencing, fax providers, hosted crm.

    AND YES, OUCH this would hurt Cisco, Avaya (goodbye Nortel nail in the coffin). Actually, Cisco may jump in on the bidding for Skype. If they lose out look for all mighty Cisco to acquire Digium.

  29. Web Design by Jacques Snyman

    April 1st, 2008 at 10:22 pm

    Google’s acquisition drive continues unabated….not only are they the PPC kings of th internet witht heir latest acquisition, now they’re looking at dominating VOIP, especially interesting when you look at the phenomenal growth in mobile. Skype will be a wise acquisition, and with Google’s resources behind it we could be in for some very exciting times!

  30. dave mcclure

    April 1st, 2008 at 10:23 pm

    I really don’t think Skype has been “financial albatross”, just maybe not the screaming home run eBay hoped for. Skype did what, $300-400m rev last year, and were only doing $30-60m when they were bought… and they’ve torn up user acquisition to over 150m users or somesuch, right? what’s not to like? sure, maybe no PayPal but not chopped liver either.

    eBay bought revenue diversification, not profit… and they got it. given how poorly eBay’s core biz (ex-paypal) has performed the last few years, I’m surprised more Qs weren’t being asked eBay mgmt, rather than Skype.

    I agree in the right hands Skype has plenty of potential. still think there’s more value in Skype-PP integration too, but perhaps that requires more success from PayPal mobile / wallet & more Intl growth.

    anyway, can’t see how eBay lost out on acquiring $400m+ ann rev in exchange for ~$2b when eBay shares have been distressed for 3 years. writedown or not, it was a decent if expensive deal. not fantastic, but not “albatross” either.

    bet they still make a profit if they sell.

  31. B. Ackles

    April 1st, 2008 at 10:28 pm

    The true FOOLS joke was eBay’s acquisition of Skype. What were they thinking? Why did they ever consider buying a product which (if integrated with eBay) would inevitably compromise eBay’s beloved final listing fee? This buyout never made sense.

    April fools or not, this would be a much better fit…

  32. Damon Billian

    April 1st, 2008 at 11:38 pm

    Given that Skype is fairly integrated with PayPal, and some of the recent animosity that eBay and Google have shown one another, I would personally be very surprised to see such a thing happen.

  33. Raanan Avidor

    April 2nd, 2008 at 12:46 am

    Google and Skype? So I will not be able to pay my Skype bills with PayPal? I start to hate Google.

  34. Stop Google

    April 2nd, 2008 at 12:46 am

    Google seemingly wants to control ALL of our communication.

    In a few years, you will spend your ENTIRE online day on Google sites (which will of course not carry the Google logo…).

    And our government will know everything about you.

    I think it’s high time to stop using Google products.

  35. Esther

    April 2nd, 2008 at 1:10 am

    I surely wont get a Google account to use Skype. If they acquire them, Skype is history for me.

  36. Moe Glitz

    April 2nd, 2008 at 2:36 am

    Apart from their great Search and Advertising Model, Google has failed to deliver on any new Business Product, especially ones that try to copy the Ebay range of products.

    How would you rate - Ebay vs Googlebase. Paypal vs Google Checkout, or Skype vs Google Talk.
    In all Three matchups, Google is a very poor second.

    You know that the only funny thing about go of these terrible April Fool Google Stories, ( Google to buy Expedia?) - is that the biggest joke of all is Google.

  37. Peter McDonald

    April 2nd, 2008 at 2:54 am

    Yahoo and Ebay ?, zing!

  38. Jim Peake

    April 2nd, 2008 at 4:11 am

    this is google making another real estate buy with users and keypads….they will surely be able to monetize significantly…all the sudden they will have boardwalk and park place and properties all around the internet & telco board.

  39. Sebastien Provencher

    April 2nd, 2008 at 5:01 am

    I think it makes complete sense. IMHO, call tracking and pay-per-call represents a large portion of future local search revenues and Google clearly sees that local search is where they will get tremendous growth in the next 5-10 years. By buying the Skype infrastructure (and user base), they instantly get a core asset to execute globally on that strategy.

  40. edenstrom.wordpress.com

    April 2nd, 2008 at 5:02 am

    Isn’t there any way to ban the SEOtards? Hasn’t WP-Matt some solution to this?

  41. Frank Church

    April 2nd, 2008 at 6:37 am

    @29 (D McClure), The biggest secret Paypal has is that the majority of its users are the unbanked in countries outside the US. Paypal usage over Skype costs the recipient 4.9% +$0.30 which highway robbery. Since Ebay couldn’t find internal synergies they left it flapping on the bank like a fish out of water.

    Sell it to Google or spin it out!

  42. Frank Church

    April 2nd, 2008 at 6:39 am

    @29 (D McClure), The biggest secret Paypal has is that the majority of its users are the unbanked in countries outside the US. There simply is way too much friction to make your dream work out (but keep your stock, just in case)

    Paypal usage over Skype costs the recipient 4.9% +$0.30 which is highway robbery. Since Ebay couldn’t find internal synergies they left it flapping on the bank like a fish out of water.

    Sell it to Google or spin it out!

  43. jc

    April 2nd, 2008 at 6:59 am

    I don’t think skype is for sale. They just got a new director in Josh Silverman and they are cash flow positive. I can see why google would want them, but I don’t see why ebay would sell at this point as they are continuing to grow and gain traction… http://skypenumerology.blogspot.com/

    I do not think they will sell, partner maybe, but not sell.

  44. Harry Wang

    April 2nd, 2008 at 9:25 am

    New CEO, fee changes that seem to be working even more, site changes, possibility of selling Skype. I may be looking to unload soon if we get a good pop on the stock here soon. Maybe we’ll see another Amazon like run up this year (i.e. as Amazon’s stock did late last year).

    Harry “I hope so” Wang

  45. Harry Wang

    April 2nd, 2008 at 9:43 am

    While we are postulating…eBay may want to retain Skype as it is generating a decent yearly return even though it is not at the level they had anticipated. The whole “synergy” thing didn’t roll. With VoIP still somewhat in its infancy, that return may be a solid ride until bigger and better possibilities come about.

    Also, on a tangent, if Microsoft buys Yahoo, Microsoft should sell off Yahoo’s auction properties and/or some other asian interests to eBay to turn some quick cash profit. This would also boster eBay’s position in asia.

    Harry “I think therefore I am” Wang

  46. Harry Wang

    April 2nd, 2008 at 9:43 am

    [forgive it this get posted more than once - TC seems to be a bit unstable at the moment]

    While we are postulating…eBay may want to retain Skype as it is generating a decent yearly return even though it is not at the level they had anticipated. The whole “synergy” thing didn’t roll. With VoIP still somewhat in its infancy, that return may be a solid ride until bigger and better possibilities come about.

    Also, on a tangent, if Microsoft buys Yahoo, Microsoft should sell off Yahoo’s auction properties and/or some other asian interests to eBay to turn some quick cash profit. This would also boster eBay’s position in asia.

    Harry “I think therefore I am” Wang

  47. What a Joke

    April 2nd, 2008 at 10:52 am

    Great, another business that Google can throw money at. What makes you think Google can run Skype any better than eBay?

    4 years from now, Microsoft will be trying to buy Skype from Google.

  48. StrategCore

    April 2nd, 2008 at 11:37 am

    Take a deep breath because when Google puts Skype into its mix (does anyone use Google Talk?), there will be very little quiet time! Interesting to think how this potential acquisition could affect Google’s mobile ambitions.

  49. spammy comments

    April 2nd, 2008 at 12:13 pm

    These comments need some serious moderation. Mike, it looks like TC is really starting to see the same problems Digg, Reddit have experienced. With your mention of HN they seem to be worried about this as well. It would be interesting for you to do a write up of the growth of a site and the deterioration of the comments/community. It seems as though thoughtful discussion always gives way to UFO’s and conspiracies.

    Digg is pretty much worthless now, used to be the comments were better than the stories. Reddit was soon to follow.

    Sorry for the rant, I would delete this as it has no beraing on the discussion.

  50. Michi

    April 2nd, 2008 at 5:15 pm

    In my oppinion they wont buy Skype.

    Michi
    http://www.glimpseofnewyork.com

  51. Nicolai

    April 2nd, 2008 at 11:48 pm

    Combination of Skype’s user base, and features such as those provided by GrandCentral, would provide an interesting proposition for Google I think, and would pose a serious player in the space that we (my startup) is operating in, which is where Voice over IP goes beyond cheap calls, and is more about integration of Voice as one of many Internet communication method, and it becomes more about how people are Reached, and more complex presence management.

    I think that we will see a lot of things happening in this space with companies like Ribbit, GrandCentral (now Google) and our Semantic Presence.

    Nicolai
    http://reachcards.com/

  52. friendcredit

    April 22nd, 2008 at 5:14 pm

    Big News

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