News Review: eBay on the acquisition path
eBay buys up Skype
The announcement by eBay that it will pay $2.6 billion for Skype might give a new insight into the way in which eBay views itself.
The strengths of eBay are that it's business model was very clear, very simple, understood, and very clearly marketed. In fact, eBay has surpassed Amazon.Com as the defining application from the dot-com era.
However, the purchase of Skype not only carries huge potential, but also huge risks at the same time.
Not that eBay are risk-averse, of course. It's just that you cannot always play the game quite as casually with a multi-billion dollar company as when you first started (when there was less to lose).
There are two possible reasons for purchasing Skype. The first, and most obvious, is to supplement the existing eBay auction offerings, which are text-based, with a voice-based supporting function. If you need help with purchasing a product, press the "Skype" button, and you can talk to someone in the Call Centre. You could even have the situation where people bid by voice over the internet in real-time. This would be an extremely powerful next-generation eBay.
The second reason could be that eBay have decided that it is time to diversify out of auction services into delivering collaborative groupware over the internet. This would be a clever, but very risky, move. Effectively, eBay would be bidding to become the de-facto standard for voice over IP over the Internet. They would be aiming to sell Skype functionality to all-and-sundry, not just eBay customers. Just as we have internet terms like "to Google", or "to eBay", so we would be "Skyping".
But the problem with this approach is that the business model is very different. And most importantly, there is a company called Microsoft which has huge marketing potential and wants to own the internet for itself. I don't think the founders of eBay really want to rouse the beast from Seattle.
If Microsoft retaliated with it's own voice over IP offering (which I am certain that it will), then eBay may find themselves the AOL of voice - a good package, but increasingly non-standard.
Watch this space for what eBay do next.
Reviewed by Dennis Adams in September 2005