Skype, eBay Divorce: What Went Wrong

The future looked bright in September 2005 when eBay announced it was buying Internet telephony company Skype Technologies for $2.6 billion. But after four years of unfulfilled expectations, the marriage between the online auction giant and the upstart VoIP provider came to an end Tuesday when eBay said it was unloading Skype to a group of private investors for $1.9 billion.

Bad Partners

Why did the merger fail? When eBay bought Skype, it had hoped the VoIP service would improve communications between its customers. Buyers could talk easily with sellers about items they were interested in; in turn, sellers could build relationships with customers via the power of VoIP chats.

But the Skype-eBay integration never panned out. The main reason: For most eBay users, email is good enough. Buyers and sellers don’t really need a voice call to seal a deal.

“I’m a fairly regular eBay user, and there are ways of interacting without using voice over IP,” says blogger and tech journalist Tom Keating, who writes the VoIP & Gadgets Blog for TMCNet. “I think people like the anonymity of eBay. Talking is a great thing. You can communicate and ask more details about the product. But people prefer anonymity, and they don’t necessarily want to talk with the person on the other end.”

Andy Abramson, a marketing consultant and Internet telephony guru who writes the VoIP Watch blog, agrees. The eBay ecosystem, he says, consists of three groups: buyers, sellers, and third-party operators that ship products. “Those three [groups] were built around a bunch of customers who never wanted to talk to anybody,” Abramson says. With eBay, “you don’t have to talk to your customers. You have to email them. Skype is all about talking or chatting.”

The eBay-Skype marriage suffered from other problems too. First, the culture clash between the two companies was too great to overcome. “eBay is an extremely conservative, bank-like culture,” says Abramson. “Skype was out to be the democratization of voice. They were out to be the leveler of the playing field, and they’ve done that.” In addition, Skype went through several management teams during its four-year eBay period—a lack of consistency that didn’t help matters at all.

Skype’s Future?

Now that Skype is free of eBay, where will it go from here? Keating sees Skype making a play for the business VoIP market, where competition is fierce. Abramson believes the company will focus on bringing advanced video conferencing services to consumers, and on expanding its presence in the mobile VoIP market.