Telepocalypse

A thousand words

In a spare moment I whipped together this little diagram that tries to explain in pictures what I’ve probably failed to convey in many thousands of words.

It’s certainly more illuminating that the arm-waving “Power of 3” stuff in eBay’s investor relations blurb. There’s magic happening somehow in the arrows in their diagrams.

So, what’s the message? Really, it’s quite simple. Marketplace enablers can be defined by the breadth of goods on offer, and the depth of support for the transaction they offer. The picture shows how eBay, Amazon and Google are currently positioned, and how Skype might be positioned in future. The edges are “clipped” because not all transactions go to the maximum depth; e.g. not all eBay auctions are settled via Paypal, and Amazon sometimes hands off fulfillment to 3rd parties. (The eBay region is made translucent — I hope it’s still obvious which bits are eBay despite the colour transition.)

At one extreme, Google has a very broad business base (any commercial transaction that can have an unambiguous keyword associated with it). But it doesn’t do much beyond that.

At the other extreme is Amazon, which will encase your goods in gift wrap and even deliver them to you personally when it comes to certain digital goods.

eBay falls in the middle. Its business model is narrower and shallower than these extremes, but perhaps encompasses a greater “commercial land area” as a result.

The purpose of the Skype-eBay deal is to push eBay into a broader realm of things for sale. For instance, if you want legal advice today, Google is the only place to go search for it. Want a reputable lawyer nearby? Sorry, the eBay reputation system doesn’t help you — yet.

The many articles on “pay per call” models for Skype tend to miss the bigger picture. Skype isn’t constrained by PSTN circuit technology, so previously unimagined transaction-supporting functionality can be integrated. Only by looking at the increased breadth and depth of a Skype-eBay transaction environment can you see where the value lies.

I expect Google to continue its strategy of expansion along a different axis — the set of “search moments”. I have previously argued that Google missed an opportunity to deepen its business model by acquiring Skype.

Currently Skype’s business is a thin, empty line along the bottom of the diagram. Infinite width, zero depth. US$4.1 billion is a lot of money for what amounts to a risky experiment. But the prospect of re-defining the experience of how consumers and businesses talk to one another is an exciting one. For someone it may even turn out to be a lucrative one, and not just Skype’s management and investors.