eBay’s Skype Sell-Off

By Craig Buckler
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eBay's Skype saleeBay has sold 65% of Skype, the VoIP system they purchased in 2005. At that time, eBay had been a surprise buyer and outbid both Google and Yahoo by paying $3.1 billion for the service. The deal would have cost a further $1 billion had Skype’s business not stagnated following the takeover.

Skype has over 480 million registered users and an 8% market share of global international call minutes. eBay had planned to increase auction revenues by enabling buyers and sellers to talk with each other. They hoped Skype would help with complex transactions, such as those for cars and high-end goods. However, eBay has recently concluded that the acquisition was ill-judged and a bad strategic fit for their business.

The company planned to float Skype in 2010, but the public offering has become overshadowed by a courtroom battle with the co-founders, Niklas Zennstrom and Janus Friis. eBay may lose the license for some of the peer-to-peer VoIP technology and are developing their own versions of the software.

Potential buyers for Skype included Google, but the 65% stake was finally sold to a consortium led by Silver Lake Partners. The investors include the Canada Pension Plan Investment Board and Andreessen Horowitz, a new venture capital firm led by Netscape founder Marc Andreesen. It has been rumored that the partnership will offer an investment opportunity to Zennstrom and Friis to resolve the legal issues.

Although the negotiations are continuing, Silver Lake is likely to pay around $1.7 billion for their share. This re-values Skype at $2.6 billion or a little over $5 per registered user.

Have you ever used Skype during an eBay transaction? Did you find the service useful? Could eBay make more of Skype’s technology? Was the marriage doomed from the start?

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  • Peter in Ireland

    I think the almost anonymous nature of ebay is one of it’s attractions.

  • Pankaj

    Maybe eBay didnt market Skype enough to eBay members. Skype has in fact become very important to small businesses and for international communication. As statistics suggest, Skype is the largest provider for cross border voice communication. We ourselves use Skype extensively at HyperOffice, for which we recently also won the Skype for Business award. With the simplicity with which people can communicate through Skype, its a wonder it didn’t appeal to eBay members.

  • Jim

    I never did understand why eBay wanted to allow communication between buyer and seller on their site, when they are so against off site sales occuring.. Was an odd purchase for them. I sell at http://www.alsoshop.com – avoid that fee noid!

  • Kevin

    I tried using Skype, but found they had poor call quality. Could not imagine using this for anything business related.

  • Joel

    I use skype daily for all business voice communications. Rarely can I fault it.
    It might be a poor fit for eBay biting believe it is still one of the best apps available.

  • mmatsoo

    After using Facebook for the first time I thought Skype would be a natural fit – they have the “Chat” feature showing who’s online anyway. You could choose to IM or actually talk with your friends.

  • @mmatsoo
    You’re right – Facebook or one of the other social networking sites would have been a better fit. I’m not sure eBay really knew what to do with Skype. I suspect it was a speculative deal rather than a natural business decision.

  • Brian

    Skype’s proprietary protocol is a problem for long-term viability; either everybody will have to use Skype, because they aren’t releasing the specs to their protocol, or Skype will fade away as people begin using software based on open standards like SIP. Skype is trying to follow the Microsoft model of getting everyone to believe that theirs is the best product because it is what everybody else is already using, so if you want to be compatible you have to use it also. Encourage the use of open standards while the VoIP market is still relatively young.

  • I am a big eBay buyer and seller. When I am selling, I include a Skype option for buyers on all my listings.

    I get some buyers who really like to be able to communicate with me about an item (especially a collectible type item, and ask detailed questions about condition). It has also helped me resolve some disputes with buyers, as we can easily talk via Skype, instead of trading emails.

    I don’t think the issue is that it never appealed to eBay sellers, but that it just wasn’t promoted, nor integrated well.

  • This situation shows the importance of software licensing and the supreme position of licensing in what I call the “openness stack.”