Monday, November 13, 2006

Yahoo, Linksys Partner On Cordless VoIP Phone

"Yahoo Inc. and Linksys, a division of Cisco Systems Inc., said Thursday (Nov. 9th) they have partnered on a new cordless phone that enables calling on a landline and over a broadband Internet connection."

How will this affect Skype? After all eBay's Skype recently announced their own Linksys Cordless VoIP handset. Obviously Skype and Yahoo use different technology for thir VoIP services but if VoIP is going to be the future then the early winner winner is Linksys. They manufacture handsets for both services. It appears Skype has no huge technological advantage over Yahoo's service and I would guess there is more competition on the way.

When will eBay's $2.6 billion dollar investment in Skype actually generate significant ROI? As a former seller I never believed in the value of Skype as a tool for selling online. I would not have adopted it and you can bet most eBay sellers have chosen not to use the service. If you want to get a snapshot of how eBay sellers feel about Skype all you need to do is go to the Skype discussion board on eBay Since Sept. 6th of this year there are a total of 38 seller generated threads discussing Skype and only 3 have more than 7 comments. The most active thread is entitled Why I think Skype is not a good idea.

If I owned stock in eBay I would be very concerned. eBay speaks of the "Power of Three" eBay, PayPal and Skype. In my view it's more like a three legged stool with one broken leg (Skype) and won wobbly leg (eBay marketplaces) Try sitting on a stool like that. eBay would have been far better of with a step ladder (eBay and PayPal) and spending the Skype money on fixing the eBay marketplaces.

PayPal was a fantastic purchase in 2002 because it was already used by nearly 60% of eBay's user base and eBay's marketing power could maximize it's potential. In 2002 they spent $1.5 Billion for PayPal and boy what a success. Without PayPal's revenue growth eBay's stock would be even more in the tank then it is today. In contrast to the success of PayPal we have Skype a company that was never profitable, had negligible revenues, a new technology, and was not being used by any eBay sellers, oh yeah and they paid $2.6 billion for it in 2005.

If eBay still works under the mantra "it's okay to make mistakes as long as you fix them quickly" then they better make some changes in regards to Skype and fast.


Frank Ross said...

LOL, your analogy of the stool is a funny! Seriously though after going partially through that message board, I can see why commodity sellers would not want to use Skype and that would include us. Our eBay margins would not allow us to hire someone (or a call center) to answer the Skype calls. On the other hand it might be a good match for the higher end markets like real estate, automotive, and high-end collectables. It might also play well for the eBay Trading Assistants. But those are somewhat specialty areas anyway and what makes up the mass of eBay sellers? I would guess it's not those and the rest of us who are busy scraping for crumbs on eBay are surely not going to open up our tight schedules to Skype callers.

Randy Smythe said...

Right on point Frank. I think eBay may have over estimated their market (sellers). I agree Skype may be a suitable option for Motors and the high end categories but not enough to justify $2.6 Billion.