Wednesday, October 3, 2007

eBay and Skype not going so well

John Paczkowski at AllThingsD writes that the honeymoon is most definitely over in the eBay/Skype marriage:

This morning the Internet auction giant said it was taking a $1.43 billion charge for its acquisition of the Internet telephone provider and that Niklas Zennström, a co-founder of Skype, was stepping down as chief executive of the division. The charge announced today reflects the “updated long-term financial outlook for Skype,” eBay said in a filing with the Securities and Exchange Commission.

When I wrote about this at the time of the acquisition, we were all trying to figure out why eBay bought Skype. The canned response from eBay at the time didn’t make much sense, and I thought I had the right answer: eBay was angling to be the virtual Kinko’s. Think about it: FedEx bought Kinko’s in part to become the brick-and-mortar operation for small companies and sole practitioners of all stripes who didn’t have shipping or communications departments. You could send and receive faxes, ship boxes, use their computer applications to lay out publications, print up signage, even use their a/v equipment to do videoconferences. I mentioned at the time that eBay was already offering healthcare for those high-volume ‘power sellers’, PayPal had added transaction management, its integration with the USPS and UPS made logistics increasingly seamless – and its conferences of power users were becoming industry events unto themselves. For the increasing numbers of individuals who were turning to eBay to build a business – of acquiring and selling goods, with eBay as their storefront – I thought (but clearly was not thinking the way that eBay management was) that eBay’s move was downright elegant: add IM, phone (inbound and outbound) and voicemail to the virtual storefront. Seemed like a good idea at the time – and, come to think of it, it still seems like a good idea to me.

Guess I’d like to know what % of transactions are handled by ‘power sellers’ (I’d guess the number is approaching 75% if not higher). Of those, I’d want to know how many are individuals (and not just the auction group within a more traditional retailer/seller)… if that number is sizable (my hunch tells me it is), then adding telecom to its suite of services just fits.

Or maybe I’m wrong. Whatever… sounds like pressure is building for eBay to sell the company. That could get interesting, no?

1 comment:

  1. The write-off is simply an acknowledgement that eBay overpaid for Skype. In one painful event, eBay will be able to eliminate the drag of the amortized purchase price from future earnings. Skype has been profitable the past 2 quarters, and with reasonable expectations that it will continue to be so, eBay should have a clean slate going forward.