eBay and Skype (continued)

My two previous posts on this deal were two of my most popular posts in the past 30 days.

I have no idea why people chose this blog to discuss, comment, and link to a deal that I had no part of (other than being a user and fan of both services).  But the fact is I had 19 trackbacks, 28 total links (according to Google), and 40 comments to my original post.

I had 5 trackbacks, 2 links (according to IceRocket), and 10 comments to my follow up post.

That’s a fair bit of discussion for this blog anyway.

So, after reading Tom Evslin’s complete trashing of the deal (from eBay’s perspective), I figured it was time to weigh in once more.

Tom says that eBay could have gotten IP voice talk technology for way less than what they paid for Skype.  Tom was one of the first guys in the VOIP space, so he knows what he’s talking about on this count.

He also says that while Skype does have a large user base in the developing world, its the availbility of payment systems (ie PayPal) that matters in those markets, not the ability to talk to the seller.  I am not sure that is entirely true, but again, they could have gotten voice IP voice talk technology to build into eBay for a tenth of the price.

His final point is that Skype is not a great standalone business. 

There is where I sort of disagree with Tom. Skype has amassed an enormous user base and its growing every day.  It’s either Metcalfe’s law or Reed’s law, not sure which, but we are seeing serious non-linear value creation going on in the Skype network.

Tom calls Skype an asset, not a business. I guess the distinction is one has value, the other has cash flow.  If that’s the distinction, I agree with Tom.  But I would be willing to bet that Skype will (and would have if it had stayed independent) generate significant cash flow in the coming years.

My first instinct is to Skype someone if I can.  I only reach for the phone if I have to.  Skype offers me presence detection, the ability to initiate a chat first to set up the call, and then one click and I am talking.  That is a much better user experience for me.  When Skype appears on a mobile device, that’s going to be great too.

The big thing Skype needs to do is open its network to other networks.  I want to be able to Skype someone on AIM, Yahoo, or MSN.  That’s when it will get really interesting.

But back to Tom, I agree that the eBay deal was kind of nutty. And have felt that way since my original post.

But I don’t agree that the $2.6bn was necessarily an overpay.  Maybe for eBay, but not for the asset itself.  It’s a jewel of a business.

#VC & Technology