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eBay Buys Skype for 2.6 Billion
[September 12, 2005]

eBay Buys Skype for 2.6 Billion

By RICH TEHRANI
TMCnet Editor-in-Chief

After all the rumors of
eBay purchasing Skype and the downplaying by both companies, the acquisition is official today. As I mention in prior postings the significance of this announcement to the VoIP market cannot be understated. Ebay has finally helped the market put a valuation on a VoIP company and I am sure VCs and other companies in the space are ecstatic.

That is not to say everything is fine and dandy. BusinessWeek
talks of frothy VoIP markets and other terms not heard since Allan Greenspan tried to talk down the Internet boom in the late nineties.

Whether 2.6 billion dollars is too much money to pay for a company with forward looking earnings (well 2005 anyway) of $60 million is unknown as Skype really has no equal in the VoIP space. There is simply no other service that has garnered so much attention from the market. Furthermore, no other service dreams of having as many users.


Right now, Skype gets just over a dollar per active user. I am sure eBay thinks – and they are likely right , that Skype will grow its active user base and also grow its revenue per user. So in another 18 months or less we can expect Skype to have 100 million active users and perhaps each will pay an average of $3. This gets us to $300 million.

Of course Skype has its potential problems to deal with.
Port blocking in some countries and the declaration that Skype is illegal and a fining offense are obviously not too good for your business model. Still, this is exactly what happened last week in China. Will China become a model for the rest of the world or an isolated incident?

These questions along with competition from AOL, Yahoo, Google and Microsoft are really good reasons to explore and take an exit strategy. Hats off to the Skype team that is partly responsible for bringing VoIP into the mainstream. Zennstrom and Vonage’s Citron can take a good deal of credit for the excitement and activity in the VoIP markets today. A hearty congratulations to both of them.

I personally cannot wait to hear Niklas Zennstrom speak at
Internet Telephony Conference & Expo in another month to get his take on this transaction… This is really big for the VoIP market.


-----

Rich Tehrani is President and Editor in Chief at TMC and looks forward to the day he can use Skype to place a call directly to a seller on eBay and craigslist. Better yet when he has problems with PayPal, perhaps technical support will merely be a Skype call away. He thinks one day soon we’ll be able to bid how much we will pay for Skype Out long distance on eBay.


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