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
    Cowarldy eBaiter, 1 Oct 2007 @ 11:11pm

    eBay Miss-Steps

    I'm shocked (sarcastic grin)! I dunno Mike...

    Some of the clowns at eBay don't seem to recognize a lot of things that are blatantly obvious to even most basic of thinkers. They've ignored major problems with their user interface for years. They lay blame on sellers for problems they could easily fix in their search results. They have a confiscatory rate structure that is unnecessarily complicated. They call it a 'community' and then smack down commentaries from the brave voices who refuse to 'shut up and drink the kool-aid'.

    This executive departure and massive write down is just the first round. Wait until they 'unveil' the new and improved version currently in the works leading buyers and sellers to exit in droves after a lack luster holiday selling slump.

    This company is poised for mediocrity.
    - Next stop: Irrelevance.

    Eventually, Google Product Search (formerly Froogle) will simply eat their lunch --

    Can I get an AMEN?

    Anyone??

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