Auction company expects Skype's voice technology to broaden sales base.
Ebay Inc. is betting heavily that voice over IP will become an integral part of the E-commerce experience. EBay believes that VoIP service provider Skype Technologies SA, which the online auctioneer will acquire for $2.6 billion, will provide a way for buyers to instantly connect with sellers and will help broaden eBay's marketplace.
"By combining eBay and Skype, we can create an unparalleled E-commerce and communications engine," eBay CEO Meg Whitman said in a conference call soon after the deal was unveiled. "Skype can accelerate the velocity of trade on eBay." It potentially could generate $3.5 billion in revenue from markets that eBay traditionally has had trouble penetrating, including real estate, travel, new-car sales, and expensive collectibles, Whitman later said. Those markets require more communication capabilities than eBay currently offers and are developed through lead generation, where sellers know a lot about potential buyers. Skype will help in both areas, Whitman explained.
The question is, do eBay users--buyers and sellers alike--really want Skype? Many of eBay's top sellers apparently aren't interested in adding VoIP service to their sales models. "They can barely keep up with the E-mail that's coming in right now," says Scot Wingo, president and CEO of ChannelAdvisor Corp., which provides marketplace and auction-management software to sellers and comparison-shopping services to big companies like Best Buy Co. that liquidate stocks on eBay. "Part of eBay's success has been the simplicity," Wingo says, citing the ease of use of eBay's asynchronous queue and the anonymity it provides.
Another issue is that VoIP could accelerate eBay's so-called "gray market," items that end up being sold outside the eBay structure to avoid its seller fees. EBay has 185 million customers and estimates that in the United States alone, 724,000 people make all or most of their business earnings from eBay sales.
In last week's conference call, eBay executives rarely referred to the company's current customer base, repeatedly stressing that the Skype acquisition could broaden its E-commerce reach. "It does make sense for the very small sellers that may put up one or two pieces of antique furniture once in a while," Wingo says, adding that Shopping.com, which eBay bought in June for $635 million, also could work well with Skype. "The whole purpose going forward is expanding the community," Forrester Research analyst Maribel Lopez says.
And it might provide a model for others in E-commerce. "VoIP embedded in the online experience will be a natural fit. In the long term, it's going to be an expected capability," Lopez says. VoIP use is skyrocketing, and big Internet companies recently have made their own VoIP moves. In recent weeks, Google began offering instant messaging with VoIP capabilities, and Microsoft acquired VoIP startup Teleo Inc. Consumers already have VoIP options when buying clothes online from Lands' End. And companies like Vanguard Communications provide consulting for businesses that want to move their voice services away from traditional phone lines.
If Skype takes off on eBay, more of the E-commerce industry could be pushed to follow suit.
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