October 1, 2007 3:55 PM PDT
eBay: What to do with Skype?
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For example, Durzy said the company is looking at ways to integrate e-commerce into the Skype client itself. Exactly how this would work is still unknown, but for the 220 million users who have Skype on their desktops, eBay could integrate tags to purchase goods and services.
Advertising is another avenue that eBay is exploring, Durzy said. With 220 million registered users, Skype has a big enough audience to attract large advertisers. Some analysts agree that this would be a logical opportunity for Skype to explore. But supporting a service through online advertising isn't necessarily a slam dunk for the company.
"It could be as easy as showing Skype subscribers advertisements when they use the VoIP client," said Sally Cohen, an analyst with Forrester Research. "The challenge will be in making sure that eBay can match the advertisements with the subscriber base."
Adding advertisements to its service could also pit Skype against Google. The king of online advertising is also in the voice over IP market with its GoogleTalk application.
Some analysts speculate that Skype and eBay's biggest opportunity is in taking their applications to mobile devices. Specifically, this would mean embedding the Skype client on cell phones. Today, the client is very processor intensive, so the Skype mobile client is only able to run on more expensive smart phones, such as devices running Windows Mobile.
Scott Devitt, a managing director at the investment firm Stifel Nicolaus, said that he also sees Skype and eBay leveraging the mobile platform in the payment arena as well, combining eBay's PayPal service with the Skype client.
"Wireless is the key to their future," he said. "In my eyes, that is the only future opportunity that justifies the price that eBay paid for Skype."
Durzy said the company is primarily focused on addressing desktop users, but eBay is committed to putting the Skype application in the hands of its users on whatever device they're using.
But mobile has its own challenges. The wireless industry is completely controlled by the mobile operators, and in the United States, the four major carriers exert great power in deciding which applications they allow on handsets and which they do not. Verizon Wireless specifically spells out in its user agreement that its 3G wireless data service is not to be used with a VoIP client.
"Verizon and the other phone companies can (see) what Skype traffic looks like," said Charles Golvin, an analyst with Forrester Research. "So if it gets to a level that takes away from their business, they can shut it down."
The other problem with Skype on mobile devices is that it requires a high-speed data connection to work. And barring the use of VoIP in a free Wi-Fi hot spot, there is little economic incentive for cell phone users to use a Skype client instead of their carrier's own voice service. The reason is simple: Subscribers still have to pay for voice minutes. And if they use Skype, they also have to subscribe to a data plan. Even with an unlimited data plan, there is still no real reason to use a VoIP service unless you're trying to call overseas.
And here is where Skype could find an opportunity. Even as a desktop service, most people use Skype for international calls, because the rates between continents and countries are often still expensive. On cell phones, the price is even higher. In the U.S., most operators require subscribers to sign up for an international service package that costs more than the standard domestic package.
For U.S. cell phone subscribers who want to use their cell phones overseas, the costs are even higher. Many operators provide roaming services that allow people to make calls while traveling overseas, but the rates are high.
VoIP, and Skype's service in particular, offer cheap calling for people traveling or calling internationally from their cell phones. But Skype isn't the only company addressing this market. There are a slew of new start-ups like Jaxtr and Jajah that are getting into this market.
Unlike Skype, these companies don't require a client to be downloaded on the device, so they can be used with any cell phone. But because there is no client on the phone, these services often rely on a laborious set-up process that sometimes requires users to access the network first on their PC, and then the network itself calls the user's phone to set up the call.
Golvin believes that wireless and mobile services will likely be controlled by the carriers, at least for the foreseeable future. Some of the mobile operators such as T-Mobile and Sprint are already moving toward voice over IP services. And he envisions wireless operators soon integrating some of the other communication features Skype offers--like presence information and instant messaging--into their own service. T-Mobile for example, could easily add additional features to its Fav Five application to tie its users together more tightly.
"The wireless carriers already see a long term opportunity in providing voice over IP and integrated communications services," said Golvin. "But they will control the service. And it will take a long time for them to migrate toward this."
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