Failures

by Mike Masnick


Filed Under:
earnout, niklas zennstrom

Companies:
ebay, joost, skype



eBay Evaporates $1.43 Billion In Supposed Skype Synergies

from the not-quite-so-good dept

eBay made a few announcements this morning concerning Skype, and while the press seems focused on Skype founder/CEO Niklas Zennstrom leaving the company, that's hardly the interesting part of the announcement. Instead, the important news is in the fine print, concerning how much eBay is paying Skype as an earnout. Back when eBay bought Skype, there was an initial payment, and then an earnout based on how many new users and how much revenue Skype brought in. At the time, we noted that Skype really didn't have that many users and while it was a good product, we didn't see the synergies with eBay. Two years in, and it seems that this view was correct, as the supposed synergies never showed up. And, while Skype has continued to grow, the pace has certainly slowed. Back when the company was bought, at peak times there were usually around 5 to 7 million users online. These days, it seems like it's usually 8 to 10 million. That's not bad, but it's hardly astounding growth.

And, in fact, this slow growth is clearly seen in the earnout. eBay only had to pay an additional $530 million -- well short of the $1.7 billion maximum payout, clearly suggesting that Skype's growth has been a lot weaker than the company had hoped. To underscore how poorly Skype seems to be doing compared to eBay's plans, the company is also taking a $900 million impairment charge to write down the "goodwill" associated with the Skype acquisition. Ouch. That hurts. It's also leading to calls from all over about how eBay should sell off Skype, admitting defeat in an acquisition that never made sense in the first place. The funny thing is, a big part of the reason why eBay ended up paying so much for Skype in the first place, was due to a ridiculous and misleading hype frenzy (in part, based on a typo). You would think that eBay, of all companies, would recognize the buying frenzy created by an auction situation -- but apparently not. As for Zennstrom, it hadn't really seemed like he was all that engaged at Skype anyway, and the timing of his departure coincides with the launch of his new product, Joost.

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  1. identicon
    Rick, 1 Oct 2007 @ 3:02pm

    I like Skype

    ...as a PHONE alternative. I use their SkypeIn and Unlimited SkypeOut service instead of a landline. Vonage is overpriced, and Skype gives me the same thing with my USB to phone adapter - minus 911 service for about $6/month. I don't have ANY Skype contacts nor do I care to have any. I see no need to add more IM clients to manage even more friends lists.

    I do have issues with their site though, and I'm sure many others do as well - negatively affecting their sales.

    Prices are always in Euros - I'm in the US, they know that - I'm logged in - show me prices in DOLLARS.

    Skype Pro 'sounds' interesting, but it's unlcear what discounts it gives me on my SkypeIn and SkypeOut options. If I add SkypePro - what will I get other than the vague descriptions it notes on the info page? Show me examples - show me US prices for the whole collection of services.

    They SHOULD market themselves as a MUCH CHEAPER alternative to VOIP or landline services.

    They should partner up with Dish Network and DirecTV so their satellite boxes can 'call-out' via Skype, rather than a landline.

    They should link into other voice enabled IM systems.

    They should get their act together, as an eBay stockholder I expected MUCH more, but they have so far dropped the ball.

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