

EBay's $4 Billion Lesson in the Value of Hype - dpapathanasiou
http://bits.blogs.nytimes.com/2007/10/01/ebays-4-billion-lesson-in-the-value-of-hype/index.html?hp

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dpapathanasiou
Lessons learned, according to the article:

 _1\. Just because a company has a huge and growing audience doesn't mean it
can find a huge revenue source_

 _2\. It's almost impossible to pay for a deal through "synergies"_

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davidw
> 1\. Just because a company has a huge and growing audience doesn't mean it
> can find a huge revenue source

How does this fit in with "make something people want". I don't think it
invalidates it, maybe it just means "make it, then sell it in the hopes that
someone else can find a way to make money from it"?

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cstejerean
Well, make something people want first and find a revenue source later works
just fine. It's not that Skype didn't find a way to make money and became a
failure despite of it's uesr base. The problem is simply that Ebay paid way
more than Skype was worth. $90 million in annual revenues is a decent amount
of money and at a lower price it would have been a good investment.

~~~
dpapathanasiou
_The problem is simply that Ebay paid way more than Skype was worth. $90
million in annual revenues is a decent amount of money._

Right, Skype would have been a great deal at a lower price.

But it's a case study that might give future acquirers of other startups
pause, as the last paragraph suggests:

 _"Here's a suggestion to every Internet executive: take a Post-It note, write
'EBay wasted $3 billion on Skype' and stick it to your monitor. Stare at it
the next time some hot social whatever-2.0 company comes by and talks about
growing fast and finding a revenue model later."_

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aston
An interesting point raised in the comments there is that it's hard to peg the
actual value of a product that's coming at a problem in a totally new way.
Skype is by far the leader in its approach, and if in the future the entire
world moves away from landline phone they'll be well positioned to maybe even
kill Ma Bell II with their really robust VOIP technology. Plus, with $90m in
annual revenue, they're making a ton more than the nearest company with a web
2.0 logo (unless you count guaranteed payoffs from the likes of Microsoft and
Google).

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ntoshev
Hmmm, the "lessons learned" are far from obvious for me. What were the
performance criteria for Skype? Were they realistic, were they _meant_ to be
realistic? Without the details it just looks like accounting trickery.

