Meg Whitman, CEO of eBay appears to be justifying eBay’s decision to purchase Skype.
There’s been much talk that eBay overpaid for Skype, at $4.1Bn if they hit earnings targets.
My view is that they actually got a bargain.
Meg Whitman is right that “in the end, the price that anyone can provide for voice transmission on the ‘Net will trend toward zero,” and she sees that happening “in the next three to six years.” I’m assuming that she means all phone calls, as Net-based calls are currently free and it would be very worrying if she didn’t know that already.
With Skype, they’ve bought the biggest name in VoIP. Not just software-based VoIP (which Skype currently is), but all VoIP.
Whitman’s view? “Our belief is that the winner in this space will be those that have the largest ecosystem. What I mean by that is: the largest number of registered users, the largest number of voice minutes, the largest number of developers who develop the platform, the best product … that users are willing and want to pay for.”
I’ve always admired the genius of Skype, building a telecoms company, the equivalent of BT’s or AT&T’s retail business, but with a near-zero infrastructure cost to them – certainly zero compared with either of the previously named giants. Skype simply piggy-backed on their expenditure.
When I put this to Niklas Zennstrom, Skype’s CEO, as I interviewed him in the build-up VON in Stockholm, he smiled wryly. He’s good at that.
While Vonage went the route of building IBM, needing hardware where it was installed, Skype went the Microsoft route, software. We all know who won there.
Skype knew that the hardware would follow as their user numbers became irresistible. Cleverly they would take license fees from the hardware producer, while making their service more attractive.
___What does eBay add?
Well there’s the obvious reasons …
They’ve got huge amounts of cash, as eBay is so profitable, clearly useful, but in the grand scheme of things, so what?
More interestingly they’ve got 168.1m registered users, ideal to grow Skype’s currently 57m registered users.
As I commented at the start of September, eBay’s interest
reflects the company’s quest for new product categories and international markets, or they could integrate Skype into the service, offering purchaser and seller to talk to each other. Another option could be to use Skype’s ability to host group discussions as a way of strengthening communities with the same interests.
This is all good for the short to middle term, growing Skype’s acceptance.
I think the killer is slightly further out.
To set the scene – keep in your mind Vodafone, but more abstracted.
eBay own the ‘network’ through Skype.
Skype is a strong brand, with people already talking about Skyping each other. OK, currently it’s not global like Vodafone, but add a bucket-load of eBay cash and that’ll change.
That in itself is strong.
Here comes the interesting part. Search on eBay today for ‘Skype‘ and it brings up
We’ve been watching the market in these add-ons, and have even reviewed a few of them. This market is at a very early stage, but already, we’re seeing design applied to some of these.
When Skype goes beyond being implemented on PocketPC’s it will work without the underlying Operating System. Becomes embedded and significantly cheaper.
What pops out of the end of this is a low-cost mobile handset that speaks a number of wireless protocols and when combined with paid for or free WiFi access (which will be everywhere by then), gives you a serious competitor to a mobile phone.
Hell, eBay/Skype could even create a reference designs or two.
eBay will be in a fantastic position of sitting between the handset makers and the public. Like a global ‘phone shop’ for these devices – collecting a commission for each handset sold – without the shop, stock, support or after-sales care.
It may be that eBay haven’t thinking along these lines, but I’d you’d have to doubt it given the amount of money they’d spent on it.
Update: I’ve not had time to read all around the comments on Skype since the deal, but following writing this, I found an excellent blog on it by Mark Evans. I’d heartily recommend it.