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September 12, 2005


Rahmin Sarabi

What are the barriers to entry in the VOIP market? Why didn't eBay attempt to develop the technology internally instead of shelling out all the $$$? Even if the technology made sense for eBay, which is questionable, why buy it for $4.1B? Either eBay has just made a huge mistake or we're all missing something here... I'd start selling my shares.


there are cheaper per-user VOIP solutions i'm sure, but i think the real reasons as carfi noted are greater desktop presence and paypal integration.

i would offer a more basic reason, which is simply a large & viral userbase (recent info on growth metrics aside) which eBay can cross-market features & services to.

one of the areas eBay hasn't really pushed hard is to increase page views / time on site among less active users, and (like google uses free gmail to further monetize adwords) use the increased minutes/eyeballs to further monetize eBay and PayPal transactions.

while i can't comment on the relative cost vs value of the deal, i would say it's a reasonable way to use the cash (other than issuing a huge-ass dividend, that is)... there may have been other less expensive deals they could have done, but it's not a bad choice for logical fit or good reason in my book.

while i might have suggested a dividend is the best solution for shareholders, for an activist management team this is not a bad way to go. that said, the other area i don't see eBay doing much with that could be energized is by doing a number of early-stage investments that would be relevant to the eBay ecosystem. they appear to have left that to local VCs, but i think abdication there is a poor choice (again, from a shareholder perspective).

full disclosure: i used to work at PayPal, and i'm pretty with the conservative approach eBay generally has taken to non-geographic acquisitions. altho the Shopping.com deal was a step towards more active M&A, this is a much more anxious and/or aggressive move -- depending upon your perspective.


Another Skype threat after Gizmo, VoipBuster, Yahoo Messenger and the mighty Google Talk, OpenWengo is an open source alternative for Skype which includes features such as sip calls, SMS, video conference, and automatic NAT configuration. Currently under heavy development, you can download the stable Windows 2000/XP client and the beta versions for the Linux and Apple variants. The project is calling for developers too.


Jeremy Fain

Jeff, your analysis of Skype´s acquisition is one of the best I´ve read on the topic. I tried on my behalf to elaborate a little bit on how Skype is being eventually integrated to eBay. Here´s the link:

I have to say that I´m pretty skeptical about the real added value Skype is providing (at least Skype´s voIP component since instant messaging allows for asynchronous answers).

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