As Vonage's brand and stock comes under siege, it is interesting that Skype continue to enjoy growing goodwill as it becomes more of a mainstream tool (the free SkypeOut offer for calls in North America doesn't hurt). Nicholas Carr had a post last week critical of eBay CEO Meg Whitman's assertion during an interview with the Financial Times the company will eventually figure out how to monetize Skype. Here's Carr's take:
"We'll figure it out." "There's something here." "We already have some ideas." "We'll see." I wonder how many other multibillion-dollar acquisitions have taken place before the acquiring company had "figured out" how to actually make money from the deal. I know there've been plenty where the acquirer's money-making strategy turned out to be pure fantasy, but how many have there been where there wasn't any strategy, where the justification boiled down to "don't worry, we'll figure it out later."
While eBay will have a difficult time to ever justifying the $4.1-billion it spent to buy Skype, I would argue Carr's assessment is somewhat off-base and too dismissive. First, Skype is a high-margin $200-million, profitable business (unlike Vonage) that is growing as it becomes more of a mainstream tool with a variety of premium services. Second, Skype is starting to be more integrated in eBay's e-commerce operations. This will generate soft benefits such as better customer service and more efficient transactions, as well as hard benefits such as revenue from premium services. Skype was a major strategic gamble for eBay, which fumbled the ball when it bought whole-hog into the master M&A sales pitch of Niklas Zennstrom and Tim Draper. At the end of the day, however, Skype will become a good strategic vehicle for eBay - and a variety of "monetization" opportunities will emerge to generate plenty of revenue - contrary to what Nicholas Carr opines.