eBay Acquires Skype

[Jeff]

Auction site eBay today announced that it plans to acquire Skype for $2.6 billion in cash and stock.

The deal is worth about 42 times Skype's anticipated 2005 earnings of $60 million. With performance-based considerations, eBay could end up paying an additional $1.5 billion, boosting the total value of the deal to a whopping $4.1 billion.

"Communication is at the heart of community and e-commerce, making Skype a natural fit for eBay," eBay president and chief executive Meg Whitman told analysts during a conference early Monday.

Skype has been a force to be reckoned with in the VoIP market, garnering a huge customer-base with their free PC-to-PC VoIP service. In the past year, Skype has expanded their services to include paid-extras, including Skype-In which gives users a phone number that allows them to receive calls from any standard phone, and Skype-Out which allows users to place calls from their PC to a regular phone line.

Skype faces growing competition as traditional IM vendors have been integrated improved VoIP functionality into their latest instant messaging software and newcomers like Gizmo Project and Google Talk enter the market.

It will be interesting to see what changes are in store for Skype in this unusual pairing of VoIP service and online auctioneer.

[Jeff]

News.com has some additional analyst views on the eBay-Skype acquisition. Some analysts believe that eBay is trying to move towards becoming more of a full-service portal, akin to MSN or Yahoo.

[Anna]

This should be interesting...

I'm a little skeptical to be honest, of how "useful" Skype can prove to eBay, but we'll see how it goes I guess.

[Jeff]

Anna, I agree that it seems like a weird combination, but if eBay wants to be more than an auction portal, it makes sense. If they can win over the Skype fans (Skype has a very loyal base of fans) and not turn them off with too many commercial eBay "hooks", they might actually succeed in moving beyond auctions.

I don't know why, but it would feel much more "natural" if someone like Google or Yahoo purchased Skype. Yet both of those companies really built their businesses originally around search. Now Google has applications (Google Earth, Google Desktop), news, email and instant messaging. They've grown far beyond their original focus. It's not unreasonable to imagine that eBay would want to do the same.

I really like Skype. I use it regularly and enjoy the voice quality and the simple interface. My main concern with the aquisition is that eBay will be tempted to start over-commercializing Skype with eBay hooks. I can appreciate that a lot of people like and use eBay regularly, but I don't, and any auction-specific functions they might add would be completely useless to me personally.

[Anna]

I use Skype as well, it's an easy way to avoid expensive long-distance calls with friends back in Canada.

And I agree, to commercialize it would be over-kill, but I'm more expecting it to be used for anything but it's main purpose over time. (Much like the XBOX 2's live cam feed ...which I am so looking forward too, I swear.)

I think it's just one of those things, where you force a smile, say "Good job, really!", and put it up on the fridge.