OK, so I've never seen a billion dollars before. I will grant you that. But, chances are that you've never seen a billion dollars before either- even if you have one, you've never actually seen it, except maybe on your balance sheet. You see, that's not really the point here. I've never been to many parts of the world, but I can point them out on the map. So, allow me to talk like a billionaire.
The recent announcement that Ebay is thinking (seriously) about buying Skype is, to say the least, dumbfounding. I mean, Ebay buying Paypal made sense (people sell stuff on Ebay and people need a way for other people to pay for what they bought - so no-brainer, eh?). But Skype? Someone please riddle me that.
Ebay is in the business of facilitating auctions (I have a Teddy, do you wanna buy? My wife is having a baby, do you want to buy the rights to name her/him? Here's an authentic African Elephant's ear, dripping blood and all, wanna buy it? that kind of thing), and reaping cupious commissions in the art of doing so. Ebay does it well, having beaten back all the notable competitors. It's a successful business, and it's a growing one because there is no comprehensible/fathomable limits to the business of buy-and-sell. But Skype? Someone please explain it to me.
The business logic escapes me. What does Skype offer Ebay in terms of business relevance. Or, to bring out the big word, where is the Synergy? Skype is a collection of "all-things-free"-seeking individuals - with a sprinkling of conscentious "give-a-little-back" SkypeOut minority here and there - who just want to be able to make free phone calls, and don't want to have to pay for it. It's made up largely of the Naspter-like mob crew with a mentality that screams "everything wants to be free". It is about making FREE PHONE CALLS!!! Got it?
Ebay has been about everything but free. It has been about everything but phone calls. Ebay is made up of people who want to sell or buy stuff from the comfort of where-ever they happen to be at that time, dressed (or not dressed) in whatever they want. People who just want to talk with their mice and keyboards and don't want to have to deal with the hassles of bantering or yammering with anyone else. There is hardly anything on Ebay that could not be purchased anywhere else, but people use Ebay because it offers the convenience that is otherwise not available elsewhere. So, where is the business logic of Skype?
In 1999, Yahoo was flush in (funny?) money and went shopping for a company called broadcast.com. Yahoo shelled out a LOT of money, something like 5-outrageous-billions of dollars. At about the same time, it shelled out some funny-looking-4-or-so-equally-outrageous-billions of dollars for Geocities. Not very long afterwards - in fact, maybe a little less than a year after - both acquisitions were worth some probably-what-they-should-have-been-priced-at-originally-if-Yahoo-wasn't-stoooooopid ...... well, a fraction of a billion dollars. Both acquisitions sank so fast, it made the Titanic tragedy look irrelevant. To rub salt into the injury, NOTHING came out of either acquisitions. In spite of the cacophony of buzz-words that were being invented and thrown around to justify the acquisition, Broadcast.com flounderered and died, but the previous owners had taken their money and invested in something more worthwhile. Geocities? What Geocities?
OK, so back to Ebay and Skype. Maybe the acquisition would have been understandable IF Ebay were being paid to offer Skype to its members. But, no. Ebay is planning to shell out ...... please don't throw up ..... 5-absofreakinglutely-outrageously-incomprehensible-BILLIONS of US Dollars. You see why I'm having a hard time swallowing? 5 Billion dollars for Skype? For what? To what end? Skype itself has no infrastructure worth a percentage of that amount of money. So, what is Ebay paying for? Membership. What membership? Ebay has a ton of members. Are they looking to convert Skype's members into Ebay's (that is to say, auctioning) members? No! The logic is that Ebay is interested in Skype's VOIP business and want to barge in without having to start from the grounds up. So, they figured it would be easier for them to pay $5b for the members that Skype has. Makes sense? F no! Makes no sense. Not when Ebay already has so many members of its own. Not when Ebay already has so much name recognition. Not when it costs much, much, much less than, say, $100 million to put together the necessary infrastructure and marketing buzz to create ANOTHER Skype. Not when the price tag has a "b" in it. There is no way Skype is worth a "b"! Got it? Much like there was no way broadcast.com was worth what it got paid. Much like there was no way Worldcomm could have legitimately made those money it used to buy up all those companies, and even though everyone knew it, we let it happen anyway.
Again, I've never see a billion dollars before, but I sure know what I will not be spending it on .... when I see it. If Ebay can't figure out what better to do with its money, may I suggest that it lowers the commissions it's taking off each sales right now? You know, the members aren't quite happy with Ebay right now, they just don't have a better alternative to migrate to. Maybe Ebay can bring back good feeelings by redistributing a fraction of that toilet-bound $5b to the members.
Well, what do I know? Never seen a billion dollars before.