“EBay Inc. is in talks to buy Web telephone phenomenon Skype Technologies SA, a source said on Thursday, prompting a 4 percent drop in shares of the online auctioneer amid concern Skype could crimp highly-profitable eBay’s growth.” (Justin Hyde and Eric Auchard, Reuters)
According to the named Reuters reporters, who cite Wall Street Journal and New York Post as sources, above, the purchase price eBay may be willing to pay is between $2 and $5 billion. That seems far too rich for a company with little, albeit growing, revenue and little or no profit. We definitely seem to be in another “dot-com mini-bubble” in the e-commerce and Internet services industries. And, although John Battelle thinks the deal makes sense for two reasons (the first being eBay would be acquiring 50 million new potential customers of its own in buying Skype’s user base and the second being having a powerful peer-to-peer VoIP technology with which its buyers and sellers could communicate), I’m quite negative on this deal. Many Skype users already have eBay accounts so they aren’t buying new customers, they are paying twice for their own customers. As for the smaller, secondary reason of buying a technology platform its members could use to communicate on with each other, this seems rather inconsequential. eBay sellers are already deluged with questions from buyers on instant messaging applications and e-mail that adding another communication platform (voice) may piss them off, rather than intrigue them.
Besides, if eBay was buying Skype for the technology, they could get the same thing for a lot cheaper, such as Yahoo!’s very minor purchase of Dialpad or Microsoft’s purchase of VoIP play Teleo, both of which were less than $50 million. No chump change for you and I, but definitely petty cash for Internet behemoths Microsoft and Yahoo!.
Now, if eBay were buying Skype as an entirely new vertical market and admitting its core online auction business was decelerating, then I could chew the deal and agree it might make sense. However, there are plenty of new online businesses to get into, why enter the low margin commodity, not to mention, crowded business that is VoIP-to-landline calling? Its purchase of Shopping.com, Ltd., earlier this year made sense for that reason. Comparison shopping online would be a new business for them, allow them to enter the sponsored search listings arena, and cross-promote it with eBay.com and Half.com. It was a stroke of pure brilliance. Skype, on the other hand, makes no sense.