RealTime IT News

eBay: 'We Are Done Apologizing for Skype'

ebay, skype and paypal
eBay yesterday outlined a host of changes it's undertaking to grow its business in spite of the bleak economy and the looming presence of its high-flying rival, Amazon.

But executives speaking during eBay's annual analyst day also 'fessed up on key missteps the company has made -- such as overestimating the synergies between its core auction business and Skype, the VoIP and Web conferencing company it bought four years ago for $2.6 billion.

While he called Skype "one of the fastest growing businesses in history," eBay (NASDAQ: EBAY) CEO John Donahoe admitted the company made a mistake in thinking Skype would help its core auction business.

"We thought Skype would enhance the connection between buyers and sellers, reduce friction ... but we were wrong," Donahoe said. "Its use is in connecting people, not buyers and sellers. That said, we are done apologizing for Skype. It is a great stand-alone business, there's an enormous market and there are huge opportunities."

There are also plenty of opportunities ahead for eBay's other major business units, Donahoe and other company executives told analysts as they mapped out an ambitious growth strategy. That plan aims for nothing short of global dominance for its PayPal payment service and transforming the eBay marketplace into an online liquidation sales leader.

But it's Skype -- and eBay's inability to sufficiently monetize it -- that's proven one of the company's most vexing problem.

Saving Skype

And it's also where the company has similarly lofty aspirations.

Skype President Josh Silverman laid out plans for making Skype the "leading communication software company," a growth trajectory that will see the unit more than double its revenue over the next three years.

The unit earned $550 million in revenue last year, with currently has 400 million registered users and Skype calls accounted for more than eight percent of global international call minutes, Silverman said, adding that it. Additionally, he said calling minutes per active user are up 72 percent year-over-year for Q4 2008.

Doubling that hinges on bolstering advertising and paid services promotions, leveraging mobile platforms and partnerships, tapping into the enterprise market, and by expanding Skype into hardware devices, he said.

Silverman said the first step is to boost Skype's core business by marketing it similarly to Facebook, which encourages friends to recommend the service to others in their address books when they first try it out.

He also said Skype needs to better promote its paid products because users "have to hunt to find" the paid products because they're buried on Skype.com, which he added would begin carrying more advertising.

But it's in mobile where things could really heat up for Skype, Silverman said. For one thing, he said the company is positioned to capitalize on a paradigm shift in communications.

"We no longer communicate on phones. Now it's on multipurpose devices, and communication is no longer just about voice," he said. "Over time, hardware becomes commoditized. The opportunity for profit is at the software layer -- that's where you capture the profit.

"The opportunity is massive but the solution must be device-agnostic, it must be network-agnostic. We think the winner's going to be a software company, a brand that stand for communication, and that's us."

Page 2: Moves in mobile and the enterprise