20 Comments

Summary:

Skype Impact on eBay Stock

  1. What’s the cause and effect here? I don’t see any evidence that Skype was a bad investment.

  2. It is a bad investment if no one is using it.

  3. Robert Dewey Friday, May 12, 2006

    If eBay’s plan was to use Skype to increase communication between buyer and seller, it was a bad move. There are a few problems that I have been running into, personally, with Skype…

    1) I have Skype, but alot of the people I want to get in contact with REFUSE to download it
    2) People are afraid of spyware and viruses… Believe it or not, ALOT of people I know have never heard of Skype (or Flickr for that matter)
    3) Most people do not like voice communication, and usually use it as a LAST resort (I would venture instant text to be number one)

    A solution would be to create a softwareless communication system whereby a user simply has to click a link to establish a communication attempt. This way, the person who wishes to recieve the communication would simply setup and account and generate a unique URL… The reciever of the communication attempt would have to be logged into the website, or they could install something like a browser extension. Either way, as long as ONE party has an account you can effectively communicate.

    Through this method, you could choose voice, text, or anonymous e-mailing.

    This could be implemented into several solutions:

    1) embedded into advertising
    2) embedded into product/service listings
    3) internet forums and/or blogs

    However, I just don’t see a business model for such a service…

  4. Robert Dewey Friday, May 12, 2006

    By the way, Om… I see the reason for the drop-off in traffic. If you look at the months, the traffic spike may have been a result of Christmas shopping… I would suspect that purchasing slowly trailed off in the following months. ;-)

  5. Don Thompson Friday, May 12, 2006

    If you look at the price of eBay over a longer period you’ll see it was weakest at the same time last year. In the UK May’s a dry time for stocks being the start of the tax year (albeit the December peak was higher), don’t know if the IRS cycle is the same.

  6. John Hanger Friday, May 12, 2006

    eBay absolutely has the right idea in how they are re-purposing Skype in order to gain competitive advantage for their classified properties (Motors, Kijiji, Rent). Moving beyond contact-us forms and phone numbers as response mechanisms is very important.

    As relates to the eBay stock price, the question is still whether or not the competitive advantage gained is worth $2.6B minus whatever value the core Skype business had/has.

    Nonetheless, classified sites that don’t respond with a similar or better solution will lose traffic fast IMO.

  7. Robert Dewey Friday, May 12, 2006

    I still think that doing it via software is the wrong solution for reasons I stated above… I will agree that it’s a great idea for classifieds, ads, etc.. While eBay made the right decision, I think they made their decision too quick and picked up the wrong service for the wrong price. Skype was on track to be an AIM-like service, not really a device to help people increase sales, IMO.

  8. Startups.in Friday, May 12, 2006

    I’m not an analyst but my feeling is that Skype deal was over priced and not worth the 2+ Bil. Not sure when eBay would start seeing the ROI.

    Regards,
    n

  9. DaveMc500Hats Friday, May 12, 2006

    Ricky/Robert: the graph above isn’t traffic, and it’s not Skype. it’s eBay’s stock price.

    for a rough sense of Skype traffic (which has been going up, more than 100% growth in the past year), see here:
    http://tinyurl.com/frl4n

    while there’s a legitimate contention that eBay overpaid for Skype traffic / users, a more detailed what-if analysis would probably entail looking at a) where eBay stock price would be if they hadn’t bought Skype, and b) where else could they have spent the money / what else could they have bought, and lastly c) what if they had simply issues a $1-2B dividend to shareholders…

    i’d have to say that doing Skype was probably better than doing nothing, and if all they were buying were 30-70M Skype users internationally that were synergistic to eBay and PayPal non-US business, it probably wasn’t such a bad deal.

    however, you could argue they might have been more creative with acquisition activity, or that they should simply have returned the excess cash to shareholders in the form of a dividend — other companies with slowing growth (notably Microsoft) have made this call lately. however, i’m guessing had they done so they would have immediately signaled to the market a much lower implied multiple.

    a completely different strategy might also be to setup a corporate venture unit, and take $100-250M to invest in eBay-focused startup ventures… guessing that if you invested in 50-100 startups at around $1-2M each, you might end up with 3-4 Skypes in the mix after a few years. certainly with everyone focused on Google, Yahoo, and Microsoft this strategy could be helpful in other ways for eBay. witness Cisco’s successful efforts in spinning out / later acquiring related technology startups. probably a less immediate strategy, but perhaps also less speculative bet than the $2-4B Skype deal.

    in summary i’d still grade the Skype deal as a ‘B/B-‘ with an option on moving to a ‘B /A’ if the growth turns into the revenue they’re looking for in ’06/’07 and beyond.

  10. Robert, I like your idea. Can this be accomplished by AJAX software. It has to launch a “software app”, but maybe this could be totally web-enabled without installing anything on the person’s PC, very similar to web-based e-mail vs an e-mail client like Outlook. This definitely has some merit.

    Surely Google is developing this.

    BTW, Skype is pathetic. I refuse to install it on my computer anymore. Everytime I install it, my CPU usage goes nuts. This happens when I just turn on the computer and don’t even use the sorry program over their sorry network.

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