So I listened to the Skype-eBay conference call this morning and talked to many people about the deal - and still can't quite get my head around why eBay is so willing to spend $4.1-billion on a company that had sales of $7-million last year (albeit a target of $60 million in 2005 and $200-million in 2006) and doesn't seem to have a sustainable competitive advantage. Here's my second take on how Skype fits into eBay's strategic thinking:
1. Skype is integrated into eBay as a sales tool, particularly for categories such as automobiles and B2B where eBay can score high margins and healthy profits.
2. Skype is a play in the click-to-talk market, which may or may not materialize as the Web's next killer business app.
3. Skype is a pure telecom investment play as it win more users and premium customers at a time when Google and Yahoo have also set their sites on the market.
The problem is I'm having difficult time seeing a single multi-billion dollar slam-dunk component to the deal. Instead, there are several plays that could work out. This isn't a sure-that-makes-sense deal like Paypal where the pieces fit nicely together like a puzzle. Until someone convinces me otherwise, I think this is a high-risk move that will takes a long time to properly assess. At the very least, it's an ultra-aggresssive development, particularly given eBay's spending half of its cash reserves to make it happen.
Among some of the other doubters out there are Oliver Starr, who questions eBay's move into the telecom industry, and Jeff Pulver, who mourns the end of Skype as a disruptive force while getting excited again about Free World Dialup. Om Malik could also be thrown into the doubters pool given he doesn't see Skype as the "white knight" for eBay's slowing growth while wondering why eBay stepped up to the plate after Google and Yahoo passed.  Fred Wilson thinks Skype is a bargain at $2.6-billion but he doesn't buy the "synergy stuff" many people are focused on.
For some interesting insight into Skype's early days, check out James Enck's blog.

The strike between Telus and its 11K unionized employees is getting nastier every day, which is not surprising given how entrenched both sides are in terms of what they want. Telus wants flexibility to deal with growing competition, while the union wants to protect as many jobs as possible. The latest low blow is DarrenEntwistle.com, which takes a shot at Telus CEO Darren Entwistle.

The Skype-eBay marriage is dominating the VOIP spotlight today but what of Vonage, which was the industry's poster child before its buzz suddenly evaporated? What does the Skype deal mean for Vonage's IPO, which is supposed to raise $600-million. Is it good for Vonage by raising the valuation benchmark or does it hurt the company by showing there are better prospects by investing in a P2P VOIP play that has little infrastructure? Om Malik notes the biggest threat facing Vonage is the growing presence of cablecos, the Bells, upstarts and the "increasingly unfriendly FCC". A highlight of eBay's conference call earlier today was CEO Meg Whitman dissing Vonage by saying that in terms of users "Skype is adding a Vonage week" - meaning it attracts one million new registered users every seven days. It would off base, however, to suggest Vonage's IPO will fail because there are enough investors who believe in Vonage and/or VOIP's growth. The question is how much stock Vonage will have to give away to get an IPO done. One more thought about the Skype-eBay deal is you'll hear a lot more about pay-per-call joining pay-per-click (AdSense, etc.) as the next killer e-commerce app based on the idea that buyers or advertisers will pay a fee if people connect to them using VOIP.

No other way to describe it but as stunning as the rumours about eBay Inc. acquiring Skype turned out to be true. For a cool $2.6-billion in cash and additional payments based on future performance (which could apparently boost the deal to US$4.1-billion), eBay has dramatically and quickly become one of the leading and highest profile VOIP players. Can I stop here to express my surprise again? As I mentioned last week, the idea of eBay acquiring PayPal.com or Rent.com makes complete sense as do investments in eBay China or the purchase of a Chinese auction house. But Skype? It will be fascinating to hear today's Webcast at 8 a.m. to hear how eBay justifies Skype's acquisition from a strategic perspective. 

Here's my initial take on why eBay made the deal. Part of it has to be defensive. It has become increasingly obvious the Web will be dominated by a handful of large companies (eBay, Google, Amazon, AOL, Microsoft and Yahoo and News Corp. if it keeps making acquisitions). The key consideration is traffic but in a different way from the dot-com days when attracting traffic was more about attracting VC or pumping up a stock price. Today, the strong growth of the advertising and e-commerce markets means traffic is big business. Skype brings more than 52 million registered users to eBay and 2 million paying customers. With this database, eBay can cross-sell its other services and, at the same time, generate new revenue from voice services as Skype moves into the mainstream. Looking at a slide from the Webcast presentation, one thing that struck me is that eBay can easily integrate Skype into the eBay selling and buying experience so that when you're doing business you can easily make a phone call. At the same time, eBay can be integrated into Skype so its users can easily jump into an auction. eBay CEO Meg Whtiman said lead generation will be a new business line for eBay by making it easy (for a fee, of course) for sellers to have buyers contact them.
It's probably not a big issue right now but I wonder what Niklas Zennstrom and and Janus Friis do now after having Kazaa and Skype under their entrepreneurial belts? For those interested in Zennstrom's thoughts - nothing too surprising, mind - click here while Whitman's message is here.
For more details, check out Skype Journal, which reports Skype had $7-million in revenue last year and expects to have $60-million in 2005 and $200-million in 2006.
For more thoughts from the blogosphere, check out Christopher Carfi , Andy Abramson (who thought the deal made sense when it was first raised by the Wall Street Journal last week) and Rich Tehrani.