Looks like Ebay is buying Skype after all! Apparently the web auction company is in the final stages of sealing an agreement to buy the fast growing provider of voice calls over the internet.
It seems that Ebay will be paying $2.6bn now in cash and stock, and up to $4.1bn if Skype hits certain performance targets between now and 2008.
Ebay will integrate Skype with its own software to bring voice calls to its online market. It's good news for telecomm operators as Ebay is unlikely to compete with them, but Ebay is thought to see the acquisition as a way to jump into new markets, including charging fees to companies that use the voice service to generate sales leads over the internet.
Has Ebay overpaid? Is Skype likely to prove a risky move and a complex entity for Ebay to intergrate? Well, the positives seem to me to be that strategically this makes sense for Ebay. Skype will add a whole new dynamic to its already vibrant community, that could effect all participants positively. Adding voice to en email based service should greatly enhance the Ebay services. The key is to see if this increases the number of transactions Ebay conducts and/or the average value per transaction. Who knows, but my gut is that it should. The other positive for Ebay is that they will be the first company to effectively add voice services to online commerce. This should create a strong differentiator against competitors.
The downsides are that the Skype service is still in its infancy, and soo to the company and this could prove hard to integrate and manage. Plus, Ebay have had to pay one hell of a price for an as yet unproven bet on adding voice technology to internet commerce.
My gut tells me that the upside probably outweighs the downside. But, time will tell, and first the deal needs to be completed.
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