eBay acquires Skype
The Issue
eBay has purchased IP telephony company Skype for $2.6 billion. The purchase gives eBay access to Skype’s 54 million users and an IP-based telephony technology that delivers relatively high quality voice communications over the Internet. Info-Tech analyst Carmi Levy believes eBay had no choice but to make this acquisition. The growth of eBay’s core auction business has flattened over the past year, and recently the company has been buying into everyone from Craigslist.org to Shopping.com and Rent.com. It needs to find a way to energize its legacy offering.
What it Means
Levy believes the primary issue with this acquisition is whether the return on investment will be sufficient to justify the multi-billion-dollar price tag: the price could rise to $4.1 billion if Skype meets certain performance objectives. Can eBay generate enough revenue from the increased user base and IP-based telephony to justify the investment?
Both companies claim integrating Skype technology into the current auction process could, for example, allow buyers and sellers to speak with each other.
The hope is that enriched applications like this could solidify eBay’s competitive position in the ecommerce space and open up new revenue generation opportunities.
This occurs against an increasingly competitive communications backdrop: Microsoft, Yahoo! and Google have all made moves in recent months to solidify their IP telephony service offerings. Levy says eBay’s entry into this market signals its recognition that competitors can come from all sides, and the traditional understanding of who plays in a given market – auction, telephony, or any other – is evolving rapidly.
