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Skype out: eBay auctions off overpriced impulse buy

This week the auction site it would separate from its Web-telephony arm. We look at what went wrong with the $2.6bn acquisition, and why it's a good move for Skype, if not for eBay

Why you would ever want to call your discount-CD dealer in Hong Kong has for years been a mystery. But when eBay bought Skype in 2005 for $2.6bn, then-CEO Meg Whitman thought the combination of eBay, Skype and eBay's PayPal service would "create an extraordinarily powerful environment for business on the Net".

She was wrong. This week eBay announced plans to separate from Skype, and offer up the company as a standalone business. The intention to turn Skype's free phone-call platform into a global method of business communication has failed, despite enjoying over 400 million users and 2008 revenues of half a billion dollars.

Additionally, it's reported that eBay is not opposed to an out-right 'Buy It Now' sale of the company, and Skype's founders themselves are interested. They've been approaching private equity firms to raise $1bn to put towards the re-buy of their creation, according to The New York Times.

So what went wrong?

In order for something to go wrong, things at least had to be right in the first place -- the costly wedding of Skype and eBay was unsettling from the day it was announced in September 2005.

While being able to call your seller or buyer to get answers about your auctions sounds divine in a world of utopian global commerce, the real world is full of nervous private sellers and anonymous bidders. The idealistic dreams eBay had were just too uncomfortable for most users to adopt.

But that wasn't the only plan eBay had for making cash from Skype -- a pay-per-call advertising model was suggested, in which businesses would pay each time a new customer (presumably from eBay) called them to enquire about a product or service. It's a service Skype offers itself in partnership with Ingenio, but is obviously not a route eBay ended up fully exploring.

The next steps for Skype

Pulling Skype away from the auction-minded hands of eBay -- either as an independent company, by returning to its founders and their investors, or to another buyer -- is undoubtedly a good move for Skype, if rather a sad day for eBay.

Skype has been exploring new platforms for its service, such as the iPhone, and even as a corporate telephony solution. Emerging from under eBay's wing could give the company more energy to focus on these more obvious business routes.

And hey, maybe if Skype does end up back with its founders, they'll ditch Joost. After moving away from P2P-delivered IPTV, it has far more in common with a fierce set of competitors, and that hasn't helped the fact that you've still probably never heard of it at all.