Most investors have probably read enough about the eBay-Skype deal by now. But arguably the two most important implications have been ignored, because they impact other companies more than eBay. Here they are:
Take-Away 1: Increased competition for Amazon, Google, Yahoo, and Time Warner
The eBay-Skype deal increases the competition among the leading ‘Net companies. The clearest way to see this is paradoxically through a spurious claim made by eBay in its presentation to investors yesterday. In slide 47, titled “Focus Matters”, eBay claimed that the leading Internet companies are focused on different areas: eBay on commerce, Paypal on payments, Skype on communications, Google on search and Yahoo on content.
Wrong. We know that the walls between these categories are collapsing:
Google attacks eBay: Google searches offer merchants an alternative means of acquiring traffic to eBay. PPC ads thus compete directly with eBay’s fees and commissions in merchants’ eyes. Google attacks AOL (Time Warner) and Yahoo: Search is now the on-ramp to content. By offering users an efficient way to find content, Google chips away at Time Warner’s and Yahoo’s traffic-dependent content businesses. Doubt this? Try typing a stock symbol into Google. Yahoo attacks Google: With its purchase of Overture, Yahoo declared war on Google. Yahoo’s fastest revenue growth now comes from search, and its stated aim is to integrate search throughout its content pages. Amazon attacks Google and eBay: By investing in A9 and sending GPS-enabled trucks to take location-indexed digital photos of store fronts, Amazon effectively declared that it was interested in the local search market. And why not? Amazon wants to become the platform for third party vendors, many of which have stated that the prices they get on Amazon are better than those they receive on eBay. Where does Skype play into this conflict? Google, Yahoo and AOL/Time Warner already had voice-enabled instant messenger programs, and all three are racing to provide an integrated set of communication, content management and personal publishing tools. Yahoo stated this explicitly with its announcement of Yahoo 360, and Google’s release of its own web email and instant messenger/VoIP client (Google Talk) confirmed this. As eBay pointed out, 44% of all time online is spent communicating, and Instant Messaging has the largest share of minutes per user per month (195, versus 80 for web email and 16 for search).
Another critical factor: Google and Yahoo and desparate to reduce their dependence on the Microsoft-owned browser. But getting your own client out there isn’t easy when Internet Explorer comes bundled with every new PC. The acquisition of Skype gets eBay its own client, with sticky usage. But users will tolerage a limited number of clients, so that clearly increases the pressure on Google and Yahoo.
Perversely, Google’s stock rose 3.6% yesterday in reaction to eBay’s acquisition of Skype, despite the increased competition to Google Talk. And Yahoo’s stock rose 1.3%. Bizarre.
Take-Away 2: Google’s not buying
Google recently raised $4 billion by selling stock. The sale was greeted with rampant speculation about which companies Google will use the cash to acquire, despite the fact that Google CEO Eric Schmidt stated explicitly that Google wasn’t interested in large acquisitions.
We now know that Skype was in play. It has a large and rapidly growing user base. Google was interested in an IM/VoIP client. Yet Google launched Google Talk instead of buying Skype.
Does anyone still doubt that Google isn’t interested in large acquisitions?
Related:
Did eBay Pay Too Much for Skype? eBay, Skype and the Name-the-Synergies-Game (EBAY) Seven implications of Yahoo! 360 VoIP Rush: Microsoft Buys Teleo, News Corp to Buy Skype, Vonage IPO? Earthlink discusses voice over IP Google Launches Jabber-based Google Talk; Early Product Details and WEBB Exposure All Internet Stock Blog articles on Amazon, eBay, Google, Time Warner or Yahoo. The complete list of stocks (and links to articles about them) covered by The Internet Stock Blog.
I listened to a replay, nothing to get excited about, I should have sold when the presentation did not create any waves. Yes, the $17.5 to $18 is buying zone, and I may very well double up if it gets under $18, as planned.
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