A most valued reader (i.e. my brother — my mum is the other reader) points me to a colleague’s friend’s blog busy referring to my previous entry. So to complete the nepotistic circle of cliquedom, I’ll point you back to the other side of the echo chamber. It’s one of the more succinct observations of what the Skype-eBay thing is about:
Google is now going to have to play an uphill battle. That battle was made conspicously apparent when Google released GoogleTalk. Why does Google continue to insist on invitations to grow it’s Gmail accounts? Why is the only other registration mechanism is to use a mobile phone? I take it that Google understands the value of tying one’s digital identity with something tangible in real world. That is you have a Gmail account because of your real world contacts or your ownership of a mobile phone.
Interestingly enough, it is eBay that has the enviable position of providing digital identities with true value. eBay’s reputation system is without competition. A seller’s ability to command a premium bid is affected by his reputation. Buyers without established reputations are sometimes barred from bidding. Paypal’s verified attaches a real bank account to an identity. When one attaches a credit card to an identity, the address becomes verified and adds additional reputation for a buyer.
This is an elaboration of Stuart’s allusion to the digital identity imperative of eBay and Skype:
Skype and eBay profiles: A huge winner in this area is possible. eBay will provide just one form of reputation data. Caller ID solutions are not far behind.
I gave a talk about 18 months ago one why the real asset of a telco was the data in its customer database, and not the network. Nice to see the real world catching up.
One shouldn’t ignore the international aspects of this deal. It’s easy to be parochially US or Euro centric, as Jonathan Boutelle notes:
This also means that in many emerging markets no one has heard of eBay, and eBay has no effective way to reach these markets other than expensive late-stage acquisitions.
Owning Skype will make eBay immediately relevant to millions of Pakistanis, South Africans, and Georgians. It gives them a way to reach customers and drive marketplace adoption in every country on earth.
The only way an eBay-Skype hookup can justify the price paid is if eBay infects Skype with transactional functionality. Skype has to burst out of a pure C2C voice play as there’s not enough money in it to support big-league financial expectations. There are many break-out points, but B2C/C2B communications strikes me as the easiest to mine for gold.
Telepocalyptic prediction #1: We’ll see a “merchant edition” of Skype within 12 months, and this will be indirectly a paid-for service to eBay sellers. Skype becomes the “PBX for micro businesses”, and it’s the seed from which eBay can grow a bigger assault on the moribund PSTN application, particularly the 800 number market. The economic driver will be increased conversion rates, larger transaction sizes, lower transaction defect rates (e.g. wrong address), and increased up-sell during closure. Only an advanced multi-modal client can achieve these things.
Telepocalyptic prediction #2: Within 18 months, Skype will be giving away ougoing PSTN calling to places with low call termination charges, in exchange for people adopting the Skype/eBay identity and proffering personal data. eBay needs to grow Skype as fast as possible to keep as much calling on-net as it can. There comes a point when your network effect means you can suddenly drop the price for a wide range of vital services to zero (think: search, browsers) in order to support an adjacent business.
As Yannick Laclau notes, the telcos will respond with their own scorched earth policy of offering PSTN service for free in conjunction with Internet access. As he later observes, this is fatal for the PSTN disintermediators:
The internet players are deflating voice to support their applications-layer businesses in commerce, content, and advertising; the telcos are deflating voice to support their growing broadband access business.
The losers in this will be folks who only make money selling voice. Top of mind in this category is Vonage, SunRocket, Packet8, VoiceGlo, GossipTel, and the other pure VoIP guys. Skype, I felt, was dangerously headed in this category until today’s rescue by eBay.
Many of the telcos unloaded their directory businesses in a fit of panic to raise some cash during the downturn. This will now look foolishly short-sighted as local search becomes the hottest part of the telco value chain. Expect to see the most “e-enabled” local search providers being snapped up by Google, eBay and Amazon. (I’m not brave enough to make specific predictions! Apart from anything, I’ve not been tracking the space closely — go read Om and Andy for the detail.) This local directory business will be particularly critical to integrating “voice-centric” small businesses like plumbers, take-away restaurants, etc. rather than the web-centric ones that are the traditional eBay fodder.
The collective loss of the directory businesses will also weaken the ITU cartel’s ability to dissuade the listing of non-PSTN contact identifiers.
Ultimately, though, I can’t beat Stuart’s pithy cluetrained comment:
A marketplace is nothing without conversations.
Whether the messages over Skypenet are worth the crate of gold that was offered, I’m skeptical, but the strategic fit is certainly there. We definitely live in interesting times.
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Sold to mwhitman, a member from San Francisco from Skype Journal
A most valued reader (i.e. my brother — my mum is the other reader) points me to a colleague's blog busy referring to my previous entry. So to complete the nepotistic circle of cliquedom, I'll point you back to the...
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very insightful article just got to go to google now to search the acronyms I didn't understand:0
Posted by: at September 14, 2005 08:10 AMYou know I think there may be a more conventional, economic, reason behind the price of VoIP being driven to zero. One of the basic rules of business that I learned in a 1st year economics class, commodotize your complements.
Microsoft, Ebay, Google, Yahoo, AOL, I think all of them could make the connection that voice is complementary to their business model, and so they should make it free. Never mind bundling, never mind the more complex explanations, free voice facilitates consumer relationships, and costs (relatively) very little to make available when access is paid for by the consumer.
It's just unfortunate that companies have based their entire business model around items that are being 'commodotized'.
Posted by: at September 15, 2005 03:56 AM