13 September 2005

13.09.05. You can never tell where the next good idea is going to come from (Skype, EBay and sustainable development)

Editor’s note: I want to bring this article from today’s New York Times to your attention with the thought that it shows how technology and society rarely advance in straight lines. And how innovation more often than not comes from off the wings, rather than from the center. As many of you know we here at EcoPlan and The Commons have been using Voice Over IP for several years (the early ones being a bit painful, to be sure) and for the last year have been firmly plugged into Skype for virtually all of our international communications (other than for videoconferencing where after no less than twelve years of extensive daily use our present technology of choice is SightSpeed).

What’s the point? Well, that I think we will do well in our uphill struggle toward a more sustainable and just society to spend a bit more time looking into the wings to see what might be out there that can help us make a difference. Indeed it has for years been our firm belief here that these internet based tools are one of the most obvious parts of the necessary solution set. And if we think of the Skype progression from jive file-sharing software for trading music (Kazaa) to a long string of lawsuits for theft of intellectual property, and from thence on to a pathetically small backwoods technology startup in of all places Estonia -- all of which within two years have presented to the traditional, huge, entrenched and apparently tone deaf telephone monopolists the challenge of their fat and sweet existence. Hmm. Wow! And now why not for more of the same in the sustainability wars? Are you staring right in front of you for your answers? Or are you looking out there on the wings?
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Betting on future: EBay to buy Skype

By Ken Belson The New York Times, SEPTEMBER 13, 2005

NEW YORK EBay said Monday that it had agreed to buy Skype Technologies, the Internet phone provider based in Luxembourg, for about $2.6 billion in cash and stock, a move that the company hopes will bolster trading on its online auction site.

The total value of the deal may grow based on "potential performance-based" considerations that could be worth an additional $1.5 billion, eBay said. Though revenue is expected to grow to about $200 million, from an estimated $60 million this year, eBay does not expect Skype to turn a profit until the fourth quarter next year.

EBay's purchase ends months of speculation about which company might buy Skype, which since 2002 has been giving away its software that allows people to talk to each other for free by linking their computers. News Corp., Google and Yahoo were mentioned at one time or another as potential suitors.

In buying Skype, eBay's executives are making an expensive gamble that giving its 157 million traders a way to talk to each other for free will make it easier for them swap everything from toys to cars. Skype could also help eBay's customers trade real estate, vacations and other services that typically involve more detailed conversations to complete, eBay said.

"Communications is at the heart of e-commerce and community," said Meg Whitman, chief executive of eBay, which also owns PayPal, the online payment provider. "By combining the two leading e-commerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net."

While eBay will acquire Skype's 54 million users in 225 countries and territories, the company said it was not interested in becoming a telecommunications provider or challenging incumbent phone providers.

Still, with Skype adding 150,000 users a day, the firm represents another threat to established carriers that have expensive phone and data networks.

In North America, Skype has more users and provides more voice minutes than any other Internet voice communications provider, the companies said.

About two million Skype customers have signed up for a pay service that allows them to use their computers to make calls to regular phone numbers as well as receive calls from landlines and mobile phones.

To complete these calls, Skype pays phone companies small per-minute fees.

Skype's software also offers features that include voice mail, instant messaging, call forwarding and conference calling.

Only 13 percent of Skype's users, though, are in North America; nearly half are in Europe and another quarter are in Asia.

With growth at eBay showing some signs of slowing, Whitman said she was not interested in developing a portal that included a variety of products and services, like Yahoo, Microsoft and Google have been doing.

"I'm a big believer in focusing brands and businesses that are in very large markets," she said by phone from London. EBay is "absolutely not" interested in developing a portal. "You can be sure we're going to focus on e-commerce."

Last month, Google announced a service similar to Skype's free service called Google Talk, and Microsoft said it was acquiring Teleo, a San Francisco company that allows users to call conventional phones from their PCs.

Even without a portal, some industry analysts said eBay's purchase of Skype was a sign of how voice calls were increasingly becoming one of many services that companies will provide, not a stand-alone business.

"This turns the entire telecom industry picture on its head, and demonstrates that voice, presence, text messaging and other IP-based applications will be essential for the company of the future," said Jeff Pulver, the chairman of pulvermedia, which promotes Internet-based phone services.

EBay shares rose 32 cents to $38.94 on the Nasdaq Stock Market.

Still, some industry analysts were less certain that eBay should have paid so much money for a company with so little revenue and a technology that is being rapidly imitated.

"Quite frankly, you look at the numbers, and you realize there has to be something more for eBay to buy into," said Carmi Levy, an analyst at the Info-Tech Research Group in London, Ontario. "There's significant risk because the cash is not there now."

Terence Neilan, Andrew Ross Sorkin and Vikas Bajaj contributed reporting.

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