Monday, September 07, 2009

Skype and eBay divorce

In what I can only describe is "it's about time", eBay decided that Skype didn't fit in their business plan and sold it off. Skype is an online phone system, basically allowing people to make free calls to other people on Skype through their Internet connection. It can also be used to call from your PC to a telephone, at lower rates than most standard phone services have. For example, it's 10.3 cents a minute to the Dominican Republic, and 10.6 cents per minute to India. Compare this to Verizon charging 17 cents a minute to DR and 33 cents a minute to India. What's kind of nice is that the other person won't even know you are using a computer to call them. Nice idea!

The question I had when eBay bought it a few years back was "what are they going to do with it? How does this fit in eBay's business model?". I suppose the answer has been found.

The sale (which does allow eBay to keep a share of Skype) allows eBay to focus on what they know (online auctions). I always wonder if it is better to focus on one thing and do that really well, or to spread your business out. In this case, there was very little integration between the two applications, so it was an odd fit from the start. Meg Whitman, a former CEO of eBay, was approving of the purchase, but now that she is gone, the company found itself free to rid itself of an asset that was not helping the bottom line.

Part of me wonders if eBay is being smart, since pending legal issues have led experts to question whether Skype will need to be shut down eventually. The question is this - Skype doesn't sell advertising, and though it has 405 million users, how do you turn that in to real revenue? I don't know how many people use it for anything aside from free calling, so I couldn't tell you.

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