E Bay admitted yesterday that it had overpaid for Skype by over $1 billion (purchase price:$2.6 billion) two years ago and that its original projections for future profitable growth were, shall we say, overly optimistic. While Skype has 220 million registered users, fewer that 45 million are estimated to be active users, and the percentage of active users to registered users has been dropping. In addition, those who are active users are shunning Skype's premium (meaning paid) services - and this is a surprise how, given that calling is free?
When E Bay bought Skype, there was all this happy talk about synergies to be had:
"Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.
The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBayâ''s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate. eBayâ''s other shopping websites â'' Shopping.com, Rent.com, Marktplaats.nl and Kijiji â'' can also benefit from the integration of Skype."
Oh well, not is all lost, if you believe Pop!: Why Bubbles Are Great For The Economy author Daniel Gross who argues that bubbles are the way to get infrastructure paid for which otherwise wouldn't get built.
Hmm, maybe the real reason why E Bay failed is that it didn't pay enough for Skype. Well, there may be hope yet, if you believe those who are encouraging other companies like Google, Microsoft, or Yahoo to buy Skype from E Bay. All of them (except maybe Yahoo) can afford to blow a couple of billion more blowing bubbles.