Friday, September 23, 2005

50 ways to get to $4.1bn

Today I had lunch with a Triple Platinum mega value reader who is also a friend and trusted source of information and ideas. Inevitably we started riffing on various angles for eBay and Skype. He said he didn't think I had been clear or strong enough in my earlier posts in stating a view which I did put in a note to clients, that the full $4.1bn on offer for Skype should be viewed not in terms of the business as it is today, but would be more appropriately viewed as an option on what it may become in a completely new context. The outcome depends not only on the kind of synergies which eBay believes it can generate, nor solely on the development of Skype's existing game plan, but also (and maybe mainly) on something new taking shape around the whole. Here's one idea that came out of this process, and some subsequent reflection on my part:

At the moment eBay facilitates the selling of physical goods, but not virtual ones. With a lot of "long-tail" decentralized media development taking place, there is a nascent market developing around the concept of hosting and distributing this content, in exchange for a cut of the action. Should this market grow to the level which I expect it very well could, there will be potentially millions of relatively low-cost independently-created download transactions each day, with commission revenues in play for whoever gets the model right. eBay takes its cut for hosting the content, and PayPal also gets an opportunity to be the payment mechanism. Where Skype sits within this picture is somewhat unclear, though its social aspects might generate some value for users (speak with the author now, join a forum to discuss what you have just seen). Additionally, if we take on board the idea of superdistribution as a part of this model, then Skype plays a big part as social network and distribution mechanism (via file transfer).

This idea could just as easily apply to other non-physical content such as software. PayPal is already the preferred payment mechanism for a number of independent software projects, some very well known and probably not in need of additional exposure, but countless others of which languish in obscurity. I presume that this approach could also apply to the various third party applications (or hardware) which may spring up around Skype in future, where the developers are seeking to monetize their creations. eBay takes a commission on the sale, PayPal transacts the deal, and Skype gains greater intensity of usage.

One down, 49 to go.

UPDATE: This intriguing post from Jaanus seems to confirm my suspicion that the roadmap is a work in progress. How long will this openness survive once inside an SEC-registered company?

UPDATE 2: A mega-value reader writes in with the following very interesting thoughts:

"I see it as a strategic move to position themselves as the manage presence provider for small businesses. Ebay already provides a transaction mechanism, shop front and email communication. For product-based business this is fine but service-based needs voice communication. Skype allows them to provide the voice communication service without investing significantly in infrastructure. Ebay is now the complete outsourcer of business processes for small businesses. It is further monetisation of the long tail. What I find most fascinating about Ebay is not the auction system, or everyone clearing out their garages, but all the micro-businesses that have sprung up. Many of these micro-businesses people make a reasonable living from, but none could exist without, Ebay and the services it offers. It won 't be long before these businesses will make up the bulk of sellers on Ebay. Skype only widens the possibilities. The joker in the pack is, of course, the consumer. Will the consumer want to hire a plumber through Ebay? I think they probably will. What would you prefer to do: hire a plumber from the Yellow Pages that you have no idea about, or hire a plumber through Ebay after reading reviews on the plumbers work? Integrating a search function into the Skype client for businesses suddenly gives the Skype user a Yellow Pages with reviews of businesses and a direct connection at a reasonable price."

UPDATE 3: Yet another Diamond Cluster charter member writes in to say that this is really all about creating a viable global standard for micropayments. I'm taken back to the Egypt section of Vodafone's presentation last week, wherein it was observed that only 500k people in that market have credit cards (and 72% of the population have monthly income below $160), though already 2m have used Vodafone's "minute balance transfer" facility. The internet may be creeping towards 20% adoption among total world population, but broadband is still only around 3% (and overwhelmingly concentrated in rich countries). Theoretically, there is a huge long-term demographic uplift coming the way of a reliable micropayments provider.

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