Looking back at Ebay's Skype thinking

The talks regarding eBay's sale of Skype has not yet proffered an acceptable bid and a divestiture, into a stand-alone public entity, is now the expected resolution for this corporate soap opera. When such a strategic and visible transaction does not work out, it's valuable to look back at the reasons for doing it in the first place.

Below, courtesy of Slideshare, is the presentation eBay Management showed to the world two years ago to justify why they paid $1.3B in cash + $1.3B in eBay stock + $1.5B in potential earn-out value ($500mm was earned) for this little revenue, fast growing Company with such wonderful potential to disrupt the communications business.

Post-acquisition, Skype grew by leaps and bounds, built a sound economic model through being at the forefront of permacheap communications and seems poised to become a great standalone communications business. Yet, the promise of the acquisition "to accelerate commerce on eBay", failed miserably. Moreover, it failed as a platform (Skype Extra) whose mandate was to diminish commerce friction or even to encourage growth in numbers or transactions, for the eBay community. Simply put, there was no 'synergy'.

Unlike Youtube, which at the time of Google's acquisition had many similar traits (fast growth, unproven economic model, huge acquisition price) two fundamental differences stand out. First, is that YouTube's founders stayed involved (there is no replacing the passion or vision of founders), second is the business of YouTube is so closely aligned with the business of Google that I have never heard a Google person speak of YouTube as an appendage to body Google.

E Bay Skype Acquisition

View more presentations from Cfederman.

I hope Skype prospers in its Splendid Isolation