Talk about short memories--eBay's Skype experiment

Hand it to eBay's management. Despite blowing billions on one of the dumbest mergers in recent tech history, the company remains in remarkably good shape.

Maybe eBay will fess up to a nasty surprise during its third-quarter earnings call, but so far there's little evidence to suggest anything is amiss with the company's auction business. I can't say the same about the expensive chemistry experiment that was the Skype integration.

When it acquired Skype a couple of years ago, eBay argued that the pickup would help move the company beyond its core online auction business. Didn't the suits at Time Warner say pretty much the same thing when they temporarily lost their minds and agreed to do the AOL deal?

Here's a snippet from the 2005 announcement:

"Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. 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 eBay'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. eBay's other shopping websites--Shopping.com, Rent.com, Marktplaats.nl and Kijiji--can also benefit from the integration of Skype."

Oh boy. Let's be charitable and say this remains a work in progress. So it is that eBay on Monday disclosed it will take a $1.4 billion asset-impairment charge and that Skype CEO Niklas Zennstrom is outta there. (No surprise to anyone following eBay. Zennstrom's been putting most of his energy into his newest venture, Joost.) Maybe some of the smart MBAs employed by eBay ultimately will be able to figure out a way for this deal to pay for itself. After all the lessons supposedly learned after the Internet bubble burst, they don't want to be remembered for yet another instance of leaping before looking.

Then again, memories are short.

[gwilliamp]

Non starter

My wife has a busy shop on eBay. Most of her day is spent dealing with various forms of messages. At least she can deal with those in the order she chooses and at her own pace. Can you imagine having to deal with endless Skype calls? Nothing would get done.

I just asked if she would like me to activate the Skype feature - I can not publish her response ;-)

[BobKalk]

eBay - We Try Hardly

Once you've reached a certain critical mass with money, it's hard to screw up fast enough for mistakes to be reflected in scheduled earnings reports. Skype's innovation stopped cold when it was acquired by eBay. How hard is it to get caller ID to work?? And yet Skype users still get their calls blocked because Skype teams don't have the programming resources to address the issue.

eBay now competes with its sellers. It raises its fees when it can no longer deliver buyer competition. It raises its fees when its competitors are advertising on TV. It raises its fees for stores and then excludes store inventories from search results.

One can only leverage the power of incumbency for so long. eBay saw Skype as a way to bolster up sagging sales and halt disaffections from its auction business. In that context it never saw Skype for its true potential.

Now eBay hires expensive consultants to design surveys that leave off the hard questions. All the while they could have gleaned the answers they need by reading the customer service emails and responding to the frustrations of its user base.

The priorities of a custodial CEO apparently don't include gaining insights as to the true condition of the enterprise. Instead the focus is always on diddling with feel-good numbers before the next stock holders meeting. - Bob Kalk Washington, DC