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JOHN JULIUS SVIOKLA

eBay Sells Skype – should Facebook have bought them?

At $2.75 billion and 405 million users, Silver Lake Partners, Andreessen and company are paying $6.79 per registered user, and a little over five times 2008 revenue of $511 million. Skype had grown by 44% in 2008. Cheap or dear?


My guess is that the buyers got a good deal because human voice is the most fundamental and global average revenue per user (ARPU) used to be in the range of $50-80, so Skype is paying about 1/10th the ARPU for the registered user. So what? Well, given that the phone and data over the phone is unquestionably the fastest growing part of the consumer electronics market, and will be so for the foreseeable future, it seems to me the investors are buying a cheap option on the most disruptive, and fastest growing part of the entire telecommunications market. Communications is the killer app of almost every technology - from telegraphy to email!


Furthermore, because Skype terminates on phones - and people are accustom to paying for phone calls - especially international ones, and due to the fact that international phone call pricing is a still a ridiculous patchwork of usually outrageous tariffs, Skype will continue to grow not only because of lower costs - but also due to simpler pricing.


If you think of Skype more abstractly, they are a company with a great peer to peer infrastructure, a robust database of people and their communication devices, and a global footprint. In addition to voice, they are already sending video. They can be the first global multi-media, person to person communications, and file sharing company. That's worth at least $6.79 per user. From this point of view, perhaps Facebook should have bought them because the phone revenue could be the razor blade to fill the giant social razor that Facebook has built.

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