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Where eBay-Skype went wrong

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Kai Ryssdal: EBay got out of the phone business today. Why exactly an online auction site was in the Internet phone game in the first place is an excellent question. Our senior business correspondent Bob Moon has more on eBay unloading part of its stake in Skype for around $2 billion.


BOB MOON: There was plenty of head scratching from the moment the deal was announced back in 2005. At the time, a company spokesman hailed it as the creation of 'an unparalleled engine for e-commerce and communications around the world.' But customers, literally, never made the connection.

Analyst Sucharita Mulpuru follows the online auction and marketing site for Forrester Research.

SUCHARITA MULPURU: The consumers that were using Skype weren't necessarily using it to complete purchases and transactions on eBay, and the eBay transaction volume didn't materially change as a result of Skype. I mean, Skype for the most part exists for people who are trying to avoid making landline phone calls. I mean, when you're using it for that purpose, you're not going to then go and buy a product on eBay.

EBay execs say Skype will do better as a standalone company. But some analysts say the bigger worry for eBay is focusing on its core business.

Colin Sebastian is an analyst for Lazard Capital Markets. He says Amazon, Google and other online marketing giants have been steadily chipping away at eBay's dominance.

COLIN SEBASTIAN: Their marketplace was decelerating even before the economy started to move downhill. They have been retrenching, to make it more attractive for buyers and sellers. But I'd say that's a work in progress. And how it's connected to Skype is that this allows management not to be distracted by Skype, and to focus full time on the marketplace and PayPal.

That online payment system turned out to be a much better fit for eBay. And investors may yet see an upside from the Skype deal. Sebastian points out eBay is holding on to a minority stake, and could see a payoff if Skype keeps growing.

In Los Angeles, I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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