The Jeff Pulver Blog: Some thoughts on eBay’s Purchase of Skype -- Evidence that the Communications Revolution will be IP-Televised (and available for purchase on eBay (or downloaded for free via BitTorrent, if not Kazaa)):

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September 12, 2005

Some thoughts on eBay’s Purchase of Skype -- Evidence that the Communications Revolution will be IP-Televised (and available for purchase on eBay (or downloaded for free via BitTorrent, if not Kazaa)):

Usually we don’t see revolutions until after the fact (oftentimes many years after the fact and only after years of analysis and digestion). I suspect that historians might come to recognize today’s announced acquisition of Skype by eBay, as one of the great indicators of the historic transformation in communications. Today's move by eBay in purchasing Skype is transformational because it signals the ability and value of an “Applications Company” adding a “Communications Company” to its portfolio. The acquisition turns the entire telecom industry picture on its head, and demonstrates that voice, presence, text messaging and other IP-based applications will be essential for the company of the future.

Until today, we looked at building communications networks and applications differently. Telcos never were the developers of applications – frankly, developing applications is not the telcos’ strong suit. Innovation happens at the edge. Now we have an example of how communications will be swallowed by the edge. eBay, because it comes from a place where it knows about community, how to build community, and how to enable end-users within its community probably knows how to harness the products and services that Skype’s technology will enable.

Unlike traditional voice communications providers, eBay gets the concept of community and community building. Adding a rich IP-based communications capability -- including IM, voice and presence applications -- to its community should dramatically enhance the value of and services available to eBay’s community.

eBay and Skype are both essentially ‘peer-to-peer’ companies that recognize the value of building community and communicating via a multiplicity of modes and applications within that community. eBay’s recognition that a peer-to-peer communications company has value should shine a spotlight on the other IP-based communications technologies, networks and applications. I suspect others might follow eBay’s lead, see the value of pee-r-to-peer and IP-based communications products, and acquire competing IP-based communications companies.

Companies like eBay that live in the "bottom up" space know what people want -- and now, via Skype’s enabling technology, can deliver the applications that people want. By improving the ability of eBay users to ‘see’ others’ ‘presence’ with Skype, the effect should be the creation of a more perfect market and allow eBay sellers to increase auction prices based on a more efficient method of reaching all possible bidders.

Telcos may suffer in the long term, but, frankly, I can see a more dramatic impact on Sotheby’s and the “Antique Road Show.” :)

If you take the elements of eBay, including the micro-payments capability of Paypal and, now, the IP-based communications capabilities of Skype, we may be seeing the formation of the next Reuters.

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Posted by jeff on September 12, 2005 12:09 PM | Permalink

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Comments

that would be cool. the idea that live auctions could be held over skype. Or news syndication through skype.
Either way the telcos with the wires or satalites will be fine. If a telco does not have the network then they are just a sales person not a true telco

Posted by: Gerard at July 9, 2006 07:08 AM

I still am totally confused as to why they paid so much for it when there are others out there that do the same thing but look just a little less pretty.

We set up http://www.i-voip.co.uk about 7 months ago selling VoIP hardware and usb phone it has allowed us to see how the consumers are reacting to it... With a fist full of other providers doing much better deals than skype im sure ebay are scratching their heads as to why they spent so much.

Posted by: stef at May 17, 2006 06:51 AM

I agree with Timothy that ebay WAY overpaid for Skype!
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Posted by: Admin at December 18, 2005 01:45 PM

This theory about Ebay buying Skype to make it a part of itself and use it only to develop e-commrce kind of does not make sense to me. May be you can help to put in perspective to me.

I am thinking why not just outsource the part of e-commerce and voice communication integration to Skype and say “integrate your voice comm. Capability to my website and I will pay you 100 million every year”?? Would Skype not want to do it?

Why go and buy it? It is like buying a coffee estate because you want to have a cup of coffee…

Posted by: Ravi Shiroor at September 20, 2005 11:28 PM

eBay/Skype icebreaking deal pointed to the fact that VoIP is no more just an IM play but a rapidly emerging business to earn big money. Market comes to understand that good speech quality is worth good money; very good speech quality earns even more. A new business model puts bigger functional value onto VoIP for new ebays to sell value-added services to the audiences they rose. To sell those VASs they need a sound engine efficient in terms of voice fidelity, in cost as well. Behind mega-billion hype, cost balancing has been out of focus; still it is important for such new business.

Here, GIPS’ sound engine is hastily overstated as if it were getting a 'de-facto standard' for quality design once used in applications we have known. But I doubt it is. Besides, there are developers competing, managing VoIP challenges as good as GIPS does and, probably, even better... For instance, a company named SPIRIT DSP has successfully deployed its own sound for multi-point voice conferencing. They claim integration of their VoIP into both Macromedia and Oracle collaboration systems newly released which looks quite intriguing. (Business Wire through http://www.conferencingnews.com/news/8070). Seems like they know what they do, and do it quite well!

Posted by: archer at September 19, 2005 08:24 AM

I agree that rich media and community-building is the way that the world is going, but can’t help wondering why eBay paid so much, when they could have used other technologies which are around. For example, this week on eBay’s own site they could apparently get a product from http://www.whitephone.com which allows a “branding partner” to “compete directly with Skype, and go a stage further with your own community-building announcements system, video mail broadcasts, and many more unique features."

Here is how they might have saved themselves several billion dollars:
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=5807543926

Posted by: John Farmer at September 14, 2005 11:43 AM

There is something fundamental here and I think I know what it is--instead of being the pie telecommunications is becoming an ingredient in the pie.

Posted by: Ed Meko at September 13, 2005 04:18 PM

Interesting take - Is Skype more like a utility company, like, say, Vonage? Or are they more of a community/network of people with a common interest? Even if they aren't a strong community, eBay will no doubt use their technology and base to enhance its own community.

Posted by: rogerd at September 13, 2005 08:41 AM

Let's not forget about Free World Dialup which is being relaunched as Fwd:Networks next week in Boston.

Posted by: Jeff at September 13, 2005 08:19 AM

ebay WAY overpaid for Skype! Skype typically has 2-3MM users online (and many of those just leave it running in the background because Skype makes it nearly impossible to delete) which means that ebay paid $1000 per user of a free service! And maybe lots more since there's additional monies skype can earn.

Yeah, Skype touts a gazillion downloads (I've downloaded it about 8 times), but the only thing that matters is actual users.

Since ebay already has users, they should have just licensed Skype or Gizmo Project for a handful of millions.

Now that Gizmo has added IM to their beta version it's just as good as Skype - even better in many ways because it does call record, SIP, call mapping, unlimited conf call, free voicemail. And of course it does full PSTN and fine NAT traversal.

If Skype is work billions, then someone should buy Gizmo for 100 million and get a bargain. They are the only company left. Google should buy them because they have no PSTN capability and will require it to stay in the game.

Posted by: Timothy Cheng at September 13, 2005 07:44 AM

Skype isn't a softphone, it is a network as well, one that offers presence, encryption, PSTN gateways around the world, NAT traversal that works, instant messaging, and a ton of features that a softphone like xTen on its own doesn't offer.

Buying a softphone company, or even Gizmo, would have meant that they'd still have to develop presence and IM systems on their own.

Posted by: irwin lazar at September 12, 2005 09:47 PM

Yeah, I'm also surprised they finally went with Skype...

Jeff, can you share your thoughts on why Skype and not *any* soft SIP phone maker?

Do you not question the need for the realtime voice communications between buyers & sellers on ebay? Just look at how many listings actually have the phone numbers -- not that many...

Any ideas what else eBay might have bought Skype for, besides integrating into an auction listings?

Posted by: Stan at September 12, 2005 07:44 PM

Hi Jeff,

In the interest of preserving the purity of definitions associated with horizontal business models, can one truly call Skype a "communications" company? Or, is it an application company, just like eBay, that develops vertically-integrated applications that run on top of communications networks? I'd suggest the latter, although the larger points of your message are well taken. Also, I'd like your take on Skype's recent partnering announcements, and whether you think it will continue predominantly as a peer-to-peer application, as opposed to wherever IMS may take it? Any thoughts on that?

Frank

Posted by: Frank Coluccio at September 12, 2005 05:08 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 02:03 PM