What EBay Will Do For Skype and VoIP

Rich Tehrani : Communications and Technology Blog - Tehrani.com
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What EBay Will Do For Skype and VoIP

Virtually all the big boys in the software and technology service markets have some sort of VoIP strategy. AOL, Microsoft, Yahoo!, Google… It was only a matter of time before Ebay and others got into the game. Will Amazon.com be far behind?

Today may be one of the biggest days for VoIP in recent years because sources say that EBay is looking to spend between 2 and 5 billion dollars for Skype, the world’s Internet telephony leader.

At $3 billion, EBay is valued at approximately 43 time sales and that is a staggering amount. Indeed this Wall Street Journal article mentions it is difficult to value Skype as it is software that can be easily duplicated.

What can’t be duplicated is the name that Skype has established and the momentum the company enjoys in the market at the moment. Furthermore, Skype has critical mass meaning hardware vendors are eyeing ways to add Skype’s proprietary Internet protocol into their hardware which means Skype can charge a dollar or so per Skype enabled device!

The competitor to Skype’s protocol is SIP and over time it is possible that SIP users will be more numerous than Skype users. Interesting I had a chance to interview Niklas Zennstrom at last year’s Internet Telephony Conference & Expo where he honored our show with his first keynote ever in the United States. I asked Niklas why he didn’t decide to support SIP and he told the audience that there were firewall issues, unnecessary complexity and cost associated with adopting SIP. Besides he said there are more Skype users than SIP at the moment!

Mr. Zennström is slated to speak at TMC’s ITEXPO once again this year and we are excited to host him and have him answer more questions about where he sees the market going.

The question we are all wondering about after hearing this news is what is an Internet telephony company really worth? I reported on July 13th of this year that BellSouth was reported to be in talks to buy Vonage for $3.5 billion and the valuation at the time would have been $4,375 per subscriber. People told me the number was astronomical and I must have heard wrong. Now, it seems like the numbers I heard make sense as Vonage too has momentum, critical mass and unlike Skype, every customer pays.

This gets us back to EBay. The company has been looking for ways to extend its business model. They purchased PayPal and part of craigslist, a VoIP service provider would be a nice addition as like PayPal it is a way to extend services to the vibrant community the company has built. Will they charge for multiparty VoIP conference calls where a number of potential EBay purchasers will ask a seller questions about a product in round-robin fashion? I can imagine questions like “So did your ‘57 Chevy ever have any water damage?” or “Are you sure you never dropped this PDA?”

In addition, the Ebay name and customer base may allow Skype to grow even more quickly. EBay could decide to turn the service into a complete broadband telephony solution ala Vonage and start taking on Vonage where it hurts, with a series of ads that challenge the famous WooHoo campaign Vonage has so famously deployed.

If the deal doesn’t go through (the Wall Street Journal Reports the deal is fragile), the VoIP industry will still reap tremendous rewards from this news. It shows that leading companies in the VoIP space are worth a potentially staggering price premium. Moreover, it further shows every technology company that they need to think about how to integrate VoIP into their strategies. They need to be exploring ways to get into the market.

This is probably the reason that our attendance at Internet Telephony Conference & Expo at the Los Angeles Convention Center is already tracking at 100% increase in attendance over last year. This show is turning into the one place you need to be to learn about where VoIP is today and where it’s going in the future. Between the recently announced Vonage IPO and now the Ebay/Skype talks, this is definitely the year that VoIP happened and I look forward to the future… VoIP 2.0 which we will explore in just over a month in Los Angeles.

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