eBay will acquire Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration that gives the deal a total value of up to $4.1 billion.
Founded in 2002 by Niklas Zennstrom and Janus Friis, Skype offers high-quality voice communications to anyone with an Internet connection anywhere in the world. Users download and install Skype software, enabling them to make free calls to other Skype users online. User can also use Skype's premium services to call traditional fixed and mobile telephones.
In a Monday morning conference call, eBay CEO Meg Whitman said Skype is a great business on its own, and the acquisition will also expand the company's share of ecommerce. She expects Skype to help accelerate commerce on eBay in four ways:
- accelerating existing categories, like used cars;
- penetrating new categories that are more complex, hi-touch, like new cars, real estate and personalized services, through alternative lead-generation;
- monetizing new marketplaces like Kijiji, Shopping.com, Rent.com and Mobile.de through pay-per-call and helping to differentiate those marketplaces from the competition;
- expanding eBay's global footprint into emerging markets like India, China and Russia, which are typically characterized by gray markets, low levels of trust, a culture of haggling, and price sensitivity, as well as facilitating cross-border trade.
eBay has long been concerned about off-eBay transactions (which it calls "fee avoidance") and has traditionally tried to limit buyer-seller contact to email that goes through the eBay system. In answering an analyst question during the call, Whitman seemed to indicate eBay would charge sellers to include Skype contact information in listings.
In a message from Whitman on the eBay Announcement Board announcing the acquisition Monday morning, Whitman told users, "You can include your Skype ID in your About Me page. For now, however, Skype links may not appear in View Item pages. We'll be working with you, our Community, over the next few weeks to thoughtfully work out the details of how eBay and Skype will interact, including any policy changes that may be required."
Scot Wingo, CEO of marketplace-management provider ChannelAdvisor, said he's spoken about Skype to his customers, many of whom are high-volume sellers on eBay and other marketplaces. "The integration of Skype into eBay is not appealing to our large customers," he said. "Hiring people to answer customer service calls is not appealing," nor is it cost-effective in most cases. Wingo said the service might be more appealing in certain higher end categories like real estate, but not for high-volume DVD sellers, for example. While Whitman talked about Skype eliminating some friction inherent in ecommerce transactions, Wingo said eBay does not allow sellers to include chat windows in their listings, though he believes phone numbers are allowed.
Analysts asked eBay about the rumored ban of Skype in China by China Telecom (http://www.forbes.com/business/feeds/afx/2005/09/12/afx2217719.html). Niklas Zennstrom said Skype is working with telecom operators and said there are synergistic opportunities because Skype drives broadband sales. (He called Skype the "killer app for broadband.") He said a local branch of China Telecom is blocking some traffic. Whitman said the media reports are largely a rumor, and that eBay has been in touch with their government contacts. "We are largely comfortable where we are in China," she said.
eBay seems highly interested in the Pay-Per-Call lead-generation opportunities Skype holds. In May, a company called ThinkingVoice raised $1 million to launch its Pay-Per-Phone-Lead service, which drives qualified online-shopping leads by phone to advertisers and merchants. ThinkingVoice allows merchants to embed "Click-To-Call" links in auction listings, emails, online business cards, websites and in Google Adword ads (http://www.auctionbytes.com/cab/abn/y05/m05/i10/s04). At the time, ThinkingVoice said 2,500 merchants and marketers were using its VoIP communications platform.
A recent Kelsey Group report said pay-per-phone-call (PPCall), performance-based online advertising that delivers telephone calls rather than clicks, will generate revenues of US$1.4 billion by 2009 (http://www.kelseygroup.com).
Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. Skype has 54 million members in 225 countries and territories. Skype is currently adding approximately 150,000 users a day and has created an ecosystem of products and services with 1,000 developers and 6,000 affiliates.
Zennstrom and Friis will remain in their current positions. Zennstrom will report to eBay CEO Whitman and join eBay's senior executive team.
Whitman said Skype will help remove friction in ecommerce. She summed up her feelings for the company, "When people use your brand name as a verb, that is remarkable."
The TechDirt blog, always skeptical, has published its take on the deal:
http://techdirt.com/articles/20050912/0312203_F.shtml
