Why eBay bought Skype

Amazing marriage today of the 2 most viral solutions online - ebay bought skype.

The pundits have been in a tailspin since rumors leaked a few weeks ago and since then, speculation has been rampant and varied as to whether or not this deal made sense.

I just realised that eBay's heading directly into a space I've spent a lot of time working on, here are my predictions ...

At first, it was obvious that eBay was buying PayPal's largest potential competitor and I'm still convinced that this was what started the talks, but after reviewing skype's press release, I'm kicking myself for not predicting the future synergy in this deal ...

1st prediction;

the market that ebay + skype will create will, within 5 years, dwarf ebay's existing consumer products business.

Use case: Instead of just buying your ipod on eBay, you will now also browse ebay for cheap support for your ipod when it breaks. If you find a service provider you like, you'll chat with them live, instantly, simply by clicking on their ebay profile. When you've been helped and your call is complete, your ebay/skype account will be debited a service fee which will be divided up between skype for the communications piece, ebay for the marketplace piece and the ebay seller / consultant. I can't understate the latent demand in the US and EU in both the small business and consumer markets for globally-competitive professional services. Service has become so expensive on-shore that we've learnt to do everything for ourselves while 50% of the world's workforce remains under-and-unemployed. eBay and Skype will create a global services marketplace that makes the Enterprise trend of off-shoring look tame. A headline for this story could be --> eBay's already-global marketlace starts to sell products that aren't constrained by Geography. Enough said ... it'll be HUGE ...

Here's my second prediction;

the market that ebay + skype will create will be FAR MORE PROFITABLE than even ebay's existing consumer products business.

Understanding this prediction requires a bit more mental exercise than a use case ... consider the model below that illustrates how revenue is shared with peer-producers in open marketplaces. I use this diagram to illustrate how markets should think about compensating their participants. A "microchunk" is that piece of "work" that participants in online communities contribute to the product; the term is stolen from Umar Haque's presentation, the atomizing hand - and the model is an adaptation of Haque's prerequisites for Commons-Based Peer-Production namely that "microchunks" be re-usable and "modular", forming component parts of the product of the community.



As you can see, the right thing to do is to share more marketplace revenues with participants as their share of the product increases and as their ability to re-use or re-sell their "microchunk" decreases. Today, I added the future skype / eBay professional services to the model. With Pro-services, the percentage contribution to the product by the participant is the same as in the current marketplace but the beauty of moving the eBay marketplace to services is that eBay thereby increases the "re-use" of the work that their sellers do. Unlike a used product, a professional service, once listed can be sold MANY MANY times. This is how service businesses make their money - by "productizing" the services they are good at - and then re-selling that service to as many customers as have that demand. A good management consultancy finds a niche, owns a program and replicates similar projects at multiple clients (obviously making each client feel like they're the only one).

What does this mean for eBay? Simple - eBay will retain a higher % of revenue of services transactions than they do of product transactions. They're creating more value for services sellers than product sellers because they introduce re-usability to the marketplace. How much will eBay retain? I'm not sure - their challenge will be in the fact that not all services are equally "productizable" but I'd expect the retained revenues to be at least twice those of the current product marketplace ... the future never looked so bright ... not just for eBay ... but for every individual globally who has invested time & effort into becoming an expert in "something" ... who can now finally see a roadmap to being rewarded for pursuing their passions ...

My final prediction is that;

eBay will go on to create financial independence for marketplace sellers of global professional services that will surpass and greatly exceed the similar effect they've had on the lives of countless garage sellers in onshore markets.

Update: If you're still shaking your head, you're not alone. Try simply asking yourself these 2 questions:

Q1 - What is the consumer spending category that is primarily fulfilled via the voice channel?
A - Professional Services.

Q2 - What is the largest consumer spending category not / poorly represented on eBay today?
A - Professional Services.

Get it? What do you think?