When eBay paid $2.6B for Skype - with earnouts potentially making the deal go as high $4.1B - people wondered: WTF?
Truth is, that as the leading person-to-person commerce site (that would be eBay), to acquire and integrate the leading VOIP communications platform (that would be Skype), it made a lot of sense.
Did Skype co-founders Janus Frist and Niklas Zennstrom do a great job of selling their vision to maximize shareholder value? Hell yeah, and good for them. In fact, I’d say they did an even better job of selling their vision for Joost (disclaimer: WatchMojo.com is a content provider to Joost), for which they raised $45M in financing from well-tailored institutional investors Sequoia and strategic investors CBS et al.
After all, Skype was the dominant player in Voip and #8 on CNET’s Top 10 Downloads since 1996, whereas Joost was one big fat pie in the sky, facing macro-level constraints (that would be broadband not being there yet in the US) and micro-level challenges (that would be YouTube being the Skype of the video space).
But back to Skype, while Henry Blodget’s addition to the blog landscape is a great thing, I think that to criticize eBay for pulling the trigger on its Big Hairy Audacious Goal is unfair. The deal, while rich, made sense. The idea that a seller and buyer would have a higher propensity to make a transaction if upon the click of a link they could fire up a chat or instant message was in theory very accurate. In practice, this boils down to the fact that wildly viral applications and explosive startups have - sit down M&A bankers - no business in an established, maturing business… and we’re talking eBay folks, not GE or Walt Disney.
Is it a coincidence then, that today Joost launched officially while eBay announces Zennstrom is leaving Skype?
Hmm… to some extent, yes. Sure, as one of the leading brains and visionaries of Web communications, Zennstrom is probably focusing more and more on Joost, even though he and partner in crime Frist have lured former Cisco executive Mike Volpi to run day to day operations. And, that’s a good thing, because while KaZaa and Skype are great growth stories, Joost will have to deliver on its promise for Zennstrom (and Frist) to add visionaries of content, commerce to that tagline.
In the broader picture, today a lot of folks are egging on MSFT, Yahoo! or Google to pay astronomical sums for an equally unproven asset - Facebook - that would make Skype’s price tag look paltry. If eBay is wrong to have pulled this trigger, then Facebook is not worth more than a $1.5B (10x revenues). Yet, an asset’s price is what the market will pay for it, and naturally, if Facebook went on auction (on eBay perhaps), I’d estimate that it would fetch quite a bit more than that.
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October 1st, 2007 at 3:52 pm
[…] time: Skype may or may not have been a mistake (I would argue it was, although Ash Karbasfrooshan disagrees), but one thing is for sure — eBay paid way too much for […]
October 1st, 2007 at 10:44 pm
[…] also: Mathew Ingram, Paul Kedrosky, Ash Karbasfrooshan […]
October 4th, 2007 at 8:48 pm
skype has only been around since 2004, not ‘96
October 4th, 2007 at 8:51 pm
Hey Anthony. Your comment threw me for a loop. The CNET list is top 10 downloads since 1996, I was not implying that Skype’s been around since 1996.