Skype
and eBay
26 Sep
05
"There's
no question in my mind that Skype will become a $1 billion company."
Tim Draper, of
Draper Fisher Jurvetson, in Business Week, November 2004
Perhaps even Tim Draper was a bit
surprised at the value that eBay gave to Skype less than a year after
his prediction – not $1 billion, but $2.6 billion in cash and stock,
with additional incentive payouts of $1.5 billion by 2009 if Skype meets
certain performance targets.
Tim Draper with a reason to smile
Back in March, I
highlighted Skype as one of my innovations to watch in 2005. Skype now
has more than 50 million members worldwide, and is adding new users at
over 140,000 a day. Its free computer-to-computer calling has created
new kinds of businesses, such as translation services, that use the
globally free calling and member community provided by Skype to find
employees and get work done.
Many people were puzzled
by the connection between Skype and eBay. Certainly eBay investors were
concerned. eBay shares fell four percent on the news of the deal, to
trade at around $38 a share.
In fact, prior to meeting,
neither eBay nor Skype had thought there was much basis for a strong
relationship, much less an acquisition:
“Before we met with
Pierre [Omidyar] and Meg [Whitman of Ebay], we didn't think we had
anything in common. … And apparently they did not think that either. But
when we started talking, we had an "Aha!" experience in the meeting. We
both kind of went crazy on the whiteboard, mapping out ideas.”
Skype co-founder Niklas Zennstrom,
in Business Week, 19 Sep 05
Zennstrom didn’t elaborate on the
contents of these whiteboards, but here are a few of the new
possibilities:
Ř Adding a Skype button
to eBay auctions, to allow potential buyers and sellers to talk
directly. This could raise eBay’s appeal in markets that are more
accustomed to bartering than auctioning;
Ř Allowing eBay to
charge a referral fee when potential buyers are steered to a
particular seller.
Adding Skype to eBay
auctions gives buyers and sellers additional channels for
communication. This should broaden eBay’s appeal and allow it to
continue its premium pricing approach. It might even drive up eBay’s
growth, which has flattened out between 2004 and 2005. Data collected
by Nielsen/NetRatings, for example, show that eBay's page views in April
2005 grew by less than half a percentage point compared with the
previous April.
More generally, Skype-type
voice services can be added to a variety of other popular (and
profitable) online activities, such as dating, gambling, and
pornography. The peer-to-peer structure of Skype communications may not
make it the ideal choice for calling someone on a landline phone, but it
could be a powerful extension for some existing internet applications.
And for the creation of
new ones. One of the fascinating features of Skype is the high quality
of sound on the service itself. I could imagine a live concert being
broadcast over Skype to a global network of listeners. Adding a video
service (which Skype is currently demonstrating) to this high level of
sound quality creates an intriguing alternative to cable’s pay-per-view.
All of that said, Skype’s
current revenues are still quite small, at an estimated $60 million in
2005, and the company is not expected to turn a profit until 2009.
eBay’s acquisition of Skype
demonstrates its value not as a stand-alone service but more as a
platform and integral component of other services.
Before the eBay
acquisition, many people saw Skype as a service that competed with
companies like Vonage -- two different approaches to internet
telephony. With its acquisition by eBay, Skype becomes something else –
an enhancement to a number of internet activities that are currently
done via the keyboard rather than the headset.
More Information:
- Here’s what I said about
Skype in March 05 when it was one of my innovations to watch.
- I did a comparison of
Skype and Vonage here.
-
Business week interview with Skype co-founder Niklas Zennstrom.
This just in: Jerry Michalski will be hosting a
phone conversation on Skype and eBay with Stuart Henshall, creator of
the Skype Journal, on 26 Sep at 1.30 EST. The calls are catalogued, if
you miss the time. Find out more at
www.yi-tan.com.
