As everyone knows by now, eBay has agreed to acquire Skype. A lot of smart people are saying this is a dumb move, while others think it was brilliant. I’m happy to see skepticism (it’s a good antidote to the naive internet cheerleading that caused the original boom). But as a heavy Skype user, and as someone who has done a lot of consulting work for eBay, I think this deal is a master-stroke for eBay. Here are my reasons:
1) Pushing Skype past early adopters: Skype is a great service for startups and techy individuals looking to cut costs. But it hasn’t made much of a dent in the mainstream of the US market yet, where people are comfortable with their phones the way they are now and reluctant to try new things. Ebays core demographic is this Midwestern, mainstream audience. By makng Skype the default channel for eBay-related communications, eBay can slam Skype into mainstream use, making Skype much more valuable than it was before.
2) Ebay is a company that relies on network effects to win. The market only has value if lots of other people use it. That means that, unlike Yahoo! and Google, it either wins or loses dramatically on a country by country basis. This also means that in many emerging markets no one has heard of eBay, and eBay has no effective way to reach these markets other than expensive late-stage acquisitions.
Owning Skype will make eBay immediately relevant to millions of Pakistanis, South Africans, and Georgians. It gives them a way to reach customers and drive marketplace adoption in every country on earth. That’s huge. That’s something that Yahoo! and Google already have (every Indian I know has a yahoo ID, and all the ones that work with me have gmail), but that eBay has lacked until now. So Skype was not as valuable to Google or Yahoo! as it is to eBay.
As many have written, this deal doesn’t make sense on an immediate revenue basis, but I think it shows smart, gutsy leadership on the part of eBay. eBay is a good fit for Skype, and Skype is a good fit for eBay. Mazaltov!