How the hell could EBay be so stupid
So… Skype is pretty interesting. The service itself? Not so much (for me anyway) but for a lot of people the service is great too. For me, its interesting because of the business itself, how it evolved and how two guys from Europe built it. These two guys, Niklas & Janus first developed the p2p technology called Fasttrack and launched the KaZaA service. At the time, the internet was ripe for something new, Napster (first gen p2p) had just been shut down and a new, non-centralized approach had a lot of appeal.
Obviously, being in the p2p business is cumbersome and expensive at best, illegal at worst and the founders of KaZaA found themselves getting out of the business in a few years….BUT they had developed the IP and programming chops to really do p2p right. And that’s what went on to become the foundation of the Skype service. Skype was a genius move for several reasons: first of all, using a p2p platform freed the company up from humongous bandwidth requirements – the needs of the network grew as more users joined, which in turn supplied the bandwidth needed. Next, it wasn’t a potentially illegal or grey area business – VOIP was a legit offering and the technology worked pretty well. Finally, Skype figured out something that a lot of Internet startups never did: how to make gobs of cash, hand over fist. Skype did this by offering a free service but charging for Skype-In and Skype-Out (connecting to POTS services).
Now of course… most people know that the Skype founders managed to get EBay to (somehow, I can’t fathom how) pay $2.6B for the company and by the time its all said and done, probably north of $3B. That’s a lot of scratch. What never made sense to me, and apparently many others was what the hell was EBay, an auction site going to do with a p2p VoIP service provider? Well it turns out not a whole lot and they’ve decided to take their losses and spin Skype off or sell it. But here’s where it gets better: not only did Ebay pay a ridiculous amount for the company, they didn’t actually buy the underlying technology that makes Skype work! This, in mind is not just absolutely dumb founding but clearly, stupid (on Ebay’s part… Niklas and Janus – more power to ya). Of course things are back in the headlines because now there’s some lawsuits going on between the two companies and the fear that if Ebay can’t settle or come up with some alternative technology, they could have to shut down Skype. That doesn’t bode well for any potential 2010 Skype IPO that was planned, if the service goes down even for a few days the hardcore user base (the ones that pay) will start looking for something else… that something else may very well be Google Voice.