“Got kitesurfing on the mind, mixed with some search & classification tech, and a dab of political ranting”

eBay buys Skype for $2.6B+…yikes!!!

Posted by direwolff on September 13, 2005


Something about that deal that I love.  eBay has continuously shown itself to be above the hubris of a big company.  They started out with the acquisition of Billpoint which was unfortunately ill-fated from the get-go, but this didn't stop them from keeping their pride in check and taking another bite at the apple with their follow-on acquisition of Paypal.  By all appearances, Paypal has continued to run as it always did, except that now some of its processes seemed tightened up.  Nothing gives me the eerie feeling of an eBay suspicious hand manipulating things behind the scenes, as I sometimes get with some of the other modern Internet behemoths after similar moves.

eBay then invested a token $25M into Craigslist in an arm's length transaction.  This had all of the potential for getting ugly, but so far the relationship and their respective competition has remained quite civil with no evidence that eBay is seeking to crush Craig.  There's something you have to like about that, again given how frequently cultures will clash and relationships turn ugly.

This new Skype acquisition however has the flavor of a Paypal deal all over it.  It's technology that eBay can certainly use in its marketplace that adds value to its members and their interactions.  However, like Paypal, its a service that extends significantly beyond the bounds of eBay's immediate business and broadens their agenda.  The use of both Paypal and Skype go far beyond their application on eBay and that's why I love this deal.  While $2.6B seems like a lot of money, at 54M global users that's a mere $48.80 per user to get an immediate global footprint (not that eBay didn't have one already).  Skype already has 2M people paying them an average of $4/mo. on either Net-to-landline or voicemail services.  Basically, at $4/mo. they can get payback on their acquisition in one year fm each member. 

So the question becomes how many people will start paying for Skype services.  Well, I don't believe it matters because eBay and Skype are in it for the long haul and the price was not prohibitive.  Even with the additional incentive payment of $1.5B based on performance, that just makes the deal even more worthwhile for eBay since it's obviously tied to user growth and financial metrics.  This was a smart deal, and while some might scoff at the price tag, I'm actually surprised one of the usual players (ie. Google/MSFT/Yahoo!) didn't act on it first.

Congrats to the Skype founders on a 3 year job well done…yikes!!!


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