The Jeff Pulver Blog: End of an Era? eBay to purchase Skype

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September 12, 2005

End of an Era? eBay to purchase Skype

So it turns out that the rumors late last week were true. eBay is going to purchase Skype.

But one thing the folks at eBay forgot about, is that while money can buy many things, as the Beatles once said, "Money can't buy you love."

And it was a love and passion by the community of Skype users that directly helped drive Skype's worldwide recognition and success during the past two years. (Having great technology helped a lot too!)

Now that Skype has "gone commercial" I wonder how much of today's Skype community will be there in three months, six months and a year from now.

The punch line here is that it may no longer matter.

Just in a flash, Skype has become the "engine" for eBay customers to communicate with each other. An interesting business model. I'll leave it at that.

What I find to be more interesting is that the basic element of Skype "needing" to be disruptive to the world's communication service providers seemed to have been lifted.

There is a part of me that wonders if the World's telcos got together and gave eBay the money to purchase Skype so that wouldn't have to worry about being disrupted. As a friend says, "there is more truth said in jest than in fiction."

So what exactly is eBay purchasing other than some pretty cool P2P technology, a great brand and access to two of the best minds to hit the internet and market disruptive innovations who have a track record of taking a vision and turning it into a reality?

I'm afraid only the shareholders of eBay will find out.

Until recently, I never looked at Skype as an "ecommerce play." I'm not sure who did. One question that comes to mind is why eBay didn't decide on launching their own SIP service and build their own softclient to optimize the eBay/Paypal end user experience?

Oh well, looks like the market for enabling end-to-end IP Communications (between end-users not looking to do ecommerce) is going to be wide open again.

Another turn of the screw in the history of IP Communications.

Now I have a reason once again to get re-engaged with Free World Dialup.

The timing could not have been better.

Thank you eBay and Skype!

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Posted by jeff on September 12, 2005 08:00 AM | Permalink

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Posted by: clone cd at April 11, 2006 12:15 AM

I think voice meane of communicating is great but I prefer email while I mostly do it at night.

Posted by: Helen, ecommerce expert at November 24, 2005 11:26 AM

Jeff, I agree with your pessimism. Keeping it short, Skype was a company I wanted to deal with, Ebay is not. Enough said.

Take this as a signature in the book of condolences.

Posted by: Lee at September 13, 2005 05:19 AM

"Now I have a reason once again to get re-engaged with Free World Dialup."

That a really great news and Fwd looks really promising.

Posted by: Sudar at September 13, 2005 01:15 AM

Greetings,

I commented on this elsewhere, but let me try to explain eBay for a moment. eBay is NOT just an auction site. That's the growth engine that's driven them, certainly, but it's like saying that McDonalds is just in the business of selling hamburgers.

eBay's real value is in network effects. That's where the value of a network increases with each new member, and the chance of defection from the network decreases. PayPal was built on the same concept. Craigslist is built on the same concept. Skype is built on the same concept.

It's about the network effect, not the specific business model. That they can tie it into their existing set of users is grand, but NOT THE POINT.

They have (in each of those cases) invested in companies that reach the inflection point in network value (i.e. critical mass of users), and have no real costs other than the internet infrastructure required to provide a service. (No warehousing, etc.)

Skype is at that point, and meets those criteria. As when eBay bought PayPal and then enhanced their off-eBay payment offerings, I expect they will buy Skype, improve their eBay connection (can you say free SkypeIn if you sell more than a certain amount on eBay each month?), and continue to enhance their off-eBay value.

If they'd built their own, they would have been competing against the very network effects that keep other auction sites from competing with eBay. They're just not that stupid, really.

In the long run, having eBay's backing (with VERY substantial infrastructure), I'm relatively sure this will improve Skype's offerings over time, and will prove good for both communities. There are technical purists who will avoid it, and eBay knows that a certain percentage will abandon, but it's the overall network and existing user base that eBay's buying, not access to your desktop or even the specific technology currently used.

It's about the network. Never forget that.

Posted by: Morgan Schweers at September 12, 2005 07:19 PM

Just like everyone out there, I am also amazed , surprised and shocked.

Jeff, I completely agree with your statement:
"there is more truth said in jest than in fiction".

eBay could have done a number of things to just Voice-enable eBay (xten or damaka), but it'd not have been as big as it now. So, one of their objective of free, instant worldwide publicity is met. But the reason, I THINK, eBay went after Skype is because they wanted to get to their customer's desktop. But why would they want to do that? Same reason why Google released SideBar.

There is wealth of information stored on a customer's desktop. With a desktop application, eBay can track the behavioral patterns and interests of its customers (and, possibly, show targetted auctions).

Auction listings can be "automatically personalised" based on the web pages a customer views. Instead of you having to go to eBay, eBay comes to you! I am sure Skype already has technology that can find "anything" on a customer's computer. Now, consider adding a search engine to pull out music and pictures, for example, and allowing users to post auctions directly from the search results. * bulb lights on * .

"P2P SkypeBay" Now that could be really powerful!

Sippedoutyoda
...much disturbance I feel, but much hope I see

Posted by: sippedoutyoda at September 12, 2005 06:32 PM

http://www.tmcnet.com/usubmit/2005/sep/1181000.htm
Maybe they should have purchased Xten, a public softphone maker, who they could have had for a few tens of millions. Heck they could have paid double that company’s market cap and still received a good deal. Partner with a service provider, and take a penny or two off the traffic generated with eBay’s universe and voila!

Posted by: morris at September 12, 2005 02:05 PM

I suppose their handling of PayPal says both.

Posted by: Rick at September 12, 2005 10:22 AM

I wonder if Ebay will simply absorb Skype into their current businesses as an integrated service or if they will also let Skype continue in the pure telephony business as an independent brand name phone service.

Posted by: Rick at September 12, 2005 10:04 AM

"Now I have a reason once again to get re-engaged with Free World Dialup."

Very good news.

Posted by: Ludwik at September 12, 2005 08:42 AM

IMHO, Skype had a limited business model. It's only profit items were SkypeOut minutes and SkypeIn numbers. SkypeOut and SkypeIn were good deals for people who did not want to buy ATA (analog telephone adaptors) for VoIP, but once the major players gave them away, or permitted "softphones", the advantage disapeared for high volume users.
They were never a big company, I'm still waiting for a fix to the Macintosh version where something worked according to specs in April, but stopped in May. It's supposed to be fixed in the next version, but was not in the June (latest) beta.
That's the advantage of using SIP, if you don't like one client there are many others in both hardware and software.

Posted by: Geoff Mendelson at September 12, 2005 08:38 AM

September 12, 2005

End of an Era? eBay to purchase Skype

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