Seeing Beyond the Hype of Skype

Opinion: For Skype's 54 million registered users, the acquisition by eBay clouds the clear skies of free Internet phone calls with unanswered questions.

Skype, a company that almost no one had heard of barely two years ago, came out of nowhere to achieve immense popularity as a provider of tools for consumer Internet telephony. Skype makes voice over IP so easy to use that word-of-mouth marketing by satisfied users was all that was needed to make its software spread worldwide, bringing in millions in revenues—anticipated to be $60 million this year.

So spectacular was Skypes skyrocketing popularity that online marketplace titan eBay agreed to pay an astronomical sum—between $3.7 billion and $4.1 billion—for the company.

We think eBays embrace of VOIP is exciting. Giving buyers and sellers the ability to talk and to haggle over transactions can only improve the user experience at eBay, already a tremendously successful online marketplace.

Other marketplace sites, such as Yahoo and MSN, were reported to have had discussions with Skype and will presumably continue to develop Internet telephony strategies. We think expanding the use of VOIP is the kind of IT innovation we all need.

However, this progress comes with a price that is worth pausing to consider for a moment. First, the price that eBay paid is so high—potentially 68 times Skypes revenues—as to evoke memories of the dot-com bubble. While some have fond recollections of that time, we loathe the days when harebrained business plans sucked up billions of investment dollars that could have been used to back ventures delivering real benefit.

Sure, its eBays money, but wed hate to see a positive trend toward wider VOIP usage undercut by a go-go mentality that obscures the real value inherent in the technology.

/zimages/4/28571.gifClick here to read more analysis of eBays motives for the Skype purchase.

For Skypes 54 million registered users, the acquisition clouds the clear skies of free Internet phone calls with unanswered questions. Will eBay link Skypes services exclusively to its marketplace sites? Will eBay seek to recoup its huge investment by charging for the service? Will American ownership open up all users to the more stringent provisions of the USA Patriot Act? Or, will deep eBay pockets produce big bucks for much-desired enhancements, even as Skype continues as a free worldwide service?

We strongly urge eBay to answer this last question in the affirmative. The world needs it, and Skypes loyal customers deserve it. Its not a great leap for Skype developers to add video to current capabilities. Video interaction between buyer and seller can go far to bolster the feeling of trust that is so essential to e-commerce. eBay management has done so many of the right things in that companys rise to the top that we trust it will also do the right thing in this case.

Indeed, the company is talking about investing in future Skype services. If, however, eBay management takes things in another direction, we dont doubt that another provider will rapidly fill the niche that Skype discovered and so masterfully filled.

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