So, eBay Bought Skype - What Of It?

As news of the deal reverberate through the "punditsphere", my mind strays to the thought that eBay is going to far too much trouble to cinch deals online - their spiel about "connecting buyers and sellers", quite honestly, sounds like a very weak excuse (even if they bought PayPal some time back and justified it in mostly the same way).

They have to be trying to diversify their income sources...

Meanwhile, With My Telco Hat On

Okay, so now that I'm somewhat more relaxed after grabbing a bite to eat and whatnot, here's a way to look at things.

David Gibbons posted a comment on the previous incarnation of this post (sorry, but I had a comma instead of a period in the Wiki node name, so I had to change it) pointing to his analysis, but I beg to differ - I don't think this will create a complementary services market at all, at least not outside the US. But then, my only concern regarding Skype is whether or not they're still competing with telcos or simply feeding off the scraps.

Let's look at this in a rather simplistic way, but which I think will get my point across.

  • eBay lives off skimming margins - it's a volume business, just like a telco - but without infrastructure costs. Any services they spawn will have to fit the least-interference "get them together, skim a percentage" model.
  • Skype has minimal infrastructure, and its revenue model is mostly the same - but with an interesting potential for volume deals, since their parasitism (i.e., delivering service atop other networks) allows them to have high volumes of micro-transactions with 90% gross margin.
  • Both models are an easy fit in cash-flow terms, and they have PayPal to glue them together and become a micro-transaction clearing house - which, incidentally, they will have to position carefully in order to fall under banking regulations (i.e., in some countries they may be legally classified as a banking entity).

That's the cash-flow side of things. On the VoIP front, it would make absolutely no bloody sense to waste Skype's technology on a "click here to talk to a salesman" scenario - so I'm forced to re-assess eBay+Skype as a VoIP provider with a new (as yet unknown) user base, and one with surplus cash to invest into one of three things:

  • Branding (the new black in corporate strategy)
  • Interconnection Deals (for which you need extra bargaining clout, of which eBay has plenty)
  • Infrastructure (i.e., more and better SkypeOut connections)

I have no idea of what eBay intends to do with Skype branding, but they would be completely off their rocker if they even considered getting rid of it. VoIP is not a profitable business (even riding other people's networks), but Skype's greatest assets are their user base and their brand (their technology, alas, despite usable, is largely a nuisance, and Google Talk will probably wipe the floor with them when they "open" their XMPP-based voice protocol).

As to interconnection deals, that's where the cash cows are. Skype has been making some interesting inroads in lower-tier cell and broadband providers, and although none of it is yet past the (business) experimentation stage, it is enough of a threat to standalone providers that a few more of them are likely to strike deals - obviously, larger telcos with global footprints have little to fear from Skype in both service quality and impact on revenue, but the pundits will gleefully ignore that and try to hype up the juicier bits.

To this day, standard SIP with the proper equipment and codecs will still knock the socks off Skype in terms of voice quality and overall user experience, but, again, that is something that does not make catchy headlines.

Finally, infrastructure investments are a straightforward consequence of any sort of expansion. Skype can grow non-linearly with their proprietary protocol, but they'll always need some sort of back-office, more SkypeOut locations, etc.

But although I can envision them expanding their access network across the globe, somehow I think Skype has just been effectively locked down to US soil and managerial whims, and that eBay has just done the telcos a favor and made sure that Skype won't survive to be the "telco buster" of the XXIst century.

Which, as far as I'm concerned, it never was in the first place.