eBay's purchase of Skype in 2005 was perceived as one of the tech industry's biggest failures. eBay never figured out how to integrate Skype with its core business and has failed to find a way to monetize the potential of the Internet VoIP (voice over IP) service. The deal announced today, in which eBay has sold Skype for $1.9 billion while retaining a 35 percent stake in the company, is a win for both eBay and Skype.
eBay gets to unload an entity that has just not meshed with what eBay does. The original vision apparently involved leveraging Skype VoIP functionality for some sort of click-to-talk feature on the eBay auction site. That vision was never realized and Skype, while it did account for about $550 million in revenue last year, has not been able to reach its potential under eBay's direction.
The deal, valued at $1.9 billion for a 65 percent stake of Skype, also retains much of the original investment value- basically letting eBay get back most of what it paid for Skype so the experiment wasn't a complete waste of money.
So, eBay gets to dump a toxic asset that never quite meshed with eBay's business, but the bigger winner here is probably Skype. The popular Internet VoIP service is the largest carrier of international calls in the world, but it hasn't been able to thrive the way it should, and at a time when VoIP and unified communications are hot technologies, Skype has tremendous potential.
Skype, like other adolescent Internet companies such as Youtube and Twitter, has achieved a fair amount of success while having difficulty figuring out how to convert that success to income. Most of the Skype activity is made up of calls over the Internet between Skype users.
Aside from global calls made via Skype-to-Skype connections, Skype has also found a niche as the video simulcast medium of choice for networks like CNN and MSNBC. Skype video has made an army of ‘iReporters' out of just about anyone with a webcam. I recently did an interview with a Canadian news show which we conducted via Skype rather than using a TV studio as well.
Skype-to-Skype calls and video chats are offered as free services by Skype though. The trick is to find ways to monetize Skype services and generate more revenue. Earlier this year Skype launched an iPhone app that lets iPhone users make free Skype-to-Skype calls using the WiFi connectivity. Users can also place calls to non-Skype numbers from their iPhone using Skype for a small fee.
Unified communications represents a huge potential market for Skype. Companies around the world are implementing unified communications technologies that rely on VoIP for voice communications. Skype introduced a Beta service called Skype for SIP earlier this year. SIP (session initiation protocol) is the primary protocol used for VoIP and unified communications and users of Skype for SIP are able to use Skype as the VoIP backbone for their unified communications voice calls.
The real win for eBay will come if and when Skype really takes off. eBay retains a 35 percent stake of the company, so it will still get to cash in on Skype's success. The bottom line is that the sale of Skype is sort of like getting a ‘do-over'. eBay can get back to being an online auction site while not really losing any money on the failed investment. Skype can get back to innovating online VoIP and communications services. Seems like a win-win.
Tony Bradley is an information security and unified communications expert with more than a decade of enterprise IT experience. He tweets as @PCSecurityNews and provides tips, advice and reviews on information security and unified communications technologies on his site at tonybradley.com.