It's Official: eBay Has Too Much Money (Some Of Which Is Now Skype's)

from the defend-that-valuation dept

This evening the rumors increased, and as of a few minutes ago, it's now official that eBay is vastly overpaying for Skype. It's a great deal for Skype, and a ridiculous one for eBay. They're paying $1.3 billion in cash, $1.3 billion in stock and apparently there's another $1.5 billion on the line in incentive payouts based on various performance metrics over the next three years. I understand that Skype has a great product (I use it all the time) and I understand that they've built up a nice community. However, the community wasn't that large and very few of the users were paying (and even those who were paying weren't paying very much). In the meantime, Yahoo, Google and Microsoft are all getting into the same market with much bigger war chests and much bigger user-bases. Are there ways that eBay can integrate Skype into their current offering? Yes, somewhat. However, the buzz going around that this will let buyers and sellers talk to each other is ridiculous. I've bought and sold plenty of stuff on eBay, and not once have I ever wanted to speak to the person I was dealing with. The talk about synergies with Paypal seem even more tenuous. There seems to be very little in the way of real synergies between the two companies at all. About the only thing this suggests is that eBay is worried that it's existing business is in trouble and it needs help fast -- and apparently the best way to do that is to significantly overpay for a VoIP offering with too much hype.

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  1. icon
    Mike (profile), 12 Sep 2005 @ 10:43am

    Re: No Subject Given

    "The community wasn't that large" --> "54 million members to its free Web-based calling service. At current growth rates, it could double in size again within roughly a year."

    54 million is what they claim. But, it's clearly overstated. 54 million people may have signed up for user names, but most people put the *active* users much closer to 5 million. That's a big difference.

    "Very few of the users were paying (and even those who were paying weren't paying very much)." --> It should be obvious this is not part of the business plan

    Oh really? That wasn't obvious at all. You mean, not only did eBay way overpay, they're going to kill the one part of the business that actually does make money?

    "Yahoo, Google and Microsoft are all getting into the same market with much bigger war chests and much bigger user-bases." --> huh, what this just doesnt even make sense?

    Which part doesn't make sense? You have three larger companies with more cash and many more users who are all going to offer the same service. That would suggest that Skype's market is going to get squeezed big time.

    "The talk about synergies with Paypal seem even more tenuous. There seems to be very little in the way of real synergies between the two companies at all." --> This makes even less sense?..

    Ok, go ahead... explain the synergies.

    "I've bought and sold plenty of stuff on eBay, and not once have I ever wanted to speak to the person" --> I think if you were buying a house you may want to have a conversation or two.

    And you couldn't do that over the phone already? Or... eBay couldn't do that by doing a *partnership* with eBay? Also, what percentage of eBay sales are houses? Talk about a bizarre example. Besides, I'd imagine that most home buyers are doing deals *in person* rather than over the phone or over Skype anyway.

    In general I agree with Mark that the price is too high but I'm amazed that you failed to recognize even the most basic points by ebay I can only peg this blog as missinformed or patheticly uneducated.

    Your call, obviously, but you didn't prove any of your points to me.

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