Network Effect

The SKYpe Is Not Falling

Hey, nice to see someone that gets it. This thing is a gold mine. I believe Skype is at that inflection point in a network where it takes off - base of the hockey stick type stuff. It's happening to Facebook right now too. At some point, and it's hard to pinpoint exactly when it happens, the network effect kicks into overdrive and the network takes off like a rocket. Happened at eBay, PayPal, Msft, etc And now it's happening to Skype. This thing is going to take off in 2009-2010. If eBay sells it, it will be one of the biggest blunders in the company's history.

Will eBay Spin Off PayPal and Skype?

Paypal is the golden egg. Why would they spin this off?

Microsoft and eBay Team Up: Desperate or Brilliant?

eBay is becoming / building a search engine. Sellers/advertisers will someday be charged click through fees rather than listing fees or FV Fees and eBay will potentially increase its PayPal cut a little bit to make up for the difference. They will also split up auction listings from fixed price listings somehow and the "new eBay" will be seperated from the "old eBay" to allow the "old eBay" to thrive again. eBay (and its stock) will rise again, it just may take a while. These things that they are doing are starting to work, and they are starting to actually repair the damage that has been done so that many will be able to succeed again. The whole key to eBay is that many can succeed, not how many sales they can produce for a small number of sellers. And I think they are starting to realize this.

The Skype's the Limit

completely agree. skype is as big an opportunity out there as anything today. the problem is not what the possibilities are for this business model - it's the execution on those opportunities. skype could have won what apple is going to win with the app store. but now it's probably too late for skype to win that game. and if they don't watch out, Apple will continue to take away the opportunities one by one. but if they right the ship, and start executing on even just a few of the really big opportunities that are still untapped, it will be worth quite a bit more than they paid for it. but if ends up just being a service where they generate revenue from phone calls, it may still be successful, but it won't be anywhere close to what it could be.

eBay Is a Losing Bid - Barron's

Something tells me Marty knows what he is talking about from experience. He nailed it - the problem is the team. They don't understand eBay. The are doing all the things that eBay's competitors used to do in the early days of eBay (latest example is the Buy.com deal - absolute insanity for anyone who knows anything about marketplace economics). All those competitors failed doing those types of deals, and eBay is failing now as well. At some point, they will stem the losses, but it will never successfully turn around until they reinvigorate a culture of innovation inside the company and get a more entrepreneurial leader rather than an consultant. eBay is more Silicon Valley, and less Proctor & Gamble. They have to re-engage the communities in a face-to-face conversation again. Re-humanize the company, and people will eventually believe again. eBay's reputation is pretty badly beaten, and some people will never come back no matter what. However, this ship can be turned around. They just need the right people, and right strategies to do it. If they keep signing deals with the Buy.com's of the world, however, they will never come back.

eBay: The Next 4 Months

Everyone keeps talking about eBay spinning off PayPal & Skype - these are their best businesses and the future of the company. Why would they spin them off? Although I agree with your assessment of management. It doesn't appear they understand the vision of the company and its potential.

eBay: Sum of the Parts

It's a lost cause buddy. No matter how great eBay's business is, Wall Street hates the stock. I couldn't agree with you more. They have three of the best business models in the world, and put together, I would put it up against anyones (business model that is). But execution is unfortunately a factor. There is no culture of innovation inside the company. It is drowing in its own bureaucracy. Regardless, even if it wasn't, Wall Street just doesn't like the stock, and they haven't for 3-4 years. Ever since the decline from $60, Wall Street beats down the stock every time it gets any traction. Not exactly sure why, but it is what it is. Unfortunately, Wall Street buys stocks, not businesses these days. And they treat the stock like a piece of junk, so that's where it stays. The business, however, is one of the best out there.

Blodget Thinks eBay Looks Cheap; We Disagree

You should see what their valuation is in their model when you use a discount rate of 90% and a terminal growth value of -35%. You should definitely short the stock!

eBay is one of those companies where it's an unbelievable business but the street just doesn't like the stock so they find ways to say that the story is not good. But at some point, their P/E ratio is going to drop to insane levels and people will start to buy it again. Once Wall Street owns this stock, it will rise again because they will make money when it does. But until it gets to that point, the street will find reasons to knock it down.

That said, eBay needs to reignite a culture of innovation inside the company if it ever wants to be a darling of wall street again. They also need to buy back a bunch of stock so they can move the needle in larger amounts. When eBay beats by $0.02, it's the same as when Google beats by $0.20. When Google beats by $0.20, the stock goes up $100, but if eBay beats by $0.02, they sell it off. It doesn't make any sense to me, but that's the point with stocks. It doesn't matter if eBay had the greatest numbers of any company in the world, if the people with the most amount of money don't want the stock to go up, it wont, no matter how good they do.

Could eBay Be a Microsoft Takeover Target?

@ Deep Value - the value of Microsoft technology does not lie in the technology itself. it lies in the network around it. Microsoft has had inferior technology for years, but everyone continues to use it because everyone continues to use it. i realize that there may be free technology and better technology out there, but this has nothing to do with Microsoft's stranglehold on its market. It has to do with the network effect and it is almost impossible to unravel. Additionally, regarding eBay's eyeballs, I think you have been misinformed - there are more searches are done on eBay every day than on Google. And everyone searching on eBay is actually thinking about buying something so the value of their customer base is far greater than the value of a search engine's customer base. Additionally, most "customers" who use search engines are not actually customers of the search engine. Search engines are open networks which many believe is superior. however, I disagree. I think the walled garden will prevail in this race because processing transactions is a far superior business model to generating leads. This is why Google is trying to do things like Google Wallet and Google Base. They are trying to process transactions rather than generate leads because the vast majority of people who went and sold on Google are starting to go away because 90% of all clicks are on the top two spots. So, if you are not one of those two spots, it has minimal value to any individual merchant. So, as a result, they are all starting to go away. Ask any search engine marketer about it and they will tell you it is getting harder and harder to get clicks out of Google because they are all going to a smaller and smaller % of the merchant base.

Microsoft buying eBay never made sense before because eBay had a culture of innovation inside the company and Microsoft would have killed it. However, that culture of innovation is gone at eBay, and therefore an acquisition by Microsoft makes a lot of sense now. I just don't think the gov't would allow it.

Buy.com Partnership: A Bump in eBay's 'Level Playing Field'

who's running this company these days? this wreaks of everything that eBay does not stand for.

eBay's Revenue Diversification Increasing

Finally, why has it taken people forever to realize this? Everyone has been focusing on the US Marketplaces business and that has not been the main revenue or profit driver for a while. It's already second behind International. Soon, it will be third behind PayPal, both of which are growing at a faster pace than the overall pie so growth will start to accelerate. And when Skype kicks in, watch out. This will probably take a couple years though, but soon Skype will pass US Marketplaces as well. US Marketplaces can't possibly compete with these three businesses because it is confined to US eCommerce. PayPal, Skype, and International all have a Global applicable market so they will all dwarf the impact that US Marketplace revenues has on eBay over the long run. HOWEVER, for some reason, the Street will continue to focus on this smaller and smaller portion of eBay's revenue stream because the stock is out of favor. However, at some point, the value players will like this stock because the P/E is going through the floor. And once growth starts to accelerate because PayPal and International are a more and more dominant piece of the pie, the momentum guys will get back on the train and the stock will go through $100. But who knows when this will happen. The street has had blinders on with this stock forever. They just don't like it so they choose to ignore these huge growth prospects inside the company and have stayed in the rut that they have been in with the US Marketplace focus. But at some point, it won't be possible to ignore it. The whole question is when will that happen. If you are a long term investor, I would load up. If you are a trader, proceed at your own peril. This stock has disappointed quarter after quarter, despite blow out numbers quarter after quarter.

Memo to eBay: Just Sell Skype Already

if you haven't yet realized the value of skype, you will someday. it's a digital delivery ecosystem, whether its voice, video, file sharing, etc. And it's the fastest growing customer base in the history of the Internet. why do SuperBowl ads cost $2M? because everyone's watching. what do you think advertisers would pay for placement in front of the fastest growing customer base on the Internet - one that is currently at 200M+ and still growing? One that is owned by a company that also owns the largest and fastest growing online payment ecosystem? And they also own the largest ecommerce ecosystem as well. If eBay sells Skype, it will be the biggest mistake they ever make. The revenue applications are enormous, and they are compounded by the fact that eBay also has the marketplace business and PayPal. With Skype, eBay will win Web 2.0. If they sell it, they will eventually loose, and may even loose grip over their payment and commerce ecosystems someday.

eBay Watch: Q1 Predictions for PayPal and Skype

people seem to finally be realizing the power of PayPal and Skype. some day eBay's stock is going up like a rocket again.

eBay Watch: eBay's New Fees' Success, Skype on iPhone?

I think the Skype - iPhone relationship is a huge opportunity for both companies - potentially the largest opportunity. I hope they don't pass it up.

Is Donahoe Trying to Destroy eBay?

the problem with ebay is execution. it has the largest opportunity out there today in my opinion, but it doesn't have the right team. too much bureaucracy weighing that company down. needs to get entrepreneurial again - bring back Pierre!!!