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September 12, 2005
eBay Changes its Business
Posted by Dana Blankenhorn
"I'll take Bubble for $100, Alex." (That's 2004 Jeopardy mega-winner Ken Jennings, whose 15 minutes of fame are now up.)
And the answer is, "The final proof of the second Internet bubble, in 2005."
"What was eBay's purchase of Skype."
"Correct. eBay paid $2.6 million in cash and stock for a company that had few revenues, no profits, and hardly any business model, and whose operations were completely incompatible with eBay's own."
"I could understand the stock, and even understand the press claims the deal was worth $4.1 billion. It's the cash that gets me."
"It was cash eBay had."
"But what else could eBay have done with that cash in the furtherance of its real business? It could have gone into wholesaling, into b2b, into international finance. It could have bought a real bank for $1.5 billion, or started its own credit card bank, like Wal-Mart has done in Utah.
"There's a lot of physical infrastructure needed to do business which eBay does not have, and cheap phone connections are just one little piece of it. This meant they were going into an entirely new industry, were dependent on someone else's expertise to move forward, and were tapped out when that same unit came looking for additional capital with which to build their business.
"But Bubbles are like that. People do stupid things. Even people who you think would know better."
Comments (4)
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Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
1. David Orban on September 12, 2005 01:15 PM writes...
What is common between eBay, and Skype is the closed nature of their businesses. Neither is Web 2.0 in the sense that their 'API''s don't let you take and mash up the most valuable of their data: eBay's feedback rating, and Skype's voice traffic, and connections.
Permalink to Comment2. Monica Nilsson on September 13, 2005 03:19 AM writes...
Hi! I told my (Swedish) daughter about the deal yesterday. She always buys a lot of stuff via eBay. Her comment was: "Cool. No I can make bids over Skype! And maybe we can get quicker auctions." That's one way to see it. For myself I'm worried about what's going to happen with Skype's business concept.
Permalink to Comment3. michele sim on September 13, 2005 03:37 PM writes...
i happened to come across this article when i got a google alert for ken jennings. now,i really would love to talk to the author of this. because 1) his 15 minutes obviously arent over if youre still making such a freakin random reference about him that isnt even clever, and 2)i just find it so odd. especially how there's that big picture of ken in an article totally irrelevant to him about ebay and its buying of a company.
either he [the author] is a really big fan and constantly writes about ken because he cant get him out of his mind(like me) or is on drugs. or both. i wouldnt be surprised.
but, yay for random ken references!
ps: he might not be in the spotlight now, but he's got a show coming out on comedy central this january and a book coming out in the summer. muhahahaha! ken shall never die!
Permalink to Comment4. John McGready on September 18, 2005 01:26 AM writes...
It would be interesting to see if they're going to use Skype as a vehicle for
real time pre and post auction communication - i.e.
Ask seller a question
Best Offer
Want it Now
not to mention forums and Ebay University....
and now, apologies in advance for the rant...
(rant)
>"But what else could eBay have done with that cash
>in the furtherance of its real business?
????
I thought its "real" business was providing a marketplace in which
other people could sell things....
>It could have gone into wholesaling,
and undercut the businesses that sell wholesale lots on eBay,
thus severely alienating the businesses that manage to survive
the impending price war?
>into b2b,
and get rid of those sellers of office supplies as well....
>into international finance.
>It could have bought a real bank for $1.5 >billion, or started its own credit card bank, >like Wal-Mart has done in Utah.
The existence of PayPal and the MBNA card aside,
why would eBay want to add to its woes the miles of regulatory red tape inherent to banks, credit card defaults, credit card fraud, and chargebacks when they can just accept credit cards and let the banks handle the mess, especially with this October's changes in the pipline?
(/rant)
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