eBay is acquiring Skype for approximately USD$2.6B, ($2.1B Euros), say both companies. From the press release:
"eBay Inc. (Nasdaq: EBAY; www.ebay.com) has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration. The acquisition will strengthen eBay’s global marketplace and payments platform, while opening several new lines of business and creating significant new monetization opportunities for the company. The deal also represents a major opportunity for Skype to advance its leadership in Internet voice communications and offer people worldwide new ways to communicate in a global online era. Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world."
Skype generated approximately $7 million in revenues in 2004, and anticipates $60 million in revenues in 2005.
Four reasons why eBay says they are doing this (items in quotes after the emphasis are from their release):
Increase the velocity of transactions - "Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles."Pay-per-call fees - "For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate."
PayPal and Skype integration - "PayPal and Skype also make a powerful combination. For example, a PayPal wallet associated with each Skype account could make it much easier for users to pay for Skype fee-based services, adding to the number of PayPal accounts and increasing payment volume."
Introduce emerging markets to eBay - "Skype can help expand the eBay and PayPal global footprint by providing buyers and sellers in emerging ecommerce markets, such as China, India, and Russia, with a more personal way to communicate online. And consumers in markets where eBay currently has a limited presence, such as Japan and Scandinavia, can learn about eBay and PayPal through Skype."
From my perspective, there are three really interesting implications of this:
It's an opportunity to extend eBay communities to the desktop - The buddy list, collaboration, instant messaging, and communication features of Skype allow customers to create communities of interest, especially around the various areas highlighted in eBay Groups. Integration of eBay Groups with Skype makes these communities much easier to join, and greatly increases the possibility of interactions between the group members (all of which eBay can monetize).A highly strategic move into emerging markets - For geographies that are rapdily moving up the Skype adoption curve, providing an easy means to drop right into a commerce environment via Skype gives eBay an opportunity for a huge presence, especially for peer-to-peer transactions.
Integration of PayPal into the Skype interface - There is a fantastic opportunity here for eBay. With Skype, they have the opportunity to control both the "first mile" and "last mile" of a communication that supports a transaction. Here's the use case: You call the local pizza joint from Skype. (I do this already.) If the pizza joint is already on Skype, the path is easy...they say how much the pizza will be, I click the "PAY" button in my Skype interface that initiates a payment via PayPal, and I go pick up my pie. Even in the case where the pizza joint doesn't use Skype, if they have an email address, the same mechanism could be used. No more fumbling for your wallet. It's easy. It's right there. It's a click.
Now it's time to see how the numbers pan out, and if eBay can execute on these opportunities...
Some of the public statements from EBay have focused on the need to deepen conversations on a per-transaction basis which they say would help some long-cycle complex sales a great deal.
So, how do you deepen complex sales conversations? Let’s start with who those EBay sellers will be talking to. Geoffrey Moore, in "Crossing the Chasm" and "Inside the Tornado", describes the market of potential buyers for most products as made up of early adopters (20%) and the Mainstream Market (80%).
Early adopters are largely enthusiasts who either love to buy the latest, hottest thing because 1) they want to be seen as “cool” or because it makes them feel good or 2) they intuitively understand how to use products to meet their goals or overcome some issue or problem.
The Mainstream market, however, needs to understand methodically how to use an item, they want to proof that it performs as promised, and they want to know that the benefits ($ or Intrinsic) they will see outweigh the costs.
Why do most browsers - real life ones, not Explorer or Mozilla – look, but not bid or buy? They don’t buy often because sellers inundate them with features that the buyer can’t map to usage. The unifying theme for these buyers is USAGE. Successful sellers are those that can lead buyers to understand, “How can I use this item to improve my life – reach goals, overcome issues, solve problems?”
Since the large majority of the market is in the latter Mainstream group, it would be smart for EBay’s sellers to try to guide their inevitable (if you listen to EBay) Skype powered, internet-based, sales conversations along the lines of how the Mainstream Market buys. They will need to accomplish three things on these calls:
- Build a Vision of Use in the buyer’s mind
- Distill the value the buyer will derive from the item or the financial hardship that will occur if they fail to use the item, and
- How can the buyer implement the SOLUTION, without significantly impacting the derived value of the item
If they EBay sellers know their products, they should be able to build usage-based conversation models ahead of time and practice before getting on that internet phone. If they fail to, they may have a lot of bits going back and forth about what they are selling, but no BITES.
Adam J. Shapiro
[email protected]
www.customercentric.com
Posted by: Adam Shapiro | September 12, 2005 at 01:43 PM
I wonder whether eBay saw this item on their own site before they made their offer for Skpye:
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=5807543926
The seller, http://www.whitephone.com says:
"Using this product you can compete directly with Skype, and go a stage further with your own community-building announcements system, video mail broadcasts, and many more unique features."
Seems that eBay could have saved $2bn to $4bn?
Posted by: John Farmer | September 14, 2005 at 08:52 AM