Academic Master

Business and Finance

Why Did eBay Choose To Buy Skype

The main reason behind eBay’s purchase of Skype was to increase its customer base for voice-over-internet protocol services, in addition to eBay’s current transaction fees. EBay was founded in 1995. It pioneers communities sustained by trust and built on commerce. With its array of websites, eBay enables e-commerce on international, national and local bases. With the use of PayPal, eBay Marketplace, shopping.com, and rent.com, eBay brings 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 to create an extraordinarily powerful environment for business over the Internet in order for eBay to improve communication over the Internet.

What did eBay think it would gain from this purchase?

With the acquisition of Skype, eBay 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 added 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, the 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 the benefit of building a strong relationship with the buyers that will ultimately help them to have more and more buyers. According to the top officials of eBay, the main purpose of eBay was not only to transform itself into a phone company but also to emphasise the importance of communication to the core of community and E-commerce, which is why Skype was the best option available for creating an extraordinarily powerful environment for business over the internet. By considering this acquisition as a business opportunity, Skype could increase the velocity of trade on eBay by adding a voice bargaining option (Collier, 2016).

How did eBay go about making the decision?

The early fall of 2005 was full of speculation about the future of the biggest giants of the internet industry, such as 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 could target their markets of potential customers. The acquisition made by Yahoo for the purchase of Dial pad and the introduction of Google Talk by Google shows their concern for a market extension. Soon after these developments, E-bay announced the purchase of Skype for $4 billion. Although E-bay has been successful in integrating new businesses like PayPal, many doubt whether this acquisition of a totally different domain will provide better results. The reaction to this acquisition was mixed. Soon after the acquisition, the price of E bay fell by 4% (Vitzthum et al., 2009). In the acquisition phase, E bay acquired all of its outstanding shares ofSkypee for approximately $2.6 billion. Shareholders of Skype were provided with the option to get all the cash in exchange for their shares at once or with the passage of time.

Works Cited

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.

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