Communicating the power of 3

Listening to eBay's investor conference call last night which took place to discuss eBay's acquisition of Skype, and following along with the slide presentation (PDF), it's now clearer to me what the expected synergies are from this deal from eBay's and Skype's perspectives.

It's something they're calling the Power of 3:

(Click to see a larger image.)

What this diagram illustrates to me is a simple addition to the eBay/PayPal business model:

• On eBay, sellers go where the buyers are, and vice-versa.
• With PayPal, more sellers (and not only eBay sellers) offer payment options by that means, and more buyers use that option.
• Integrating Skype into the eBay/PayPal mix gives buyers and sellers the means to quickly and easily get in touch with each other if they want to, and for free if they make their calls entirely via the internet no matter where each of them is. Talk about facilitating global commerce!
• Each part of the mix feeds the other, enhancing the richness of each element and helping to bolster and grow the whole eBay offering.

So that's my concise business takeaway from this deal.

Of course, it's far more complex than that. Questions such as why did eBay buy Skype at all - could they not have simply entered into some kind of service agreement with Skype? Or why did they spend so much - many seem to think it's a very expensive acquisition. There have been plenty of instant analyses during the past 24 hours, both by mainstream media and interested bloggers, that address such questions and provide many different answers.

Three such analyses I've read today, and which I easily understand, are What will Ebay do with Skype? (Financial Times, paid sub), eBay Opens a Whole New Channel (Business Week Online), and Skype - Chapter 2 (Skype Journal). Read them and see what you think.

So where does this place the Skype user, the customer? What's in it for him or her?

Well, I'm a long-term Skype customer - I use all the service offerings - a frequent PayPal user and a very occasional eBay user. I'm probably a hot target type for eBay post-acquisition as getting someone like me to use eBay more must be part of their plan. (If the Dutch eBay site offered the interface in English as well, I'd use it more!)

But speaking as a Skype customer, I think this is a terrific deal for Skype and its users. All the information I've seen and heard since the deal was announced yesterday indicate to me that the customer will be a winner as Skype continuing as a stand-alone business will be able to develop its services with the support and resources of a robust and solid business led by people who demonstrate clarity of purpose and clear direction. There's a lot of confidence there to back up the hard financial facts which I like.

The interesting thing now will be for eBay and Skype to demonstrate all this to customers at a time when the internet phone business is looking poised to really take off. Skype may well have a presence in 225 countries and territories worldwide and be the market leader in every major country, as founder Niklas Zennström said in yesterday's investor call. That matters little to the customer in, say, Italy who continues to have a painful experience calling his auntie in, say, Costa Rica. And when there are viable-looking alternatives like Microsoft Teleo, Google Talk and Gizmo, I wonder what customer/brand loyalty will really mean.

If the foundation's solid, communicating the 'Power of 3' now has center stage.

Comments

[ashley]

I think this union will be a very beneficial one for Ebay because I have recently become a Skype customer and have fallen in love with it. The two will benefit greatly from each other because, one of the most frustrating things I find when shopping on Ebay is how terribly at arms length the communication is with my potential sellers. Chatting through emails becomes tedious and there is no real trust in the product with out personal communication.

I think when Ebay incorporates Skype in the selling process Ebay will become more of an online want ad section. Instead of using the computers to communicate, you can now hear the voice of the person you are buying from. This puts a personal spin on the online marketing world. Asking questions and getting an answer will no longer take days of emailing, but a simple conversation. Skype cuts out the computerized middleman that Ebay is, and yet Ebay will still reap all the benefits. This will make the expensive purchase worthwhile in the long run.