The main reason behind E-bay purchase of Skype was to increase its customer base for the voice over internet protocol services. In addition to E bay’s current transaction fees. E bay was found in 1995. It pioneers communities sustained by trust and built on commerce. With the array of websites, E bay enables e commerce on international, national and on local basis. With the use of PayPal, E bay marketplace, shopping.com and rent.com, E bay bring together millions of sellers and buyers every day. Skype is a global internet communications company that allows its customers to make unlimited free voice and video calls anywhere around the world. Since the launch of Skype in 2003, it has been downloaded more than 182 times across 225 countries. Skype was the best option available in creating extraordinary powerful environment for business over internet, in order for E bay to improve the communication over internet.
What did E-bay thinks it will gain from this purchase
With the acquisition of Skype, E bay will allow charges for the deals through pay per call on skype. Currently Skype has 54 million members across 225 countries. More than 150,000 new users are adding every day. With the help of acquisition, E-bay hopes to improve and enhance communications between sellers and buyers. This will allow buyers and sellers to speak with each other. With the help of this communication, buyer will have all the information that he or she wants from the seller for a specific product or service. From a seller’s point of view, they will have a benefit to build up a strong relationship with the buyers that will ultimately help them to have more and more buyers. According to the top officials of E bay, main purpose of EBay was not to transform itself into a phone company but also emphasized on the importance of communication to the core of community and E commerce that is why Skype was the best option available in creating extraordinary powerful environment for business over internet. By considering this acquisition as a business opportunity, Skype could increase the velocity of trade on EBay with the help of adding a voice bargaining option (Collier, 2016).
How did E-bay Go about making the decision
The early fall of 2005 was full of speculation associated with the future of biggest giants of internet industry like Yahoo, Google and E-bay. These companies were consistently struggling to gain the market share and to increase their user base. All of these companies were looking for extensions by which they can target their markets of potential customers. With the acquisition made by Yahoo for the purchase of Dial pad and the introduction of Google talk by Google shows their concern for market extension. Soon after these developments E-bay announce do purchase Skype for $4 billion. Although E-bay has been successful in integrating of new business like PayPal, many doubts this acquisition of totally different domain will provide better results or not. The reaction to this acquisition was mixed. Soon after the acquisition the price of E bay fell down by 4% (Vitzthum et al., 2009). In the acquisition phase, E bay acquired all of its outstanding shares of skype for approximately $2.6 billion. Shareholders of Skype were provided with the option to get all the cash in exchange of their shares at once or with the passage of times.
Vitzthum, Sascha, and Benn Konsynski. “EBAY’s Acquisition of Skype SA: Valuing the Voice of the Buyer.” Communications of the Association for Information Systems 24.1 (2009): 6.
Collier, Catherine Augusta. Success and Failure of Mergers and Acquisition. BS thesis. University Ca’Foscari Venezia, 2016.