Columns

eBay's purchase of Skype Technologies for $2.6 billion caught us all on the hop the other week. It was one of those deals that seemed highly improbable when rumours first surfaced, yet within days the deal had been confirmed. For a moment it felt like a return to the good old days of the late 1990s when Internet start-ups could launch a new product, show a bit of promise and be snapped up for millions by corporate giants who were throwing money about in panic, lest they should miss out on the Next Big Thing.

Skype is not the Next Big Thing, of course. It's a reasonably neat implementation of a technology that is an integral part of the future of telecommunications. Voice Over IP will, sooner rather than later, complete a seamless transition into our daily lives. You won't have to use special software, or even sit in front of a computer to use VOIP telephony, it will be integrated into your regular telephone services. So, despite having been early to market and benefited from some great publicity, Skype was always going to be in trouble once the big guns started firing. From that perspective, a takeover made absolute sense for Skype; there was no other way for it to compete. If you were cynical, you may think its sole intention from the outset was to launch in a blaze of publicity, generate a large number of subscriptions, then sell out. I, obviously, couldn't possibly comment.

The takeover from eBay's point of view makes less sense. The immediate assumption

ADVERTISEMENT

is that it will integrate Skype's service into its auction sites. After all, when it bought PayPal it did exactly that, cross-promoting one using the other. However, PayPal was a much neater fit. Most eBayers already used PayPal either to pay for or receive payment for goods and services sold on eBay. This is different. Many eBay users may also use Skype, but not in connection with eBay auctions. Could eBay be planning to set up a system that would allow buyers and sellers to talk to each other for free in order to make transactions smoother? Possibly, although I hope not. The last thing I want from an eBay auction is to actually talk to the other party. At least with email you can ignore the questions from oddballs, but with voice calls there's no escape. On a more serious note, for sellers with multiple auctions on the go at the same time, it would be a nightmare.

It makes sense from eBay's point of view though. One of the biggest problems it faces in increasing the number of daily listings and transactions is the issue of trust. Why would you buy something listed on the Internet from a total stranger, particularly when you have to pay for it before you receive it? eBay's initial solution, of course, was its feedback rating. Every time you buy or sell, you are supposed to leave feedback on the transaction and this feedback shows up in the other party's profile. A high positive feedback score (95% plus) engenders trust in sellers among potential bidders. Fraudsters are quickly spotted and weeded out, in theory at least. The system has been so successful that many buyers won't buy from sellers with low feedback scores and many sellers won't sell to buyers without positive feedback. However, the system is not infallible. After all, if you have a bad experience and leave negative feedback, there's nothing to stop the other party reciprocating and leaving negative feedback for you. The need for sellers to have near 100% positive ratings is such that many are reluctant to leave negative feedback for other eBayers and prefer to leave no feedback at all.