Comments on: A possible vision behind Ebay’s acquisition of Skype?

By: maryline

maryline — Tue, 04 Oct 2005 02:35:26 +0000

I agree with you Nathan that a real time market does not translate well over an audio-medium. I also believe it is just a question of time before Skype/Ebay offers video capability. The technology is similar to the audio, you just need larger servers to carry more data and eventually, you will need more broadband spread in the general public. Companies like Akamai Technologies who I used to work for, or Real Networks do this very well for their BtoB customers. Personally –and I know many people who do the same- I launch my webcam via Yahoo or MSN, while using Skype for the audio and talk and see live my speakers. I feel pretty close to them. A couple years ago, we were broadcasting live auctions over the internet with a platform that would allow bidders to participate from distance. The business model was not profitable then but I believe that, with the spread of the technology, it will become a profit center in the near future. Take a look at what is happening in the online gambling business and games like pokers: a gold mine.
Regarding paying too much money for Skype, I would imagine that its huge customer base (about 2 million people online at any given time) has a strong value even if, like you said, they might not currently be of the same value as Ebay customers. Skype is very strong in Europe so it might be a strategic move for Ebay to penetrate this market faster? The value of a company is also based on its potential for PR and promotion. In 1999, financial analysts said that Yahoo paid Mark Cuban’s company: broadcast.com too much money. They did not take into account the formidable promotional tool streaming media would become.

By: Nathan

Nathan — Thu, 29 Sep 2005 17:20:20 +0000

I think the biggest issues with this purchase are:
• The purchse price is ridiculously overpriced
• It’s not clear that voice2voice interactions will aide auction sales
The first is based on the fact that Skype currently doesn’t target (nor promote) buyer/seller interactions. So, while they have a lot of cutsomers, these are not the same customers that are, necessarily, valuable to Ebay. Next, this technology is simple and could be replicated by a small team (3-5) of developers quickly (3-6 months). Since Ebay could deploy it to their customers immediately, and the development and even promotion costs to themselves would be under $1M, spending $2.6B on Skype is both insane and reckless.
Secondly, one of the things that has made Ebay successful is their ability to offer people all over the world (in all time zones) acces to locally available goods. They’ve shown no evidence that requiring or allowing time-synched communications will improve sales in any way. It may be plausible but they haven’t shown any evidence to support it.
I understand your analogy, Maryline, to the live realtime market but I don’t think this translates well to telephony. As you’ve stated in our Communications class, telephony is a medium that restricts sharply non-verbal communication, something that is not only evident but a big part of face2face negotiations, whether in a market stall or on a trading floor. I don’t think that v2v is going to be enough to make this work across the world for Ebay buyers and sellers, especially with the current dismal state of VOIP communications (cheap but completely unreliable).