EBay to sell Skype to investment group including Andreesen Horowitz | Hacker News Reader

EBay to sell Skype to investment group including Andreesen Horowitz

nytimes.com

53 pointsrms17 comments

Ouch. Sorry to kick a dead horse, but I'm not sure what exactly EBay was thinking when they bought it... solving fraud by letting people talk to each other? Really? I suppose it's something which might have seemed good in a meeting of people none of whom cared much about thinking it through.

From what I remember at the time, eBay had a ton of cash and was being pushed to make acquisitions. The whole idea of using it as part of their auctions was ludicrous. Their either don't understand their customer base or were purely talking BS.

Part of the drivers for eBay was that Skype was at the time (apparently) responsible for something like 90% of paypal signups (especially outside of established markets like the US).

I think they were worried that if Skype had been purchased by Google, and they switched to using Google Checkout rather than paypal, that they would have lost a lot of market share.

Wow, 90% seems like a lot... although I can't seem to find a source for that. According to an answer on Amazon's askville [1], the total ended up being ~1.7% around Oct 2006.

At one time, the life cycles of the companies might have aligned (as Skype was taking off, and Paypal was plateauing) to show ridiculous numbers like that. Still, it seems hardly justifiable to pay billions to buy a company just because they use your service for checking out.

http://askville.amazon.com/users-Paypal-Skype/AnswerViewer.d...

Worse what they bought was a name based upon technology they don't own. Someone just figured out that they can't move on and take it to the next level and are dumping it. Mistakes happen, they should have bought everything not just the pretty outside and user base.

Why do they they say it was such a bad deal? $900 million yearly on $3 billion seems quite good to me.

Edit: Er, $600, $900 was the writedown.

900m revenue or profit?

The article only mentioned Skype "is on track to take in more than $600 million in revenue this year."

If Skype is a low margin business than the profits might be very low. Given that they have such competitive pricing I can't imagine they have that high a margin.

wasn't it designed to be low overheads? eg: the P2P system for bandwidth, over having to pay their own server infrastructure.

just read this on reddit [http://www.reddit.com/r/technology/comments/9g3ml/ebay_sells...]:

> was on a team that looked at buying Skype 2.5 years ago. The company was making only $0.19 per user per year at that time (ARPU) and bleeding to death. $2.0 billion is an insanely high figure to pay for Skype - not sure how this investor group is going to recover their money

Think about it: would EBay sell a company that generates $900m (or $600m for that matter) a year? And sell it for only $2b, less than they bought it for?

There's always a tendency to assume organizations handling such huge amounts of money know what they're doing. The fact deals like the Skype purchase seems insane to laymen only encourages many people to try and rationalize it with "facts we don't know" and "long term strategy" etc.

However, if you follow Hi Tech for a while, you may find that the simplest explanation for deals like these (or Sun buying MySql for $1b, or AOL buying Bebo for $0.8b, or the AOL-Time Warner merger) is that they are irrational, and the people making them are as susceptible to hype, hubris and ulterior motives as anyone else, perhaps more so - they usually stand to personally lose less as result of their mistakes than the your local Tacqueria owner will lose by choosing a different lettuce supplier.

EBay wants $2B for a company they bought at $3.1B four years ago? They might as well have taken the "billions" that the NSA was rumored to have offered in return for being able to eavesdrop on skype calls ;)

See http://news.ycombinator.com/item?id=522092

Skype is a dead end technology anyways. Go open or go away.

edit: and just to give some 'meat' for the downvoters, Jingle is being built as a true open p2p voice and video signalling, without being restricted to a proprietary protocol or walled-garden service: http://en.wikipedia.org/wiki/Jingle_(protocol)

And then there's SIP.

What alternative do you suggest? It should work flawlessly on Windows, Linux and OS X, and work well even on 128kbps connections. It should work from behind routers and firewalls, and not turn my Mac into a flaming piece of plastic.

Well?

your mac has ichat.

Yes, but I regularly need to talk to people who use Windows or Linux.

good thing ichat supports a cross platform protocol like SIP then!

I see this as a step in the direction for Skype to move towards IPO, otherwise it doesn't make sense that any VCs would be willing to invest in it.

As I see it, take a profitable company, with 600M in revenue, spend some time destructing and reworking it internally while private (possibly launching new features), then make it public so the VCs get their money back.

Reply on news.ycombinator.com