Let’s say you need to unload a promising-yet-way-overestimated tech company you bought for $2.6 billion in 2005 dollars. Where do you turn — eBay? What if listing a “Buy it Now” price isn’t an option? What if you are eBay?
The New York Times has some bubble-bursting hindsight on the broader effect of eBay’s soured Skype acquisition.
Skype earned $90 million during the second quarter of 2007, far below eBay’s projections. EBay said in a regulatory filing that the charge was “the result of the updated long-term financial outlook for Skype.”
The Skype deal helped to initiate a renewed acquisition frenzy in the online world, and a return to what some call a bubble mentality. After the spectacular dot-com flameout seven years ago, Internet executives pledged to begin judging technology companies by revenue rather than by something as ephemeral as “eyeballs,” or traffic on a Web site.
But somewhere along the line, the high-tech industry reverted to its old form.
“We are almost going back to year 2000 types of errors,” said Aaron Kessler, a senior Internet analyst at Piper Jaffray. Internet companies “are buying users instead of revenue and profitability. That’s what eBay did for Skype. They saw a great asset with tons of users but no clear monetization path.”
How bad’s the bleeding? Ebay says it’s $1 billion-bad. Silicon Ally Insider‘s Henry Blodget says it’s probably $1.4 billion-bad. And, on The Next Big Thing blog, Don Dodge even adds Skype to his list of “Worst Billion Dollar Acquisitions of All Time”. Says Dodge:
I wrote a post “The 10 Worst Billion Dollar Internet Acquisitions of All Time” Skype didn’t make the list at the time because it was too early to tell. Not anymore. It takes a spot very high up on the list. AOL, Lycos, and Excite are still the clear leaders in this dubious category.
If you’re reading this, eBay, we may not be able to provide much comfort — but here are some tips for selling “it” on eBay.*
[*Please Note: The term "it" may not apply to "IT".]