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EBay Admits To Bad Call On Skype

Zonk posted more than 6 years ago | from the fun-for-users dept.

Software 297

MaineCoasts writes "The Times online reports that two years after buying Skype for 2.6 billion, Ebay yesterday warned shareholders that they may have made a mistake. In essence, they vastly overpaid for the company. ZDNet offers analysis of the announcement: 'Clearly, the current business model is not enough to satisfy eBay in light of how much the company spent on Skype. And the reason is simple. Even though Skype has done a very good job of getting users to download its software client, most people who use the service do so to make free Skype-to-Skype phone calls. The only way that Skype makes money from its subscribers is when people use its Skype-In or Skype-Out services. Skype-In allows users to pay to rent a phone number, which people on regular phones can call. Skype-Out allows users to call traditional phones or cell phones for a fee.'"

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There's only one solution for Ebay (5, Funny)

Anonymous Coward | more than 6 years ago | (#20823687)

SKYPE - 200 million+ users - Used, LIKE NEW! A++++ SELLER

Buy It Now: $2,000,000,000
Current Bid: $5.50

Re:There's only one solution for Ebay (5, Funny)

Billosaur (927319) | more than 6 years ago | (#20823909)

Congratulations, GoogleBuyer, you are the new high bidder!

Current bid: $6.00

Maximum bid: $10.00

Re:There's only one solution for Ebay (5, Funny)

Laute (1110221) | more than 6 years ago | (#20824123)

Reserve not met.

Re:There's only one solution for Ebay (1)

brian.gunderson (1012885) | more than 6 years ago | (#20825169)

Funniest comment in a long time. Well done.

Bubble (4, Insightful)

Artimaeis (1164311) | more than 6 years ago | (#20823713)

Hmmm... smells like the bubble could be collapsing.

Re:Bubble (3, Funny)

Spy der Mann (805235) | more than 6 years ago | (#20823791)

Hmmm... smells like the bubble could be collapsing.

Look! A needle! :D

Re:Bubble (4, Informative)

oliderid (710055) | more than 6 years ago | (#20823793)

I still remember that Ebay had difficulties to explain how Skype could integrate their core business.
There was no point for them to invest so massively in such a service.

Re:Bubble (1, Interesting)

Anonymous Coward | more than 6 years ago | (#20823887)

I said this way before the dotcom ver1.0 bubble burst but here we go again:

1. a non paying customer base has little value - base a company value on revenue and operational margins

2. customers change services rapidly on the web

Re:Bubble (2, Insightful)

MightyMartian (840721) | more than 6 years ago | (#20824659)

Should have put in an advertising model.

"Hi, my name is Shelia, and while you wait for your call to 283-582-2482 to go through, I'd just like to tell you I'm *really* hot for you. You make me moist. Why don't we fool around. It's just $2.99 a minute, and 283-582-2482 can wait."

Re:Bubble (1)

Opportunist (166417) | more than 6 years ago | (#20824137)

Umm... yeah... that smell's the bubble collapsing... the bubble.

Re:Bubble (1)

fbjon (692006) | more than 6 years ago | (#20824181)

I just hope that I'll be able to continue using SkypeOut. In some cases it's cheaper across the world than local phone calls.

Pretty obvious, wasn't it? (3, Informative)

darthflo (1095225) | more than 6 years ago | (#20823715)

Just out of interest: Of everybody you've ever hear talking about Skype, how many mentioned the free Skype-Skype calls and how many mentioned you can pay to call others, too? (It's about 50:1 with quite a lot of non-techies in the 50 and an ex-coworker in the 1 group...)

Re:Pretty obvious, wasn't it? (4, Insightful)

apdyck (1010443) | more than 6 years ago | (#20823897)

I personally use the Skype Out service. I have one contact in Skype that is a Skype user, and he uses it for work (that'd be my father). I paid $17.50 CAD for a year of unlimited long distance, and I tell everyone what a great deal it is and how they should sign up for the service. As of yet, not a single person I've told about Skype has even downloaded it, let alone used the service. Perhaps people are just afraid to try something new?

That said, there is one thing I have noticed. I get great call quality with Skype when I call my parents in Ottawa, or my friends nearby, but when I call my in-laws (up in the Northwest Territories), I have anywhere from 3-10 seconds lag, and the quality of service is poor. It would seem that the quality of service is limited by the available bandwidth - they just got 768K 'high speed' Internet there a few months ago! After all that, I plan to continue to use Skype Out, and when they finally start offering more Canadian phone numbers, I may even consider using Skype In.

Re:Pretty obvious, wasn't it? (4, Insightful)

Fizzl (209397) | more than 6 years ago | (#20823993)

When I was working in sweden for couple of months, I actually used both skyp-out and skype-in to call my relatives. The international call prices are ridiculous between Finland and Sweden, even when me and the other end are on the same companys network! (TeliaSonera)

Re:Pretty obvious, wasn't it? (5, Interesting)

Jaseoldboss (650728) | more than 6 years ago | (#20824213)

I've also used it from Holland, leaving my cellphone in the UK. Nearly every internet cafe has Skype installed and, even including the internet fee, it's cheaper than making an international call.

However, from the article:

"Skype has been focused on user acquisition, and it's done a great job. But we also feel like we can find new ways to monetize those users."

I'm very wary of what 'monetize' might mean. I'm surprised that they didn't plaster ads all over the application soon after eBay bought it to be honest.

Re:Pretty obvious, wasn't it? (4, Interesting)

FewClues (724340) | more than 6 years ago | (#20824165)

It was pretty obvious to a lot of seniors living in deep southern Texas. A lot of us have canceled our AT&T long distance and gone with the annual Skype premium service. The annual charge was about what we paid a month with AT&T and we now can chat without one eye on the clock. I don't know about the non-techies in the 50+ bracket that you know - but I can introduce you to hundreds in the 65+ that Skype out constantly.

Re:Pretty obvious, wasn't it? (1)

OrangeTide (124937) | more than 6 years ago | (#20824489)

Skype has advantages over services like Vonage because you can get into the basic parts of it for free. And chat with people online, and pay a small fee to replace your phone service with it. It's quite popular. Of course I often wondered why ebay saw such huge value in it. Maybe google will buy it and combine it with a google phone.

Re:Pretty obvious, wasn't it? (1)

AxelTorvalds (544851) | more than 6 years ago | (#20824263)

Skype is good. It works, it's easy, it supports your platform. Seems like there will be ways to make money from it, that doesn't seem like a really difficult problem to solve.

Now what I don't get is how/why ebay is in the mix, this doesn't seem to have anything to do with what ebay does.

Re:Pretty obvious, wasn't it? (1)

R2.0 (532027) | more than 6 years ago | (#20824497)

In reverse order:
"Now what I don't get is how/why ebay is in the mix, this doesn't seem to have anything to do with what ebay does."

Ebay makes money, so...

"Skype is good. It works, it's easy, it supports your platform. Seems like there will be ways to make money from it, that doesn't seem like a really difficult problem to solve."

Ebay thought that was a good busines plan and staked $2B on it.

I SkyeIn and SkypeOut (3, Interesting)

everphilski (877346) | more than 6 years ago | (#20824351)

I use SkypeIn and SkypeOut, paid up for a year. For what my wife and I paid in cell phone bills for a month (2 phones), we now have home service for a year (we have a paid-by-the-minute phone for emergency purposes when traveling). Roughly $70 a year. I can't complain. We don't use free skype-to-skype calling because none of our friends/family use it yet.
Just wanted to let you know that we saved a ton of money on our phone bills by switching to Skype!

Re:Pretty obvious, wasn't it? (5, Interesting)

griffjon (14945) | more than 6 years ago | (#20825207)

The problem with skype is that their income is in inverse relation to their network size, making it a particularly poor "web 2.0" network-driven company. The more people who have skype (and a connection to support it), the fewer people will use skype(in|out) services. For example, my girlfriend lived in China over the summer. At first I called her using skypeout. When she finally got Internet, tho, we just used skype-to-skype, because of better call quality and video capabilities.

Skype has to find a way to increase their revenue as their network of users increases; probably through an ad-revenue stream to their in-calling services. Doing this the wrong way, though (pre-call audio ads, etc.) will just scare people off to IM services with voice chat capabilities, which is increasingly all of 'em.

Good luck to 'em. I like skype (except for the lack of "quit/exit" in their file menu!)

You're Going to See a Lot of Criticism (5, Insightful)

eldavojohn (898314) | more than 6 years ago | (#20823723)

You're going to see a whole slough of articles on this because it's now very easy for everyone to criticize after the facts are in. But, I caught this in The New York Times Blogs [] yesterday and I found these lessons learned to be quite accurate:
  1. Just because a company has a huge and growing audience doesn't mean it can find a huge revenue source. Skype's appeal is that it offers services free or very cheap. That limits its ability to raise prices. And it turns out that there are limited opportunities for advertising or add-on services.
  2. It's almost impossible to pay for a deal through "synergies." EBay executives talked about how Skype would be useful to connect buyers and sellers in its marketplace. This always seemed to be hooey. The eBay market is already full of chatter, mainly by e-mail, and sometimes by phone. Sure, some of that might well be handled by Internet phone, but how much and what value was created by eBay owning its own voice chat system? Not much, it turns out.
I think the second point is the most important. This deal was easy to criticize because they didn't know what the hell they were going to do with it. They had no forward plan. Where were they taking Skype? What were they going to do with it? How was it going to make money? Nobody knew. And, most importantly, eBay didn't either.

So why did they make the deal? Maybe they felt pressure. Maybe it looked like easy cash. One thing is for sure, it never came to fruition whatever they saw in the company. I personally liked the tool but once you start asking for cash, you can expect to see your user base taper off. You're competing with something that is already incredibly cheap in the states. If it ain't free, you're going to have problems operating in the black. If it is free, you better have some mad advertising revenue or market data stuff to sell ... I don't know but that's why they over paid for it.

Google knew where they were going with the YouTube purchase. It's now pretty clear eBay didn't know exactly what they were going to do. But, hey, they could treat it like Microsoft's original Xbox venture, "We lost a lot of money but fsck it, we've got a ton to lose and I'm bored with being the top dog in a single market!"

Re:You're Going to See a Lot of Criticism (1)

Billosaur (927319) | more than 6 years ago | (#20824013)

Shades of AOL/Time Warner, no? A little different, in that AOL was actually a money-making proposition, but I don't think Time-Warner knew exactly what it was going to do with AOL, save hook its star to it, place some of their content on the site, and watch the money roll in. Flash forward and now TIme-Warner looks pretty stupid.

Re:You're Going to See a Lot of Criticism (3, Informative)

Znork (31774) | more than 6 years ago | (#20824781)

Eh, well, except it was actually AOL buying Time-Warner. Merger, wherein AOL owners got 55% of the new merged company stock.

They later changed the name and refocused as the dot-com bubble collapsed and the 'AOL' part approached worthlessness in evaluation, and the company didnt exactly need the loadstone of a posterboy for the bubble as a name.

As to the flash-forward, the merger structure and name changes makes it fairly difficult to figure out exactly who the most stupid party was, but anyone left holding stock in the joint company probably had more left than if they'd been holding only AOL stock. Which doesn't exactly make them less stupid for touching AOL stock at all.

It's sortof sad how the high-flying corporate execs appear to have learned very little about how to avoid getting brainslugged by clever marketers.

Re:You're Going to See a Lot of Criticism (0)

Anonymous Coward | more than 6 years ago | (#20825147)

Except that AOL bought TW, not the other way around.

Re:You're Going to See a Lot of Criticism (1)

packetmon (977047) | more than 6 years ago | (#20824131)

I see the same issue coming around the corner for Google/YouTube. "What the hell to do with it." I wonder how long after the lawsuits (infringements) start hurting Google's pockets before they turn around and shoot themselves in the foot for buying YouTube. Provided is still around, I personally feel Google mad err there

Re:You're Going to See a Lot of Criticism (4, Insightful)

kebes (861706) | more than 6 years ago | (#20824399)

I see the same issue coming around the corner for Google/YouTube. ... Provided is still around, I personally feel Google mad err there
The Google acquisition of YouTube makes much more sense than eBay/Skype. Google has a solid business model based on advertising, and YouTube fits with that. YouTube has a huge userbase, so the ads that are now running (selectively) on YouTube are undoubtedly generating income. Of course I don't know if the income is enough to offset the bandwidth (and legal!) costs, but I suspect Google is still confident that they can turn it into a profit center, since they are continually de-emphasizing Google Video in favor of YouTube (e.g. nowadays most of the "related" links in Google Video point to YouTube).

Re:You're Going to See a Lot of Criticism (5, Insightful)

kebes (861706) | more than 6 years ago | (#20824155)

Excellent post.

Skype's appeal is that it offers services free or very cheap. ... once you start asking for cash, you can expect to see your user base taper off.
I think it's further worth noting that Skype has had some unfortunate technical issues. The business model behind Skype is something along the lines of "get people interested in the product by offering free Skype-to-Skype calls, but charge for calls to/from conventional phones." I think many users, including businesses, seriously considered using Skype for their international calling needs. It seemed like a good fit.

However Skype has certain stability problems. In my own usage, I've noticed that it can sometimes be a bit flaky. Moreover, the entire Skype network went offline [] for many days. As a result, businesses stopped thinking of Skype as a serious, reliable option.

My point is that things could have turned out differently if the Skype technology had become mature and stable enough to be a viable option for reliable international calling. They could certainly have gathered a large, paying customer base if the system was bullet-proof. But, as is, many people are (rightly) dubious of the reliability. I think Skype's business model has merit, and the program is very useful. But, eBay certainly overpaid in as much as they paid as if they were buying a mature technology/solution, when in reality there are still many growing pains left in that technology sector.

Re:You're Going to See a Lot of Criticism (2, Interesting)

LWATCDR (28044) | more than 6 years ago | (#20825087)

Part of it is proprietary nature. We use Asterisk at my office for our phone system. I would love it if we could pay a small fee and make calls too and from our phone system using skype. Sort of a Skype toll free number. Some of our overseas customers use Skype but there isn't any good way to integrate Skype with our current phone system.
A Skype module would also be nice to put into our software. Just click a button and call tech support over the Internet.
Skype has potential but not in it's current form.

Re:You're Going to See a Lot of Criticism (2, Interesting)

mpapet (761907) | more than 6 years ago | (#20824415)

Oh, but you and the summary are missing the many, subtler issues that suggest real, bottom-line trouble for ebay with the skype acquisition.

- About a half-billion dollars of the charge is for a payment to Zennström, Friis, and other early Skype investors. Cha-CHING! I've been on the wrong end of a couple of similar (smaller) acquisitions and what typically happens in a well-negotiated deal is ebay (in this case) doesn't pay them whatever they agreed to beyond a token up-front signing payment. Right or wrong, typically the founders don't have enough capital to drag it into court so they take their small pay-out with the original deal and that's the end of it. In this case, ebay negotiated so poorly they couldn't get out of their deal.

- Sure they value deals at Billions(!) but when it comes down to it, normally acquisitions are just not that cash-rich. Except in this case. If they had met their earnings targets, then the payout would have been double the charges they are taking.

- ebay's being very uncharacteristically up-front about the charges. Which suggests to me the damage is far worse that what's being reported. Look at all of the mortgage-backed securities that are still going from billions in valuation to zero overnight.

This suggests there's far more wrong at ebay than right.

Re:You're Going to See a Lot of Criticism (2, Interesting)

14erCleaner (745600) | more than 6 years ago | (#20825191)

Google knew where they were going with the YouTube purchase.

Did they? I think Google is just flailing around these days, trying to figure out what to do with all their money. Buying YouTube made no sense to me; basically YouTube is like Napster for videos, except that they have to pay for their own bandwidth. Google bought it because it was cool and popular, not because it made sense financially.

Who would have thought? (2, Insightful)

smooth wombat (796938) | more than 6 years ago | (#20823727)

most people who use the service do so to make free Skype-to-Skype phone calls.

Imagine that. You offer a free service to people and they use it. Seems a bit odd to now say you're not making money because people aren't willing to pay for one of your other services.

To top it off, a technology company now claims they paid too much for you.

Those who cannot remember the past and all that comes to mind.

Re:Who would have thought? (2)

Billosaur (927319) | more than 6 years ago | (#20823879)

Well, let's face it: your average eBay user probably does not know what Skype is, let alone that eBay bought it. Since eBay did little to integrate it into their offerings, this should not come as a shock. Also, eBay doesn't have the most sterling reputation, so you had to be wary that they'd poison the Skype pool somehow trying to make money out of it.

is that the version number or the price paid? (0, Redundant)

fattmatt (1042156) | more than 6 years ago | (#20823751)

from the post...

...two years after buying Skype 2.6 billion...

Clearly it's the version number. (2, Informative)

_Shorty-dammit (555739) | more than 6 years ago | (#20824175)

Otherwise, there would have been more characters typed. And nobody ever, EVER, makes stupid mistakes in slashdot posts, and if they ever do, well, then the top-notch editors fix them up before the post makes it up there.

Re:is that the version number or the price paid? (1)

sjaskow (143707) | more than 6 years ago | (#20824383)

In honor of /. 10th anniversary, may I be the first to tell you "You must be new here?" :)

Call Me....No Skype Needed!!! (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#20823763)

I'm a bored housewife....I need to talk to spark my life up.
call me!!!
(740) 354-2095
(740) 352-0322 (Private Celly)

Mention my myspace page, and I just might show you my ( . )( . )!!!! []

Re:Call Me....No Skype Needed!!! (4, Funny)

Nilych (959204) | more than 6 years ago | (#20823863)

If you really want your life to get more interesting, give us your husband's cell number.

Shades of 2000 (3, Insightful)

Valdrax (32670) | more than 6 years ago | (#20823775)

Honestly, this was another classic case of someone with money looking at a wildly successful and completely unprofitable business and snapping it up without some serious thought to how to make it profitable or more importantly if it was possible to make it profitable.

None of these businesses that provided expensive service for free and whose selling point was that it was free have ever managed to become profitable. eBay should've known better when buying a business in 2005.

Skype is not an expensive service though (1)

Pinky's Brain (1158667) | more than 6 years ago | (#20823915)

Not to run anyway, VOIP is a very cheap service ignoring patent litigation.

Shades? (4, Insightful)

Chineseyes (691744) | more than 6 years ago | (#20824641)

This IS 2000 all over again. Wait until the social networking sites that are being valued in the 2-10 billion dollar range yet only bring in a couple of mill a year in revenue start collapsing then it will really get ugly.

the problem, as i see it (2, Insightful)

erlehmann (1045500) | more than 6 years ago | (#20823811)

is that however ridiculous ebay's "future bizness model" will be, it will be forced down the throat of skype users due to closed source and the proprietary protocol.

Re:the problem, as i see it (2, Insightful)

Goffee71 (628501) | more than 6 years ago | (#20824017)

Guessing here but 90% of Windows users don't know what closed source is, so they don't care and will go on something called 'quality of service'. If that's no good then Skype really is screwed and with all the bad press, that's all the typical user needs to hear to steer clear.

i seriously doubt that (1)

erlehmann (1045500) | more than 6 years ago | (#20825237)

look, i know some people who use skype b/c their friends use skype. they know that it's no good. they even say that in discussions. but they are afraid of "losing their friends".
for most people, this is way more important than slightly degrading quality of service - hell, even icq is accepted by sheeple these days, despite it featuring heavy ads and stuff.

that said, a real friend would a) understand the issue at hand and b) find other means of communication.

Re:the problem, as i see it (1)

delt0r (999393) | more than 6 years ago | (#20824093)

This is true. However there are more than enough alternatives that people will switch too if the deal is to rough.

And thus the second dotcom bubble bursts (4, Insightful)

Fross (83754) | more than 6 years ago | (#20823841)

In exactly the same way as the first. "Old money" companies (as 1st generation dotcom companies like eBay are now, in comparison) paying way too much money in speculation, for a piece of the "next big thing". Next Big Thing fails to materialise as a sustainable business enterprise, money is wasted.

3 years ago, it seemed like everyone and their mom was getting into VoIP. I remember asking someone writing one, how are they going to make any money? He answered, get bought out by a big corporation.

Well, it worked for Skype, I guess.

Since the project has failed to make money... (1)

dogganos (901230) | more than 6 years ago | (#20823973)

...just release it as open source and dump it!

Seriously, it could make money by having you seeing advertisements during your conversations.

Re:Since the project has failed to make money... (1)

Fross (83754) | more than 6 years ago | (#20824071)

It already does. You see adds when the client is open.

Re:Since the project has failed to make money... (1)

dogganos (901230) | more than 6 years ago | (#20824363)

It already does. You see adds when the client is open.
Hmmm... I don't know what you mean. I have the linux client and I never see any ads...

Everything fails until it works (1)

Quadraginta (902985) | more than 6 years ago | (#20824911)

Yes...but how do you suppose you ever do make money on the Next Big Thing, if you never take what looks at the time like quite a risk?

The rate of return on an investment is always determined by its risk. That's because the rate of return is the "price" those who want the capital must pay for the right to borrow your money. Obviously if the investment is quite safe, borrowers can pay a low price for your money. That's why the US Treasury can pay a measly 4 to 5% interest on the money it borrows. It's a very safe investment.

On the other hand, people who think they have the Next Big Thing, technology-wise, and are rushing to bring it to market without a totally clear idea of how they'll monetize the whole shebang are clearly presenting you with a very risky investment, and hence must pay enormous rates of return to get your money. So that kind of investment pays hugely, when it pays at all. It's basically the only way ordinary people (people not gifted with superhuman looks or athletic ability) can get rich.

It's all well and good to inveigh against "foolish" risk with your (or your stockholders') money -- as long as everyone is willing to settle for a 1% real rate of return, so everyone can stay middle class, and no one's ever going to get rich. But if you have bigger ambitions -- if you insist on the chance to strike it big -- then there is no option other than taking 'foolish' risks, because only risks that look foolish to cooler heads will ever pay off big.

(And of course when they do pay off, the cooler heads will immediately fall all over themselves explaining how it was actually clear that this investment was clever and low-risk, and the fact that the cooler heads didn't invest in it themselves at the time was due to some curious accident, a conspiracy, a missed phone call, it all happened before they were born, or whatever.)

Re:Everything fails until it works (1)

Duhavid (677874) | more than 6 years ago | (#20825231)

All that and more.

But you don't invest in something just because it is a big
risk, and therefore might well be a large return.
You have to be bought into the dream of what it is
going to be, you have to believe and act on that belief.

I don't, in my heart, believe that EBay saw anything except
the possibility of money.

I've been a skype in/out user for a while (4, Interesting)

vlad_petric (94134) | more than 6 years ago | (#20823877)

And what can I say — their service is getting worse and worse. At the beginning of the year it used to be much better. These days, the clients are buggy, the phone number I got from them no longer works ... so, sure, I'm only using it for skype-to-skype calls.

To ebay – get your act together or you'll lose most of your current paying skype customers (and forget about growth)

I predict ... (2, Interesting)

Kristoph (242780) | more than 6 years ago | (#20823911)

This announcement is a prelude to eBay shopping Skype to the highest bidder. Even though it is not a cash cow Google, Microsoft and possibly Yahoo will be falling over themselves to buy for it's strategic value.

Personally, I hope whomever buys it, they open up the protocol as, if it does open, it could be THE voice platform.


Re:I predict ... (1)

juniorbird (74686) | more than 6 years ago | (#20824875)

While I definitely think this looks like a good match for Yahoo, eBay has $3.1B in cash and short-term investments... that's a reasonable chunk of change. A good question would be "what would eBay do with $1.6B more cash?" (One would presume that eBay would write Skype's value down to what they could sell it for -- a second write-down would be embarrassing, as would taking the write-down, depressing stock prices, and then selling for substantially more than the written-down value.)

If they think that the non-profitable Skype is dragging down the stock price, and anticipate the inevitable write-down will depress the stock price further, then their best bet is to take the write-down, do a share buy-back, and replenish their cash reserve by selling Skype 6-12 months down the road.

Don't be short-sighted (5, Insightful)

GreyPoopon (411036) | more than 6 years ago | (#20823919)

Clearly, the current business model is not enough to satisfy eBay in light of how much the company spent on Skype. And the reason is simple. Even though Skype has done a very good job of getting users to download its software client, most people who use the service do so to make free Skype-to-Skype phone calls.

Don't be too hasty. There are two avenues that open up huge potential for revenue:
  1. Corporate presence. I know several large companies that informally use Skype. For security purposes, they would probably be willing to pay for internally operated Skype networks and collaboration software add-ons. There's a huge potential there. The large company that I work for has black-listed Skype from our computers because Skype is very tight-lipped on the protocols and "phone home" cases that are used by the application. Opening up some of the "secrets" to potential customers and supporting intranet-only implementations of the software open up a revenue stream.
  2. Vonage replacement. With yet another loss in patent lawsuits for Vonage, the future is looking bleak for them. My cable company keeps sending me offers for VoIP, but frankly the thing that has kept me from switching is the much higher rate schedule for international calls. I need 5 cents per minute or less to Europe. Skype could either provide a hardware-based client to replace Vonage installations, or partner with cable companies to provide reasonable rates for long distance. Furthermore, they could start providing video conferencing capabilities.

In short, there is a HUGE untapped market out there. If EBay would stop trying to milk their investment and would start investing more into it, they could really get some substantial returns.

Re:Don't be short-sighted (2, Insightful)

psydeshow (154300) | more than 6 years ago | (#20824189)

Opening up some of the "secrets" to potential customers and supporting intranet-only implementations of the software open up a revenue stream.
Bingo. As long as Skype remains closed, only eBay gets to play "for real".

Somewhere between the lazy super-geeky hardware marketing done by Asterisk, and the ultra-mainstream consumerist approach taken by Skype, lies the whole freekin' revolution in voice communications that we've been waiting for since the late 90s.

How much does an enterprise pay for a new phone system? What if the front-end to that phone system was Skype and backend was Asterisk? I'm not an operator, but I suspect that IT managers could double their salaries, and both eBay and Digium would see big cash coming in the door.

Re:Don't be short-sighted (1)

Qwell (684661) | more than 6 years ago | (#20824961)

I saw this, and just had to respond...

As an Asterisk developer, and Digium employee, I felt that I should point out that we're not just selling "super-geeky hardware" anymore.

I'll go ahead and take the karma hit for a shameless plug here.. As of fairly recently, we also have an SMB appliance, and with the recent acquisition of Switchvox - the times are certainly changing (not just for Digium, but for the Asterisk community as a whole). See [] and []

Viva la revolution?

Re:Don't be short-sighted (2, Interesting)

MobyDisk (75490) | more than 6 years ago | (#20824395)

Skype can be used for business as well as home. I am a contractor for a company that has employees in 5 different time zones. We all work together on a daily basis, and I would LOVE to use a professional, secure, videoconferencing system with a white board. There is DEFINITELY a market.

The problem is that nothing has enough momentum for people to be willing to download it. It's like how everyone has 3 different instant-messaging applications. What we need are open standards.

Not competitive (1)

Anne Thwacks (531696) | more than 6 years ago | (#20823923)

The price for skye out call is just not competitive with other services - eg phone cards, thats why it doesnt sell.

If you target a price consious market, you need to be competitive ;-}

Re:Not competitive (1)

ogfomk (677034) | more than 6 years ago | (#20824523)

Skype could lower the price and increase sales. I would buy the service for $10 a month, so I could call my family out of the country. It might sound cheap, but the influx of cash would do wonders.

Re:Not competitive (1)

hughk (248126) | more than 6 years ago | (#20824859)

t is very competitive when calling internationally. I often travel interntaionally for work and it has saved me a bundle.

Re:Not competitive (0)

Anonymous Coward | more than 6 years ago | (#20824941)

Last year it was free. This year they charged me $15 for unlimited computer to cell/landline for a year (US only). I used phone cards before this and never found a deal that good. Now if your talking international, I can't comment. But you do have to be at the computer which can be the deal killer for some.

heard the skype founders today ... (0)

Anonymous Coward | more than 6 years ago | (#20823933)

When I woke up I could hear Niklas and Janus laughing all the way from Europe...

ROTFL LOL hehehehe


SIP VoIP vs Skype (5, Interesting)

bernywork (57298) | more than 6 years ago | (#20823935)

I use SIP extensively, it's an open protocol, used by Asterisk and is implemented by a heap of companies, providing a range of services in a range of countries. Skype uses their own protocol, and has low call quality. This isn't what I want to be paying for when buying services such as Skype In or Skype out.

SIP allows me to connect to networks without hassle and without problem. Half of Skype's problems that I see is the fact that they are using a closed protocol, again, the call quality is too low to be considered acceptable as well.

If they managed to fix this, I would be a lot happier to move everything onto one provider. I currently have to subscribe to three different service providers to get what I want, this means three bills, three accounts (In different countries, so different currencies as well) to manage and three times the headaches.

If they started offering a decent solution, and I would be one of the first to jump ship.


Ah but you wouldn't. (2, Insightful)

Fross (83754) | more than 6 years ago | (#20824039)

Because if Skype started offering what you would consider a decent solution (open protocols, interoperability), then suddenly all other clients could/would support Skype, and nobody would use their client. This is the only piece they would control, and with fewer people using it means less control and less revenue.

Skype doesn't open everything up because they have MUCH more to lose than to gain. They have the userbase, and they have the lock-in, all they have to work out is how to "monetize" that (ugh, hate that word)

Re:SIP VoIP vs Skype (1)

dogganos (901230) | more than 6 years ago | (#20824121)

I totally disagree about the quality of Skype! I mean OK, it is indeed subjective, but I find Skype call quality about 80 to 90% of the quality of a fixed landline, which is more than I would expect, even with shitty internet lines...

Re:SIP VoIP vs Skype (2, Informative)

Anonymous Coward | more than 6 years ago | (#20824171)

In my experience, the voice quality of Skype has been pretty high. Better than a cell phone, not as good as a land line. What sold me, though, was the incredibly cheap rate. For unlimited Skype-in and Skype-out in the US and Canada, the price is $30/year. That comes out to $2.50/month for unlimited calls, which is an INCREDIBLE deal.

I spent time searching for a cheap SIP plan, but there's nothing even remotely that cheap. About the cheapest rates you can find are 1.2 cents/minute for the 48 continguous states. Hawaii usually costs a little less than twice as much (which matters to me since I have family there).

With just a little bit of simple math, you'll notice that if you talk on the phone for more than 3.5 hours per month, the SIP plan becomes more expensive than Skype. Sure there are unlimited SIP plans, but they are usually in the $15/month range or higher, which is just ridiculous compared to Skype.

Skype may have some problems, but when it comes to price, no one can even come close.

Re:SIP VoIP vs Skype (2, Informative)

Aladrin (926209) | more than 6 years ago | (#20824179)

I have a feeling I'm about to eat crow. Someone just the other day said 'Skype is proprietary, don't buy a skype phone' and I laughed. (Thankfully, I didn't buy a phone yet.) Now, it looks like EBay is looking for a way out of Skype.

As you use SIP, I was wondering if you had any advice towards getting a decent wireless SIP phone and a good provider. I don't want to run a PC with Asterisk on it at home if I don't have to, but there -is- one that's always on that I could use, if necessary. (I'd kind of like to play with it, but time and effort and all that.)

Also, have you tried the Gizmo Project? I was looking at it because it integrates well with Grand Central and is 'open', but then I found [] ...

Re:SIP VoIP vs Skype (2, Informative)

Dekortage (697532) | more than 6 years ago | (#20824521)

I use SIP extensively, it's an open protocol, used by Asterisk and is implemented by a heap of companies, providing a range of services in a range of countries. Skype uses their own protocol, and has low call quality. This isn't what I want to be paying for when buying services such as Skype In or Skype out.

We use Skype a lot where I work. We've also experimented with Asterisk. The call quality with SIP is significantly lower than Skype, at least over low-bandwidth Internet connections (which we deal with frequently). Sounds like you've had a different experience, but for now, we're sticking with Skype, and watching this situation very closely....

They fail to mention a couple of things ... (1)

frovingslosh (582462) | more than 6 years ago | (#20823945)

They don't seem to mention the potential users who would have paid Skype for outbound calls, but are unwilling to do so because they consider the parent company even more evil than the phone company.

And they don't mention whatever benefit they manage to gain by stealing users passwords and other data, as referenced here: []

Re:They fail to mention a couple of things ... (1)

R2.0 (532027) | more than 6 years ago | (#20824709)

"the parent company even more evil than the phone company."

If we are measuring gradations of evil, Ebay would only be on the 3rd or 4th ring of Hell, while traditional phone companies are nudging Judas and Brutus out of the way.

Pipes are a commodity (and a miserable business) (2, Insightful)

G4from128k (686170) | more than 6 years ago | (#20823969)

This just demonstrates that owning a connection or bit of network infrastructure isn't worth much because it's too easy to find an alternative connection. The same "route around damage" ethos of the internet makes it a "route around cost" mechanism too. Skype users, like all good internet routers, only pick the Skype connection when it's free. This is why we see such battles with the telcos trying to change the playing field (e.g., lobbying hard to prevent net neutrality and open access regs) so that they can charge more than the marginal price (which is near zero per added user) for use of their infrastructure (which costs millions or billions to build).

Can't compete with free (1)

sqrt(2) (786011) | more than 6 years ago | (#20823975)

The only reason I use Skype is because it's free. And if they ever start using it as a platform to push ads I'll be dropping it. I'll use Ventrilo or something similar, or go back to AIM since most of my communications using Skype are just normal text IMs.

Also, the Skype linux client SUCKS, they're really letting it lag behind the Windows version.

bubbles and such (5, Insightful)

phantomfive (622387) | more than 6 years ago | (#20823989)

And I'll tell you another company that is waaay overvalued.....facebook. $10 billion? Even $1 billion is too much. There will always be hype and over priced companies in the technology industry......mainly because every once in a while a technology comes along that really is worth it. The question is how do you know?

Business people have trouble with this kind of thing because they don't understand the technology. As in this case, they thought 'skype will be super-popular' which may be true, but they didn't see that once everyone has Skype no one will need Skype out.

Tech people and engineers tend to have trouble with it because they tend not to understand marketing, business prospects, or what people want. They say things like, "Less space than a nomad, no wifi. Lame" or "This is the year of linux on the desktop" and don't understand why most people aren't interested in open-moko or the gimp.

If you DO happen to understand both of them, it will be a competitive advantage that can make you a killing in the stock market. As anyone who invested in nintendo a year ago knows.

Who cares about Skype? (2, Informative)

bogaboga (793279) | more than 6 years ago | (#20824041)

Who cares about Skype when we have iCall [] where one can make free (and I mean free) phone calls throughout the US and Canada, without dolling out dollars to Ebay? Skype executives should wake up and smell the coffee.

Skype-Out great for International Calls (2, Informative)

PhillC (84728) | more than 6 years ago | (#20824043)

I am obviously in the minority of users who pay for Skype services. I live in the UK and my family is in Australia. Using Skype-Out at a rate of around £0.1/minute is significantly cheaper than any comparable Telecom or other "cheap calls" organisation. I know quite a few other people who use Skype in the same manner. I spend around £5 per month on Skype.

Now in comparison, I spend somewhere between £50-£90 per month on my mobile phone. The amount largely depends on whether I've traveled out of the UK that month. With wider adoption of VoIP services on mobile devices, for sure my cell phone bill would drop and a portion of the money would siphon across to my Skype account.

The final thing holding me back from spending more on Skype is the expense and poor quality of the "phone" devices available. I spent £100 about a year ago on a Skype Wi-Fi phone. No need to have anything connected to my computer, the phone's base unit was supposed to connect directly to my wireless router and behold, I have Skype calls very easily. Unfortunately, after waiting almost a month for my order to be fulfilled, within 3 weeks the phone unit died. I gave up trying to get a refund from Skype and trashed the thing. So far I've been reluctant to spend a similar amount on a device that may die again quickly and have to deal with Skype customer service.

Re:Skype-Out great for International Calls (0)

Anonymous Coward | more than 6 years ago | (#20825037)

I am also in the UK but I use skype to make phone calls to spain. I have the philips phone and have been quite happy with it so far.

Re:Skype-Out great for International Calls (1)

xiox (66483) | more than 6 years ago | (#20825255)

I am obviously in the minority of users who pay for Skype services. I live in the UK and my family is in Australia. Using Skype-Out at a rate of around £0.1/minute is significantly cheaper than any comparable Telecom or other "cheap calls" organisation. I know quite a few other people who use Skype in the same manner. I spend around £5 per month on Skype.
Why not check out [] who offer 2.5 pence/minute for Australia. I've used them for ages - cheap as skype but more convenient.

There are paying Skype users out there... (1)

FRiC (416091) | more than 6 years ago | (#20824091)

... such as business users. I have hundreds of Skype Out contacts, and so do all of those people in my contacts list. However, due to Skype's expensive per-call surcharge and the recent outage, most are now looking for alternatives. I still use Skype for Skype-to-Skype, but otherwise I use one of the Betamax voip services for calling regular phones.

No shit!? (1)

Electric Eye (5518) | more than 6 years ago | (#20824177)

Didn't take a brain surgeon to see they vastly overpaid...the day of the announcement. Cheers to the guys who got ebay to pay them that much cash for a free service.

Liability? (1)

SIIHP (1128921) | more than 6 years ago | (#20824191)

Doesn't the admission of error mean that there is now the possibility of legal action by the shareholders?

Ebay are whining (1)

Z00L00K (682162) | more than 6 years ago | (#20824201)

since they didn't do a reality check before. Expectations were far too high and it's the expectations that were faulty not the business model.

Of course Zennström & co wanted to push up the price, but in the end the buyer is at fault by doing an insufficient market analysis.

Skype shot themselves in the foot (2, Interesting)

Exp315 (851386) | more than 6 years ago | (#20824241)

I have used SkypeOut extensively, and SkypeIn to a lesser extent. Dealing with a cumbersome network of local telephone service providers, Skype has never been able to get these services working reliably. SkypeOut is good enough for personal use, but not reliable enough for business, and forget about conference calls - the connection would never stay up long enough for that. SkypeIn was much worse - I think most users had about a 50% success rate, assuming it was available in one of the regions that you could use it. Nevertheless I continued to use SkypeOut for convenience, until they decided earlier this year that adding a connection fee would be a really good way to boost the revenue. Now I can call cheaper using my home phone service. Goodbye SkypeOut. It sure looks to me like Skype is in the declining phase that you see when accountants take over - attempting to boost revenue from the existing customer base without innovating or expanding.

early onset Alzheimer's linked to nazi hypenosys (0)

Anonymous Coward | more than 6 years ago | (#20824297)

far too much deception to sort through/disbelieve, could leave one's sense of self in question/missing/held hostage.

What's the prob? (1)

Ancient_Hacker (751168) | more than 6 years ago | (#20824315)

Maybe I'm missing something, but if Skype is making $90 million a quarter and rising, that's $360 million a year, or almost 14% ROI. Most companies would kill to make that much.

Re:What's the prob? (2, Informative)

TheSunborn (68004) | more than 6 years ago | (#20824735)

Read the quote again:
"division also recorded its second quarterly profit in a row on July 18 on revenue of $90 million."

The $90 million is revenue, not profit. There is no indication of what the profis is.

Black Swans (0)

Anonymous Coward | more than 6 years ago | (#20824357)

There is an excellent book that came out fairly recently: []

In it, the author discusses the phenomenon of break away opportunities that no one sees coming. It is very relevant to the software industry and generally to venture capital as well. The moral of the story is that it's often very hard to predict ahead of time whether something represents a huge Black Swan (breakaway) opportunity (i.e. Google or the "Next Anything"), so companies often pay a lot of money to expose themselves to the conditions under which Black Swans emerge in order to take advantage of them. Sure, it's expensive, but there has to be massive risk and it sure sucks to be on the losing side of the equation. The Dot Com Bubble 1.0 wasted massive money, but it was ironic that Google came along right at the end of the bubble, and generally there were plenty of success stories where now Google, eBay, Amazon, Yahoo are the winners in a winner-take-all market. The barriers to entry are so high in building massive data centers, that most companies will have to be content to build on top of the existing infrastrucutre + frameworks (web services API's etc) that have already been put in place.


thatskinnyguy (1129515) | more than 6 years ago | (#20824393)

It's been stated many times but it bears repeating. Just because you have a product that is A+, doesn't necessarily mean that it will be successful. What makes a product successful is the business behind it. Look at McDonalds! Crappy product but good business!

Of course, in Murders and Executions, it is up to the buying company to decide before getting heavily invested. They might have an excellent product but ass for business processes. Companies are not only buying-out shareholders but they're also paying to un-ass a company's old business processes in order to fit with their own.

Ebay... what can I say? I expected more out of them.

EBay, Ebay, eBay?! (0)

Anonymous Coward | more than 6 years ago | (#20824433)

I know this is /. but some consistence wouldn't hurt at all!


Why you paid for it? (1)

suv4x4 (956391) | more than 6 years ago | (#20824475)

They wanted to be the first to own the new phone with flashy interface and Internet abilities, right?

They got what they bought. They have nothing to complain. If they paid the price, then they clearly thought it was worth it. There's no point now in releasing sad, sad statements in the public that they feel cheated or were wrong.

Wait, I forgot what we're talking about..

Features (1)

Wowsers (1151731) | more than 6 years ago | (#20824511)

Well, there's still no 64bit Skype (any OS), the Linux version does not even have half the features of the Windows version, and the Windows version has hooked up with what many would describe as dubious company like Paypal ("send money too..." feature). The user base seems to have grown, but that's about it. I have no sympathy for ebay.

Lessons NOT learned (1)

MattTierzero (1159531) | more than 6 years ago | (#20824569)

I thought that the "give everything away for free and hope profit magically appears" online business model was long dead, a victim of the last tech bubble bursting. In any case, the solution here is pretty simple, start charging for content like almost everyone else has eventually had to once a solid customer base has been established. Start with "premium members only" content for a small extra fee, then gradually make it impossible for anyone to get anything significant from the service without coughing up the dough. That will ease the difficult transition from free to pay without ruffling more feathers than necessary. True, Skype will lose a percentage of its customer base, but does it really want to keep those who are never going to pay? On a side note, anyone think this announcement has anything to do with a certain Skype CEO stepping down...

One thing that puts people off Skype (1)

thewils (463314) | more than 6 years ago | (#20824601)

Is the fact that if you don't use any of your Skype-out credit in a 6-month period, they'll hoover up the balance of your account. I know it's in the TOS, but it's still a nasty shock when they clean you out.

Zennstrom announced revenue projections at VoN... (1, Insightful)

Anonymous Coward | more than 6 years ago | (#20824991)

So why is eBay surprised?

I was at the talk he gave at VoN in Toronto... if I remember correctly, he said it would be about $10million/mo, which looks fairly accurate. His entire talk was a rant about people being ripped off by traditional Telcos. He announced he would take the $Billions made in Telecom, squeeze it down and turn it into just $Millions and then take it all for Skype.

He said that there was just no way to make huge profits off of Voice with a ubiquitous internet. It's in the VoN presentation he gave, I assume one can find the proceedings somewhere...

Now fast forward about a year... I was talking to VCs about my company. Some had invested in Skype, and now the story was different. Someone would want to leverage Skype's huge base of customers, making Skype worth $Billions. Leverage for what, they were sure someone would figure out (advertising maybe).

So. Now the question is did Zennstrom and Co. tell eBay these things. That is, "we don't know how to make a business model out of this that's worth $Billions, just $Millions" or did they lie? If he didn't tell them this, eBay didn't do their diligence given that both pieces of information were readily available from Zennstrom's and his VCs previous statements.

They didn't follow my plan (1)

Phat_Tony (661117) | more than 6 years ago | (#20825135)

I think Skype could take over the world and be worth a fortune, but Ebay's implementation has so far been lacking the key element to my plan, which I'd assumed was also their plan. They need a cheap (like, $10) home-PBX to ethernet interface box. Like Vonage sends you. In fact, they should offer a service exactly like Vonage, but with no monthly fee. A small fee for a call-in number from regular phones and a small fee for calling out to regular phones, and no charge for contacting Skype other users, just like now. Then make the thing work with everyday phones with a home PBX, so you buy this box and don't have to mess with a computer at all; all your home phones just work like regular phones, like Vonage or other VOIP phones. And all your calls to anyone else on the same system are absolutely free, because there's no per call charge/time charge/or monthly charge. It's a huge incentive to adopt the system.

Yes, for the free Skype to Skype calls using conventional phone handsets, they'd need some sort of coding so numbers dialed on the phone get translated to Skype handles by the PBX box. I don't think this would be too hard to implement.

Yes, if everyone adopted it, they would eventually lose their revenue model. But this would only happen if they came to dominate the entire home phone market, and then they can make it up with services- voice mail, ringing multiple phones with one number, call recording software, etc. Also, they'd still always make money on their fees for calling out to cell phones. I think the dangers of lost revenue do a near-monopoly on voice communications is a far-off concern.

Not a bad call, just not leveraged (1, Insightful)

Trigun (685027) | more than 6 years ago | (#20825297)

Google didn't make a mistake buying skype, it made a mistake in not using it. Google wields amazing power, and, properly leveraged, could create a huge and dominant market force.

So far, Google has:

Dark Fiber
Metric assloads of cash

What Google needs
Wireless everywhere.

Here comes the evil...

Google champions the .web TLD. Everyone who signs up gets their own gmail account, blog, skype account, gpay account, etc. all tied to their accountname.tld. Blogger becomes the hub for your digital presence, holding your contacts, meetings, calendar, digital storage, and well, everything else. Anywhere you go in the world, your new google-pda, which is an iPhone on crack, synchronizes your life. Need to make a phone call? Skype handles it. Even mobile to mobile, free, over the wifi infrastructure. Need to access spreadsheets, documents, important business functions? Google has you covered. Need to make a skypeout phone call? It comes straight from your gpay account. Need to buy something at the local store? You can g-pay right there, using your phone.

Google licenses the skype protocol to Cisco, etc, so that businesses can buy a Skype PBX. Google markets their 'Google Business Application Server', which will synchronize spreadsheets, documents, mail, and pretty much everything else, including your digital life. Number portability is built right in. Authentication is built in. Using the google phone, you can even pop up the user on google maps, send directions, etc. Promotional videos, training videos, whatever, are all served up on YouTube, with the rights management tied into the 'Google Business Application Server'. Salespeople will love it, management will love it, and most of all investors will love it. The only ones who won't love it, are the telcos, and the companies that serve up office software and e-mail servers.

Those companies start bitching about Google becoming the next Microsoft. The big Telcos fight back, and start their tiered internet, limiting bandwidth to Google. Google lights up their own fiber like the fourth of July, and cuts the big Telcos out. They had their chance to play nice, and they didn't. Now it's hardball time. Google, in trying to provide everything to everyone at as small of a cost as possible, essentially usurped Microsoft, penis-whacked AT&T, and pwn3d the entire Internet, all in one brilliant strategy. With everyone having a G-pay account now, the banks either bend to Google's will, or get cut out like the telcos.

At least, that's what I'd do, and that's probably why they were so interested in the 700mHz spectrum.

(Sorry about the incoherent rambling, I'll take my pills now)

Skype out yes, but skype in? (1)

kandresen (712861) | more than 6 years ago | (#20825305)

I did pay for having skype out, worked out perfectly, $25 for a year and can call out as much as I want to countries beyond USA/Canada. I have been quite satisfied with that service, however I was thinking I would have Skype-in too, however their price was not what I had in mind for that, and I found another service offering a phone number for where I live and unlimited reception of calls for $5-6 a month...

Skype sucks as a regular phone (2, Interesting)

MarsDefenseMinister (738128) | more than 6 years ago | (#20825309)

Skype only really works for me to call other Skype users. I tried to use Skype as a regular phone, but dropped the account when it failed miserably. I had two problems:

I can't call the IBM pukes that I have working for me. That's because Skype doesn't allow Skype-out service to some area codes, and that includes the IBM conference calling center in Missouri.

And, the Skype client doesn't support DTMF tones properly. That pretty much eliminates Skype for everything except calling your mistress on her home phone. You can't get through any kind of voicemail or call answering touch tone menu without DTMF support.

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