Why eBay was right to buy Skype

CATEGORY: News

The San Francisco Chronicle interviews Meg Whitman, eBay’s President. The changes to eBay’s shop listings last year were responsible for the fall in their share price, she buys and sells on eBay herself, more female CEOs are a generation away. All cute, nothing very surprising.

Except down the bottom, amongst the implied criticism of eBay’s controversial $2.6bn purchase of the online telephone system Skype last year, there’s a rather telling paragraph:

We think in some ways that communication can be to the marketplace what payments was the marketplace. What PayPal did was it accelerated the velocity of trade in the marketplace. … There’s protection to you by closing that transaction online. But if it actually increases the velocity of trade on eBay or off, then our users are better off and we will ultimately be better off.

This, in direct response to the question, if you let buyers and sellers talk directly, won’t they cut eBay out of the deal, signals a massive about-turn in policy by eBay, which in recent years has tried to restrict direct, off-site communication between buyers and sellers, encouraging trading partners to keep more and more correspondence on-site.

But it’s more significant than that. Paypal are currently in the processing of rolling out their Paypal Virtual Terminal; just like a physical credit card machine in a shop, this will allow merchants to take credit cards over the phone. Suddenly, putting Skype buttons on your eBay listings looks like it might make sense.

Far from being the crazy waste of money it’s been portrayed as, eBay’s purchase of Skype turns out to be a truly forward-looking move by the company. A third of UK adults now have a Paypal account; it’s a fairly safe bet that most of those accounts are largely used for eBay. But with eBay television ads bringing the site to the attention of an ever-widening audience, what are we to do with those people who just don’t want to put their credit card number “onto the internet”? Easy: we give them the option to seamlessly hand it over to eBay merchants with Skype. Just as Paypal brought internet card processing to sellers who wouldn’t otherwise be able to accept it, Skype will bring internet card purchasing to buyers who wouldn’t otherwise find it acceptable.

Smart move, that.

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