Skype Acquisition by eBay Points to New End Game in e-commerce,

London, ON - Info-Tech Research Group says that eBay's $2.6 billion buyout of IP telephony company, Skype, lays the groundwork for enriched e-commerce applications and services. But Info-Tech questions whether the return on investment will be sufficient to justify the multi-billion-dollar price.

"eBay had to act," says Info-Tech analyst Carmi Levy. "The growth of its core auction business has flattened over the past year, and recently the company had been buying into everyone from Craigslist.org to Shopping.com and Rent.com. It needed to find a way to energize its legacy offering."

Levy questions whether the price, which could rise to $4.1 billion if Skype meets certain performance objectives, is too high.

"eBay is buying Skype for its huge user base - 54 million users and counting - and its efficient IP-based telephony technology that delivers relatively high quality voice communications over the Internet," says Levy. "But whether eBay can generate enough revenue from that to justify the investment is another question entirely. It's definitely a gamble on the elusive concept of convergence."

The companies claim integrating Skype technology into the current auction process could, for example, allow buyers and sellers to speak with each other.

"The hope is that enriched applications like this could solidify eBay's competitive position in the ecommerce space and open up new revenue generation opportunities," says Levy.