No Head-Scratching at eBay About Skype's Potential

Rob Hof

If up to $4.1 billion wasn't enough to prove eBay's serious about just-acquired Skype, executive comments Wednesday sure did. And executive moves: eBay Chief Financial Officer Rajiv Dutta soon will become the London-based president of the Internet communications upstart, partly to make sure the two companies are joined at the hip. "We believe that a large portion of Skype's potential relates to its integration with eBay," Dutta told me after eBay's third-quarter earnings call. Or, to translate: "No, you ignorant sluts, we sure as heck didn't pay $4 billion just to offer free phone service."

During the conference call with analysts, CEO Meg Whitman also provided a little more detail on what she has in mind for Skype, which has left me and no small number of other people wondering about the fit and the price. "We see incredible potential for its use in e-commerce," Whitman said.

First, eBay plans to integrate Skype not only into the main site, but its,, its 150 Kijiji international classified-ad sites, and PayPal. Second, it's planning a PayPal Wallet for each Skype account, so people can use money in their PayPal accounts to pay for Skype's services, such as the ability to call regular phone numbers. Third, it has already started creating a pay-per-call advertising service that will use Skype. Fourth, Skype may provide a way to expand eBay's business in China and maybe even give PayPal a door into Japan, which eBay had to exit several years ago when Yahoo Japan's auctions crushed it. And fifth, well, there's Skype's own business, which includes additional services such as voicemail and who knows what-all.

Whitman admitted that rampant competition no doubt will drive what little Skype, or anyone else, can charge for Internet phone calls to zero within a few years. But despite that competition, she also noted that Skype is now adding 166,000 new customers a day, totaling 57 million. Some 4 million are on the service at any one time.

"Our belief is that the winners in this space will be the ones with the largest ecosystem" of users and developers, Whitman said. Sounds alarmingly like the tarnished "Get Big Fast" strategy of yore. But if Whitman can deliver on most of those plans, this may be one of those times that Get Big Fast actually works.

UPDATE: I removed a description of pay-per-call ads as "Google ads for phone calls" after my colleague Steve Baker understandably interpreted that as meaning something else than I intended. Pay-per-call involves clicking on a link that generates a phone call to a business, rather than sending you to another Web page. It doesn't mean you'll get spoken ads when you make a phone call. At least I hope not.

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