Saturday, October 6, 2007

Monetization Challenges (1): eBay's Skype Premium

eBay took a risk paying a huge premium for Skype a few years back. Now, it has written down the value by over $1 billion.

eBay is growing (in terms of subscribers and calls) but is not making appropriate profit contribution to eBay's bottom-line. Monetizing eBay's main business model is clear and straightforward but monetizing Skype (with value-added services on top of base free services) is not that clear and simple. Moreover, the so-called synergy between the core business and Skype never materialized. This is what Meg Whitman said about the acquisition in September 2005.
“Communications is at the heart of ecommerce and community,” said Meg Whitman, President and Chief Executive Officer of eBay. “By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net.”
Social connectivity is hot (and trendy) but monetization challenges remain. That does not mean Meg Whitman made a mistake when she bought Skype. This is a high-risk fast-changing business and some mistakes are inevitable. She deserves credit for acknowledging it and then writing it off against her otherwise good financial performance this year!

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