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October 03, 2007
I come to Praise Skype, not to Bury Them.
History was made on September 12, 2005 when Skype was purchased by eBay.
And I still stand by the words I posted in my September 12, 2005 blog entry:
"Usually we don't see revolutions until after the fact...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."
Back then I also was thinking how eBay might be able to leverage the power of Skype in a private eBay Social Media platform when I wrote: "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…
…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."
As it turned out, eBay wasn't able to leverage the disruptive potential of Skype. This doesn't mean it was a bad deal. At the time of the deal, in good faith the transaction took place because people believed in the possible. Chances are the issues which lead to the write-down of the asset this week had much more to do with the internal politics of eBay and the realties of being part of a multi-billion dollar transaction and the way it affects the lives of the people involved.
And from the perspective of the VoIP industry, the eBay/Skype deal showed entrepreneurs if you follow your dreams, anything is possible. And a 2.6 billion dollar transaction with the possibility of being worth 4+ billion was the biggest deal of its kind in the history of Internet Communications.
Ironically, back in September, 2005, I'm willing to bet the 300 largest communication companies from around the world would have gladly pooled their resources and paid the Skype team US$ 3 Billion dollars to in effect take away a major would be competitor from the marketplace.
My advice to the current eBay team is to take notice of a suggestion I first suggested on September 12, 2005 which was ridiculed at the time by TheStreet.com: "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." And if not Reuters, than at least Brokerage Firm 2.0.
Tags: voip, thestreet.com, eBay, Skype, Jeff Pulver
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Posted by jeff on October 3, 2007 05:18 AM | Permalink
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Comments
Ebay can afford a billion dollar mistake. Now maybe they will build Brokerage 2.0 in the widest sense of the term.
Posted by: 水族 at March 31, 2008 12:11 AM
Apparently eBay like the rest of us, haven't seen or have been able to make full use of the tool that we have in front of us.
Posted by: 月子中心 at March 30, 2008 11:24 PM
Well Jeff,
It will seem that Ebay will get to drive now, since the bonus walls have been removed. I think many will be surprised on what eBay has the ability to do. Anyone that thinks the bonus did not limit what management direction could have been imposed by eBay while it was in place, might also not know much about what the word checkmate means. I am looking forward to see eBay calling the shots and am more than willing to give them a chance to show what their vison of Skype is.
Posted by: ZOverLord at October 3, 2007 09:52 PM
Jeff (or should I call you marc anthony...) – great post.
I do not wish to comment on the actual Ebay-Skype deal valuation. Who is to say what the right price is?
I am however reasonably sure that the reason the Skype value did not maximize for Ebay, has more to do with Ebay's inability to make good on the Skype promise.
Having worked for a large Internet company (AOL), I have seen many (almost 30) companies, big (Netscape) and small (PLS) disappear and vanish due to bad management, faulty decision making processes, lack of guts, inability to
take risks and most of all, lack of trust in the leadership of the acquired companies to lead them onto the right path.
While an acquisition is often a wonderful financial return for the founders and investors, it frequently spells the demise of the acquired product or service.
I hope that Skype's large user base will prevent them from having a similar fate. Unfortunately I remember even a bigger company (Netscape) going the way of the dodo :-(
Posted by: Amit Shafrir at October 3, 2007 07:41 PM
we know that things are rarely what they appear to be and so last time i was on skype few days ago there were over 7 million people online at the same time - that's pretty impressive number since facebook only has 40 million or so and that jeff pulver pokes most of them most of the time - but who knows how many facebook people are online at the same time - we know all the variation of jeff pulver and his shadow are haunting the byteways and hallways of facebook - but i digress - i think skype is a missed opportunity and if i was them and they were me and well i would put out an rfp contest suggestion box to the public saying "what would you do if you were us and how would you envision it" to share in the million dollar question prize - i think you would get some interesting responses from people who use skype and those who see its for its unique potential - as an inventor and social- sculpture i have always seen ebay, skype, paypal for it social-media/networking/sculpture community then just a cow to milk - geo (at) insultantforhire.com
Posted by: geo at October 3, 2007 02:29 PM
The biggest thing Ebay has done in my opinion was create a more perfect market. It was a huge step in bringing the real world closer to the graphs in economics class. However since they did this on the internet and the actual source of the item is a bit of a mystery they hit a ceiling. The real value in Skype is allowing sellers and buyers to talk to each other before the purchase. This is a great idea and something that will happen eventually, but I am not surprised in the least that they are having trouble implementing it. We are talking about the next evolution of the marketplace. Its going to take a brilliant leader and a lot of time, so we've just got to be patient and wish Ebay luck.
Posted by: evan at October 3, 2007 12:23 PM
Great post, Jeff. Meg did what any CEO should, appoint a executive team, let them run the show. When the results are not there in an annual review, you bite the bullet and make changes. In this case it was becoming obvious that the earnout was not going to happen and that Skype was losing its caché. There are lots of assets and relationships at Skype that have the potential to realize your vision of an applications company that contributes to community building.
That's why the new CEO search will be difficult and challenging to find the right mix of management skills, interpersonal communications skills, partnering experience, technology background and vision to realize on your and my sense of how Skype can be a core infrastructure for enhancing real time conversations, whether personal or business.
More in my series this week over at Skype Journal.
Posted by: Jim Courtney at October 3, 2007 07:46 AM
Apparently eBay like the rest of us, haven't seen or have been able to make full use of the tool that we have in front of us.
Posted by: Paul W. Swansen at October 3, 2007 07:36 AM
Sometimes it seems to me that the web is settling down, becoming semi-monopolized with solid brands such as Ebay and Google that, as in poker, once they have the big stack, can bluff, overbid to intimidate and generally weather 'bad hands'until they draw cards that should 'win', if only in a statistical way.
I wonder if we are now entering a phase where, as in the automobile industry, the guy with the brilliant idea, will be bought out and his idea intentionally not used to maintain the status quo? (like those stories of cars that run on water etc etc), or are things still wide open for the next big thing?
Posted by: Daz Cox at October 3, 2007 07:29 AM
The BIG question, Jeff, is what was Ebay buying:
-technology: we both know there was little new tech there
-community: well, to some degree, but it was a community based on cheap phone calls. An asset, but not multi-billion asset
-hype: yup, this was it. Meg bought a lot of hot air. As I said at the time, when you have to say its strategic it probably isn't.
Ebay can afford a billion dollar mistake. Now maybe they will build Brokerage 2.0 in the widest sense of the term.
Posted by: Jacob Ner-David at October 3, 2007 07:26 AM