There are great lessons to be learned from a quick study of "Hyping Skype". Over two years, Skype went from releasing a beta product to a successful billion dollar sale. I've put together two quick charts on a rough timeline to share Skype PR releases and some of the lessons learned and gathered along the way. It's a much bigger story than just a couple of PPT's.

I've lived through these lessons and been part of them in many ways. I blogged Skype from the beginning. Over the next few days I plan on sharing a few of the lessons. In the end, the Skype community has been pivotal in determining Skype's direction and creating a momentum far beyond it's size. We are at a very clear inflection point for Skype. Will the momentum continue? Will the elements that made them so successful in Year One and Year Two translate effectively to an eBay managed world?

Year One.

Year Two.

Skype released a major version of their software for Windows today, Version: 1.4.0.71. Download. Big features for users:

• Call forwarding
  
• Accessibility improvements to the contact list
  
• 26 new or updated language files (Swedish, Finnish, Danish, Norwegian, German, Dutch, French, Italian, Portuguese Brazilian, Hebrew, Russian, Polish, Spanish, Estonian, Japanese, Greek, Chinese Traditional, Chinese Simplified, Korean, Romanian, Turkish, Arabic, Korean, Hungarian, Bulgarian, Czech)
  

• API: data channel
  
• API: write to profile
  
• API: call forwarding controls
  
• API: expressive content (ringtones, avatars)
  

28.09.2005 version 1.4.0.71

* feature: Call Forwarding
* feature: Skype Test Call Service prepopulated to Contact List for new users
* feature: 21 new emoticons
* feature: My Pictures: possibility to choose pictures from Expressive Content
* feature: RingToneManager for Expressive Content of audio files
* feature: Contact List accessible by Microsoft Active Accessibility
* feature: API: application-to-application communication
* feature: API notifications for contactlist selection and focus
* feature: API: set profile information
* feature: API: call forwarding via API
* feature: API: support expressive content files SET RINGTONE and AVATAR
* feature: API: added OPEN [PROFILE | USERINFO | CONFERENCE | SEARCH | OPTIONS | CALLHISTORY | CONTACTS | DIALPAD | SENDCONTACTS | IMPORTCONTACTS | BLOCKEDUSERS | GETTINGSTARTED | AUTHORIZATION ] commands
* feature: multilingual EULA
* feature: advanced Skype links
* feature: number of friends displayed in Profile View form
* feature: possibility to set connecting sound from Options
* feature: added dynamic messages for help and tips
* feature: possibility to select and copy profile fields
* change: new layout for Getting Started Wizard
* change: Search window redesigned
* change: Add friend window redesigned
* Change: Import Contacts redesigned
* change: quicksearch on addressbar improved
* change: improved call related error messagas
* change: 'minimize' button minimizes Skype to taskbar
* change: warning dialaog added when calling to SkypeOut using callto: links
* change: option to disable authorization message popups
* change: MSN contact importer removed from Import Contacts
* change: upgrade prompt supressed if installer is launched with SILENT or VERYSILENT option
* change: removed latin spanish language
* change: option to view online release notes after installation removed
* change: option to create a Quick Launch icon removed from installer
* change: explanatory text in Profile View if user has not been online recently
* change: month names in Profile are translatable
* change: options dialog is changed to nonmodal
* change: Send Authorization dialog is changed to nonmodal
* change: main window minimum size changed
* change: new language files - Swedish (Anders Olsson), Finnish (Heino Keränen), Danish (Mathias Schwarz), Norwegian (Stig Auestad), German (Claudius Henrichs & Dick Schiferli), Dutch (Kees Koenders), French (Fabrice Imperial), Italian (Conte Daniele), Portuguese Brazilian(Anna Nyström ), Hebrew (Ronen Ben-Naftali), Russian (Viktoria Randalainen/Tatjana Kruti), Polish (Ewa Czekalska/Karol Szastok), Spanish - (David Reche), Estonian (Eve Loopere), Japanese (Tomo Suzumaru(Livedoor)/Mayu Shimizu), Greek (Panagiotis Sidiropoulos/Magenta LTD), Chinese Traditional (Morden Chen/PChome Online), Chinese Simplified (Leon Yang/TOM Online), Korean - (Daum Communications Corp), Romanian - (Paraschiv Ion & co), Turkish (Emin Dede) Arabic, Korean (Eriksen Translations Inc), Hungarian (Mark Bender), Bulgarian (Nikolina Filipova, Nikolay Filipov) Czech (Petr Silon)
* bugfix: shortcut to desktop - dropped always, despite preferences
* bugfix: changed sound channel usage,therefore improving the stability on older operating systems
* bugfix: improved Multi Chat behaviour on multiple monitors
* bugfix: authrequests do not pop up if your status is Do Not Disturb
* bugfix: optimized loading of user-language file
* bugfix: optimizations to have faster log-in
* bugfix: improved unicode handling on win98
* bugfix: status was incorrect in chat titlebar when disconnected
* bugfix: improved URL parsing in chat
* bugfix: addressbar search updated when new contact added
* bugfix: 'start skype when windows starts' option will revert to default
* bugfix: 'Enable All Sounds' option missed one checkbox in Options dialog
* bugfix: wrong folder created to Documents and Settings when changing avatar
* bugfix: toolbar texts not visible on clean install
* bugfix: improved error handling when selected sound file is too big
* bugfix: keybaord navigation in language editor
* bugfix: Ctrl+F in chat window shows non-active main window
* bugfix: toolbar buttons were not updated on some cases
* bugfix: API: Error is returned if OPEN ADDAFRIEND command has too many parameters
* bugfix: API: Using query id messed up replies to NAME and OPEN FILETRANSFER commands
* bugfix: API: During voicemail recording SEARCH ACTIVECALLS returned call id
* bugfix: API: When offline user tried to make a call with query id, error was returned without query id
* bugfix: API: Contactlist change notifications were sent when focused contact actually did not change
* bugfix: API: Other API messages were sent before “attach success” message

SKYPE EXTENDS LEADERSHIP POSITION WITH NEW MUST-HAVE RELEASE

New Features Encourage Callers to Upgrade to Move Beyond the PC,
Be More Sociable and Express Themselves in More Ways

(Luxembourg 29 September 2005) - Skype, the Global Internet Communications pioneer which makes it possible for anyone to make free, high-quality phone calls via the Internet to anyone worldwide, today extends its leadership position as the most innovative and fastest-growing Internet communications offering with the release of the latest version of its award-winning software. This announcement is significant both for Skype's existing callers who can now upgrade to new and powerful features and also for people new to Skype who can experience an even simpler way to start making phone calls for free.

The new Skype for Windows offers callers everything one would expect from an Internet phone and more, including increased mobility options, new ways for callers to personalise Skype with original ringtones, sounds and pictures, better than ever sound quality, as well as more ways to be sociable by making it easy to find and connect to their friends, family and colleagues online.

"Skype pioneered free Internet phone calls, and even with more than 56 million people already registered, we've recently seen our growth accelerate to over 170,000 new registrations a day," said Niklas Zennström, CEO and Co-founder of Skype. "We are passionate about really understanding what motivates people want to make Internet communications a part of their everyday lives, and listening to our callers about what they want from Skype allows us to stay ahead of the game. Today, we are thrilled to be delivering on this promise by offering a new version of Skype which both new and existing callers will find adds powerful and innovative new features like call forwarding and personalisation, as well as offering our best ever sound quality on our simplest product to install and use."

Skype recently embarked on a comprehensive global survey to deepen an understanding of how Internet communications is used by people around the world and what they expect from next-generation personal communications services. According to the independent study, Skype is used once or several times a day by 76% of its callers, far surpassing the usage levels of traditional IM-based voice calling services. Callers also recognized Skype's leadership in sound quality - 72% of Skype users consider call quality to be good to excellent. Skype callers are more international, with 85% communicating with people living abroad. Skype's broad base of early adopters are eager to embrace new features, with 79% interested or very interested in receiving calls from landlines, and 73% interested or very interested in adopting call forwarding, key innovations unique to Skype.

The new Skype for Windows Version 1.4, which was first available in beta in August, incorporates two new premium services requested by Skype callers, and fortifies Skype's role as a preferred complement to ordinary cell phones and landlines. It builds on Skype's already extensive product offering which allows people to instant message, set up group chats, make conference calls, transfer files, send and receive voicemails, call and be called from a traditional phone system, and access Skype over Wi-Fi for extremely low rates.

Skype's new Call Forwarding service will allow callers to forward incoming Skype calls to another Skype Name or up to three landline or mobile numbers when they're away from Skype, at no cost to the caller. Anyone using Skype may forward their calls to another Skype Name free of charge, or forward to traditional phone numbers at low SkypeOut rates. 83% of beta testers who have tried Call Forwarding have found it easy to use.

Skype's new Personalise Skype features also allow callers to easily express themselves with original pictures, sounds and ringtones for as little as 1 euro ($1.20). This new feature opens up a new and exciting market for content providers looking to deliver great applications to Skype's global callers and is initially offered in partnership with American Greetings, Qpass and Wee World. The global ringtone market is forecast to grow to $5.2 billion in 2006, and ringtones now account for over 10% of the $32.3 billion worldwide music market (Arc Group).

The new version of Skype makes it even easier for callers to extend their social network. It's simple for callers to search Skype's Global Directory, and import personal contacts from Outlook directly into their buddy lists. With the Skype Toolbars, users can make one-click calls to numbers and Skype Names from Internet Explorer and Outlook, adding tremendous value to popular desktop applications. Advanced Skype buttons allow webmasters and bloggers to create links that instantly initiate Skype actions, such as conference calls and chats.

It takes less then 3 minutes for new callers to get started with Skype, even if they are not Internet-savvy. A friendly 'Getting Started Wizard' means it's easy to begin enjoying the cost and quality benefits of the new Skype, available immediately for download at www.skype.com.

Skype Journal begged Skype to share their near term product roadmap with independent developers. Recently they've started to do just that, in private forums for their beta developers, at meetings of their developers' advisory board, and last night at their "Skype Night" for developers meeting at VON Boston. Normal caveats: everything is subject to change, we don't know what the new feature names really mean, and this all comes out for Windows first.

Here is the chart as projected for the audience.

Details from that slide.

The current release is 1.3, so 1.4, now in beta, is coming up in September. It will include better people search, help, expressive content (ring tones and the like) and basic call forwarding. UI and usability improvements: Improved GSW (my neighborhood emergency room uses this term for gunshot wounds), Improved Search, Improved Import Contact Wizard, Web Based Visual Setup Guides, Basic Dynamic Content (?), Login-by-Alias (?)

1.5 adds video (?), client-side web presence, and partner bulids (?) in October.

1.6 is the Novemer 2005 "Community Release." New: Simple Talk (client-side) and talk directories, social networking (?), dynamic content (http), and removing bloat from the client's software libraries.

Release 1.7 will feature "Talks and PIM" in December-January. New features: advanced talks on the client side, editable profiles and enhanced video. UI and usability: UI 2.0 (phase 1) and dynamic content p2p (?). On the web: tools for webmasters and blogs.

Unscheduled items: PTT, user rewards program, offline IM, shared groups, video mail, expressive content (phase 2), and phase 3 importers .

I remember Howard telling me the story of tracking down Skype. I was certainly envious, I learned he had almost a year to work with the lads before I downloaded the first version. Having met Niklas and Howard, it was easy to see how this hidden partnership worked. I've learnt a lot as a result and about how Silicon Valley works. Congratulations Howard! It's quite a story.

Together with his partner (Howard) Hartenbaum, Draper invested about $250,000 into Skype in late 2002. They became the first outside investors, and enjoyed a 5 percent stake. (And while the exact numbers aren't known, they invested when Skype was valued at less than $2 million -- meaning they've seen close to a thousandfold return.) MercuryNews.com | 09/15/2005

So what next Howard? Will the ecosystem get some investments? I'm ready to talk the next big thing!

Where are the best blog entries on eBay and Skype? Well, Alec Saunders has a great collection. Start here with "The Skype Webcast" through to "Roundup: Skype / EBay part deux".

Similarly, by yesterday the larger publications chimed in - informed by the blogworld. Red Herring "Deal Blow to Telcos" and Business week "Why eBay is Buying Skype".

While Richard reports the telco's don't get it, Neville reports on "Communicating the Power of Three"

Ok. stage one of the media blitz is over. There are now developer stories to write. Tips for eBayers new to Skype, new strategies for telecoms and the VoIP industry, and even Skype eBay PayPal.

James Enck pointed yesterday to a Morgan Stanley luncheon session for eBay Skype. You can listen to it here. The professionalism and understanding of Meg Whitman and Rajiv Dutta shine through this briefing. I can sense Meg's "marketing nous" and interest while Rajiv would appear to have been the detailed point man all the way through.

Two main underlying themes:
1) New ways to monetise ecommerce. Not just a transaction model. eBay with Skype create a lead generation opportunity in pay per call.

2) Reduces friction. Earliest friction was trust and safety. second was description and the need a picture. Payments before PayPal another friction. Shipping now enhanced so you can download postage etc handling reduction.

Two weeks ago, I explained how Google needed Skype to move Google up the value chain from when an advert is clicked. I noted that eBay was Google's real competition for connecting consumers to merchants, and eBay has a structured transaction environment. They don't just do the search, they also help complete the transaction, including payment.

So, a fortnight later, and eBay buys Skype. What does it mean?

Companies like Dell, eBay, Google, etc. got big by thinking big. They picked a unique business model, and drove it to completion without losing focus. To understand this transaction, you need to look for where the big prizes are.

The obvious one is the wrong one. Google and eBay are already in the business of generating sales leads. The Skype community, for all its size and vibrancy, is not being bought because they can be pitched to and turned into eBay users. Or if it is, this story will have a nasty ending where all the heroes get bumped off and the princess just grows old and ugly.

There are two conveniently located stones under which to look: transaction revenue, and the freefone number business.

Banking is big, slow, cartel-like and lacking in innovation. eBay is unbundling part of the transaction chain using Paypal, and re-intermediating the settlement process. Remember that Paypal is largely a virtual payment mechanism, used to front other payment services. Communications services are a natural generator of the small transactions that Paypal thrives on due to its low comission fee structure compared to credit cards. Skype and Paypal also have an international footprint, leaving many parochial banks struggling to offer a competing product. They fit together nicely.

This is classic Innovator's Dilemma stuff. Eat your way up into the big boys' businesses by starting with the small stuff.

So the first big prize is to suck some of the profit out of the banking payments system. This is a big pool, and Skype is just a small straw. That makes the eBay/Skype transaction interesting, but not critically important.

Guess what? Telecom is big, slow, cartel-like and lacking in innovation. And it has some big prizes ready for snatching. Almost all of current retail VoIP plays are abount disintermediating high end-user toll charges. It's a massive race to the bottom, where you get your monthly talk time by cropping three coupons off your Shreddies packet.

There are other puddles of money in telecom, though. One is the 800 number revenue bucket. I don't have the figures to hand, but this isn't a small deal. And because Skype is a child of the "stupid network", it can evolve quickly to integrate new transaction-supporting functionality making the profit pool bigger.

I suspect that eBay's ambition is to become the mediator of 800-number style interactions between consumers and merchants. The www.ebay.com web site is their text distribution channel, and Skype is the audio one. Each will have different sets of merchants, buyers and transaction structures. So don't look for "eBay" functionality to appear in Skype, because they're addressing strategically similar but functionally different needs.

One last thought. If you're a telco, now is a great time to cross your chest and start saying your Hail Marys. Someone with deep pockets is about to give away telephony to support their adjacent transaction business. Browsers are free — as long as enough people tip Bill G., search is free — as long as enough people leave a few cents in Larry, Sergey and Eric's pension plan. And telephony will be free — as long as you click the "pay here" button on your Skype-powered eBay telephony device often enough.

PS - eBay still hideously overpaid given the size of the effort needed to claim the prizes.

I asked my contacts "What does the eBay purchase mean for you and or your company?"

From Taiwan. A manufacturer of Skype hardware. He wouldn’t let me use his name.

"Actually, our eBay experience is terrible. I truly wish they (Skype) can become better... every email we sent to them is just like throwing a stone to the ocean. That is why I do not see any difference having eBay buy Skype."

From Sweden. Ben Isacsson:

"Yes a very, very new culture will emerge. At least for me. I will stay (with Skype) for a while - but only until I find a non US-owned program."

"To be honest I do not really think that it will impact our business much. We use Skype all the time in our business and love it. I am confident that this move will only mean that the product gets better.

I think that it could involve very interesting revenue generating opportunities for other businesses through the use of papal credit as opposed to Skype credit. I think the incorporation of PayPal is golden.

I am hoping that they don't move it into an exclusively North American thing now however.

I am very excited by the prospect. I listened to the eBay webcast and was very impressed with the eBay people.

"I'm amazed and astounded. It doesn't make any sense at all! I just heard the news and am thinking it thru give me a few minutes....

Well, first off, I guess that marks the end of the Internet ‘crash’ – or the beginning of a whole new bubble. Good news for the Internet industry (that someone would pay 2.6 BN for a company that's not yet turned a profit and only just starting to generate any revenue at all)

I have to say I can’t quite see the logic behind the marriage. Sure they can cross sell into each others' communities, but Skype hasn't exactly experienced problems with customer acquisition (maybe eBay has - I dont know). If this is all about enabling eBay buyers to talk to each other - and generating additional revenue from the voice calls, then:

a) I don’t see why they would buy Skype - why not build their own P2P voice functionality

b) I can see that generating some additional 'net new minutes' - but I don’t know that eBay users need to talk to each other, or how many would pay to do so (to justify that kind of a purchase price)

I might be being shortsighted, but I don’t quite get it. All of eBay's other recent acquisitions have been in the marketplace/ecommerce space – logical. Perhaps eBay were simply feeling left out of the VoIP hype/race with Google, Yahoo, Microsoft etc.

Also, it'll be interesting to see what they do with the brands....2 very powerful brands, but with really quite different brand values."

"Skype has undoubtedly fused with one gigantic community and infrastructure, ready to take on those 'other camps' currently making a lot of noise. If Skype's current partnering model holds up, we see great opportunities in relationship management and all the ideas going around this. This is 10+ in our scale."

"We hope that eBay's acquisition of Skype will mean a timely solution to the issue which all developers of services on Skype face, namely how to bill for services on the Skype network. As the owner of Paypal, Ebay already has expertise in the area of payment systems and has a well-defined eBay API and Paypal API. The next step for Skype/eBay should be to provide a payment API to allow developers to credit or debit a user's SkypeOut account for micropayments. Skype/Ebay would benefit by taking a percentage of each transaction, as Paypal already does.

From the UK. Martin Schoenenberger. Skype User and Swiss Investment Banker.

"Through this acquisition eBay gains a strong foothold in the the rapidly growing VOIP market. By joining the eBay, Paypal and Shopping.com platform, Skype will be able to aggressively expand their user population. The synergies will be enormous."

"A large part of the deal is the promise that Skype will stay independent, just as PayPal has. They got acquired by eBay some years ago but they're still operating fairly independently, joining forces with eBay at places where it's good for users, just as Skype will do. (Quote from Skype Forum: )

In your mind, is the eBay acquisition of Skype a good thing?

• Yes - 29% (8)
• No - 70% (19)
• I don't care - 0% (0)

Despite the negative poll numbers, most see it as an opportunity.

Many questions are answered in this eBay financial disclosure (pdf download). For an overview of the purchase visit this eBay investor relations page.

So eBay buys Skype. Who cares? I do. The road for the next year will be tough as cultures merge and evolve, but the end result will likely be very positive, as many developers above indicated. Skype will likely get the resources it needs to compete.

This is a shock. It touches all us Skypers. It appears end users are worried about the change; but most business people are embracing the opportunity.

Deal done. Retail VOIP in the offing? Views later.

eBay has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration.

Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.

Full text of news release...

On Skype.com:

eBay to Acquire Skype

London, September 12, 2005 – eBay Inc. (Nasdaq: EBAY; www.ebay.com) has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration. The acquisition will strengthen eBay’s global marketplace and payments platform, while opening several new lines of business and creating significant new monetization opportunities for the company. The deal also represents a major opportunity for Skype to advance its leadership in Internet voice communications and offer people worldwide new ways to communicate in a global online era. Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world.

“Communications is at the heart of ecommerce and community,” said Meg Whitman, President and Chief Executive Officer of eBay. “By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net.”

Founded in 2002 by Niklas Zennström and Janus Friis, Skype offers high-quality voice communications to anyone with an Internet connection anywhere in the world. The Skype software is easy to download and install, and enables free calls between Skype users online. Skype’s premium services provide low-cost connectivity to traditional fixed and mobile telephones. Skype’s software also offers a robust set of features, including voicemail, instant messaging, call forwarding and conference calling. Upcoming product innovations include Skype video, expressive content such as avatars, and customized toolbars for Outlook and Internet Explorer.

One of the fastest growing companies on the Internet, Skype already has 54 million members in 225 countries and territories. Skype is currently adding approximately 150,000 users a day and has created a thriving ecosystem of products, services, developers, and affiliates. Skype is considered the market leader in virtually all countries in which it does business. In North America alone, Skype has more users and serves more voice minutes than any other Internet voice communications provider.

“Our vision for Skype has always been to build the world’s largest communications business and revolutionize the ease with which people can communicate through the Internet,” said Niklas Zennström, Skype CEO and co-founder. “We can’t think of any better platform to fulfill this vision to become the voice of the Internet than with eBay and PayPal.”

“We’re great admirers of how eBay and PayPal have simplified global ecommerce and payments,” said Janus Friis, Skype co-founder and senior vice president, strategy. “Together we feel we can really change the way that people communicate, shop and do business online.”

Zennström and Friis will remain in their current positions. Zennström will report to eBay CEO Whitman and join eBay’s senior executive team.

A Powerful Ecommerce and Communications Engine

Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.

The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate. eBay’s other shopping websites — Shopping.com, Rent.com, Marktplaats.nl and Kijiji – can also benefit from the integration of Skype.

PayPal and Skype also make a powerful combination. For example, a PayPal wallet associated with each Skype account could make it much easier for users to pay for Skype fee-based services, adding to the number of PayPal accounts and increasing payment volume.

In addition, Skype can help expand the eBay and PayPal global footprint by providing buyers and sellers in emerging ecommerce markets, such as China, India, and Russia, with a more personal way to communicate online. And consumers in markets where eBay currently has a limited presence, such as Japan and Scandinavia, can learn about eBay and PayPal through Skype. Skype can also help streamline cross-border trading and communications.

With its rapidly expanding network of users, the Skype business complements the eBay and PayPal platforms. Each business is self-reinforcing, organically bringing greater returns with each new user or transaction. The three services can also reinforce and accelerate the growth of one another, thereby increasing the value of the combined businesses. Working together, they can create an unparalleled engine for ecommerce and communications around the world.

Transaction and Financial Information

eBay will acquire all of the outstanding shares of privately-held Skype for a total up-front consideration of approximately €2.1 billion, or approximately $2.6 billion, which is comprised of $1.3 billion in cash and the value of 32.4 million shares of eBay stock, which are subject to certain restrictions on resale.

The maximum amount potentially payable under the performance-based earn-out is approximately €1.2 billion, or approximately $1.5 billion, and would be payable in cash or eBay stock, at eBay’s discretion, with an expected payment date in 2008 or 2009. Skype shareholders were offered the choice between several consideration options for their shares. Shareholders representing approximately 40% of the Skype shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Shareholders representing the remaining 60% of the Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close plus potential future earn-out payments which are based on performance-based goals for active users, gross profit and revenue.

The above-mentioned dollar and eBay share amounts are approximate, based on the Euro-Dollar exchange rate and eBay’s stock price as of September 9, 2005. The final value of the stock component of the consideration may vary significantly from this estimate based on the value of eBay stock at closing.

Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.
About eBay Inc.

Founded in 1995, eBay pioneers communities built on commerce, sustained by trust, and inspired by opportunity. eBay enables ecommerce on a local, national and international basis with an array of websites – including the eBay Marketplace, PayPal, Kijiji, Rent.com and Shopping.com – that bring together millions of buyers and sellers every day.

About Skype Technologies SA

Skype, the Global Internet Communications Company™, allows people everywhere to make free, unlimited, superior quality voice calls via its award-winning innovative peer-to-peer software for Windows, Linux, Mac OS X, and Pocket PC platforms. Skype is available in 27 languages and is the fastest growing voice communications offering worldwide. Since its launch in August 2003, Skype has been downloaded more than 163 million times in 225 countries and territories. Fifty-four million people are registered to use Skype’s free services, with over 3 million simultaneous users on the network at any one time. Skype Technologies SA is headquartered in Luxembourg and is growing its offices in London and Estonia.

Forward-Looking Statements

This announcement contains forward-looking statements regarding Skype and the expected impact of the acquisition of Skype on eBay’s financial results. Those statements involve risks and uncertainties, and actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the timing of the closing of the transaction, the possibility that the transaction may not close, the reaction of the users of Skype’s services, the future growth of Skype’s user base and public acceptance of Internet voice communication services, rapid technological changes in the Internet voice communications sector, the reaction of competitors to the transaction, global developments in the regulation of Internet voice communication services including those provided by Skype, the possibility that integration of Skype’s offerings following the transaction may be more difficult than expected, and the possibility that entry by Skype and eBay into potential new lines of business will not be successful. More information about potential factors which could affect eBay’s business and financial results is included in eBay’s Annual Report on Form 10-K for the year ended December 31, 2004, the company’s Quarterly Reports on Form 10-Q, and current reports on Form 8-K. All forward-looking statements are based on information available to eBay on the date hereof, and eBay assumes no obligation to update such statements.

The eBay announcement:

***A New Way to Communicate***

I’m excited to let you know that eBay plans to acquire Skype, the leader in online voice communications.

Skype has set a new standard in online voice communications with
outstanding sound quality and unmatched ease of use. And like eBay,
Skype has a fast-growing community -- some 54 million Skype users
around the world already use their PCs to talk with one another.

And best of all, conversations between Skype users via PC are free. You
can get up and running on Skype in just a few minutes. Just go to http://www.skype.com/go/x.home to learn more and download the free Skype software application. Try it – it’s fun!

Over time, we intend to make voice communications a part of the eBay
marketplace – a huge step forward in making transactions faster and
easier, as well as bringing even more interactivity and humanity to the
eBay Community.

You can include your Skype ID in your About Me page. For now, however,
Skype links may not appear in View Item pages. We’ll be working with
you, our Community, over the next few weeks to thoughtfully work out
the details of how eBay and Skype will interact, including any policy
changes that may be required.

We expect this acquisition to be finalized soon. In the meantime, you can learn more about our Skype plans in the news release we issued just a few minutes ago.

Working together, eBay, PayPal and Skype will redefine online trade and
community. I hope you’ll join us in this exciting new chapter in eBay’s
history.

Sincerely,

Meg

I have my tickets for VON Boston. Skype Journal will have three of our tribe there. Stuart Henshall (accumulating Tallinn-California-Tallinn-Boston jet lag), Martin Geddes (winding up his North American tour), and myself. Tuesday we're going to most of the keynotes, including Skype's CEO, live, but not in person. There's a blogger dinner Tuesday night. Wednesday is our meet and greet day; we're blocking in 19 minutes here and there to visit with our favorite people. Are you one of our favorite people? One of our rabid fans and stalkers? Would you like to tell us about your Skype strategy? Or asks us for all kinds of inside secrets? Just Skype Patti, our calendar maven, for a time that'll work. We're ducking into the exhibitor lunch on Wednesday so you may see us there or as we actually catch up with people and check out the exhibition on Thursday morning. Flying home Thursday night.

Skype released an update on Wednesday to Skype for Mac OS X.

In this release:

• Chat limit raised to 50 people at the same time
• Drag and drop contacts to add them to chats and calls
• "Events" pane shows missed calls, chats, voice mails. Also shows SkypeOut minutes left.
• Animated emoticons
• Notifications with Growl
• "Do Not Disturb" mode blocks new incoming chats
• Screensaver changes your status to "Away"
• option to show online contacts only, hiding all your other contacts
• return values for Skype API AppleScript interface
• tooltips in contact list
• unread chats count
• use Safari's download folder for incoming file transfers as the default location
• bookmarked chats now sorted alphabetically [this loses chronological information, so may not be an improvement]
• you can now associate up to three e-mail addresses with your account (enter them in the "Edit Profile" window)

Bolded items are Mac-specific.

7.2 MB. Version: 1.3.0.67. Release date: September 10, 2005. No change log, so no specifics on what's changed.

The Ebay rumors are hilarious. Nobody can verify or confirm anything. Not even vague denials from any of the parties. Who benefits from the leak? Skype's VCs pushing valuation buzz and Skype's bizdev team, both to better arm-twist partners.

Everything Skype can offer eBay or its subsidiaries (technology, network access, Skypification of its user experience, PayPal currency conversion of Skype Minutes) can be delivered as a service, without an equity entanglement.

And then you get the Skype Voice announcement. Bill Campbell does a fine job skewering the outrageous charges imposed by Skype. Can you imagine paying 30% of a sale to your credit card company? Or to your phone company for letting you hook up your computer to the phone network? That's Skype's program!

But that's not the worst of that deal. It's that Skype's BizDev team is driving for tactical profit but creating a strategic disadvantage. I'm tempted to say they're trying to think like a mobile service provider but Bill says it looks like simple opportunism.

This deal is an innovation killer.

This type of deal, cherry picking three players out of an entire industry, only reinforces Skype as a "walled garden," a private, tightly controlled place with one master. The other way to do it is to set things up so anyone who wants to compete can do so. Publish protocols and specs and some common tools for call termination (SkypeLite, maybe?) and for commerce. Set rates comparable to what credit card processing companies charge for debit transactions; Skype minutes are risk free since all funds are prepaid cash.

By the way, do you understand what Skype Voice companies do? They are middleware. You call a number. Their computer picks up the phone and answers with a recorded message. It creates a user experience for you using a library of prerecorded messages, a little speech recognition, Voice-XML to guide the conversation, and whatever database of content you're sharing. Like calling up for movie times and making it easy to search for the blockbuster playing near you.

Enormously helpful.

And these companies offer the service now, on regular phone lines, on toll free numbers. They make their money by selling their service to companies that want to engage their customers over the phone. Like banks for bank balances. Or a newspaper for delivery problems. Or a shipper for tracking problems. In none of these examples does money change hands. It's just my business process talking to customers in a convenient, narrow, well structured conversation.

They don't pay the phone company extra for the privilege.

Skype's partnership model doesn't allow this. If there's no revenue, nobody gets paid. And Skype must be paid before they let you pick up when a Skype caller rings you.

Skype's model doesn't allow public service implementations. The volunteers who put together KatrinaHelp would love to implement a service like this but will not charge the dispossessed to find a lost child.

And companies that want to plug in their own IVR systems are shut out too.

Like Bill said, it's a mess.

Instead of putting up a new api, protocols, etc. upon which vendors can innovate and add value the way tellme adds value (terminating calls and doing something with it), they are doing custom deals for a handful of players for short term cash, closing out the developer and entrepreneurial ecosystem including dozens of Tellme rivals.

Skype can fix it but, as it stands, the Skype Voice program is one step back.

Today's announcement on Skype Voice Services is quite exciting.

It puts some real positive spin on Skype being a Global Network; not just an application sitting on my desktop. Opening up Skype Credits will bring a smile to Markus Williamson at Connectotel who proposed something like this (download the pdf) 31 July this year.

The key point of today's announcement:

Chargeable services: callers pay per minute from their Skype Credit. You receive a share of the call revenue.

Skype "minutes" becomes currency, money to trade with.

So is Skype adding to its disruptive power against the RIAA record label owners of the world? Publishers who leave artists poor and broken?

Not with a 30 percent transaction charge for Skype. Then Tellme wants 40 percent.

Such a deal.

Niklas Z seems to want Skype to replace the RIAA Label Owners. At these rates content producers can only choose one new evil over an older one. Hey, Niklas, read Courtney Love Does the Math: "Today I want to talk about piracy and music. What is piracy? Piracy is the act of stealing an artist's work without any intention of paying for it. I'm not talking about Napster-type software. I'm talking about major label recording contracts."

Niklas' message, "We challenge the world’s most creative content providers to work with us and our partners at Tellme, Voxeo and Voxpilot to develop these new and exciting forms of Internet voice services."

The world's most creative content producers get to keep the remainders. Lucky us.

Content producers have been screwed by Hollywood, Book Publishers and RIAA Label Owners. Now we can get screwed by Skype. Content producers need a disruptive technology to unseat this tyranny. The dream we had that our saviour would be Skype and Niklas just got shattered.

I just loved this line in the press release:

"Content providers will join Skype's ecosystem of more than 400 Skype developers worldwide who are already offering hardware and software products to Skype's 53 million members."

What wasn't said was how much money these 'more than 400 Skype' developers have been raking in. No question that some hardware people like RTX are creating good revenue streams, but the majority of the 400 plus developers are into software and haven't made a dime. At least Courtenay Love did better than that with the RIAA Label owners.

Here is another great line:

Skype keeps 30% for promoting your service and connecting callers.

Inside the press release we find out what promotion to 53 million members means: "Content providers' voice services will be reviewed and the most popular will be deployed and listed on the Skype website." This is like telling Courtney Love to make her album a run away hit before we bother recording it and marketing it. At least the RIAA Label owners committed hard cash to bribe opps market the recording as it went to market.

Creating Skype Minutes as money is a brilliant move by Skype. It has the possiblities of helping Software developers monetize their efforts and of course creates a whole new set of opportunities for content producers. Especially when Skype Video ships. But I can't say anything good about the economic model Skype and Tellme propose. It is a mess.

TOM Online faces severe competitive and regulatory problems in China per reports compiled by Jirong Zhou. Jirong posted to his Zalbazone blog that TOM Online is not only far last in a three-way race for the Chinese IM market, but that major telecom operators are defending their own VoIP strategies (vaporware?) by blocking Skype.com and SkypeOut in major Chinese cities.

This is another example of telco incumbents aggressively defending their turf. Could Skype have picked a better partner, one with stronger guanxi, one better able to negotiate access to China's major markets and forge more alliances with China's regulators and incumbents? Right now they're walking away from SkypeOut revenue. How long until Chinese users get the same service as Skype users everywhere else?

The full article, including screenshots of the blockage and quotes from Tom.com CEO Wang Leilei follow...

From this post.

Cold Water

For Tom.com, third largest Portal in China
For Skype, world's largest VOIP player
For Tom Skype, their Joint Venture.

Just 3 days after Skype and TOM Online announced an exclusive joint venture (51% TOM Online, 49% Skype), there appeared a negative news on Sina's homepage, China's largest Portal. Telecom Operators are going to block Skype in ShenZheng, Shanghai, Beijing, GuangZhou. Red circled in the up picture.

I found the picture in Tom's Skype forum showing he is unable to login SkypeNet. A journalist from First Financial Daily reported his experience by calling China Telecom Shenzhen branches' 10000 service number. They said:

We detected that he used SkypeOut which is illegal to use. His number is in the black list. He must Guarantee not to use it any more. Or he will get the FINE.

Tom failed to land SkypeOut in June. And the Information Industry Department files that it is illegal to operate VOIP except the 6 Operators in China.

Within one year, TomSkype successfully get a 3.4M user group. It's an amazing rapid speed, however it still looks too slow, compared to Tencent's hundreds of Millions user group. Wang Leilei, Tom.com CEO, said,

"It's impossible to be profitable even if the 3.4M users are all using SkypeOut. So we are not going to seek opportunities to land Skypeout in the near future. The joint company is going to enrich user experiences with TomSkype."

Virtual Operators

Though it's illegal to offer VOIP Service, there are many operators making deals under the surface. Up to now only 263 got a pc to pc VOIP operating license.

Phone to Phone and PC to Phone are settled as basic Telecom service, only the 6 Operators has the legal identity to offer service. All other parties are designated as Virtual Operators. What's their fate?

[Posted by Jirong Zhou 2005-09-08 19:36:22. Mr. Zhou is business development and marketing director for Skype developer The Masters Team, maker of PowerGramo (coming into beta soon).]

Is Sony about to ship new Vaio's with Skype installed? This link to Sonystyle in Japan (which is apparently a separate company) suggests Skype has completed a local marketing deal.

However, my contact in Japan Asao Ishizuka contacted both Sony and Sonystyle and it appears that all Sony's Japanese Autumn models (Except Type A - Global?)) will ship with Skype preloaded. That's a big deal for Skype. From Sony's perspective as they preload many applications an announcement may not be forthcoming. For Skype this would represent an important breakthrough. We will continue trying to run down the facts.

Mark Evans writes a nice summary on Skype latest investment rumors which suggests Hutchinson Whampoa will take a 5% stake for a billion. (Update: Sorry folks - this was sloppy writing as pointed out in comments - suggested valuation a billion therefore.)

We can read between the lines and see real pressure on Skype to take another round and accelerate development. While 5% won't wrestle ownership control the VC's may gain some voting rights that enable control over who runs Skype in the future.

See also: Rodrigo and Andy

Note the additional icons. The blue call-forwarding icon and the green this-is-an-incoming-forwarded-call. Note: you don't know who the forwarded call was from (a potential problem). Similarly, callers who find their calls forwarded don't know who might answer. The ring tone remains the same, there is no audio signal that something is different. In this example I forwarded skypejournal to ring my Skype ID.

Skype Call Forwarding

• Is available to all Skypers using the beta 1.4
• forwards inbound Skype calls (from Skypers or on SkypeIn) to any other buddy account or phone number. When forwarded to landline or mobile it will cost you SkypeOut minutes. In some countries know what your rates are!
• works even if you don't have a SkypeOut account. You can forward an inbound call to another Skype buddy or account.
• will automatically forward calls not answered after four rings even when skype remains active. If you send it to a cellphone which answers it will take the voice mail. If the forwarded call doesn't answer then it will revert to your Skype voice mail if you have it.
• may forward and ring up to three numbers. Additional numbers don't appear to be rung sequentially, rather all at the same time.

Things you can't do on call forwarding.

• forwarded calls won't go to your skype friend's voice mail.
• similarly a forwarded call cannot be forwarded on by the buddy you have forwarded it to.
• voice messages also aren't forwarded which makes sense as they aren't meant for you buddy.
• no control over what names you can forward. This should be done by contract groups.
• no control over SkypeIn and forwarding.
• there is no notification via text to another Skyper that their call is being forwarded.

Are there still issues. You bet.

• For a Skyper the person that they are calling remains visible. It is easy to miss that the person they are calling to is a call forward. Example the caller places a call to an offline account (eg from a directory search), the call is forwarded to another Skype buddy at no charge. The buddy who answers gets a minor blue forward signal on the picture. The identity of who the caller is forwarding to is preserved. There are pluses and minuses to this strategy.
• I'd like to be able to turn call forwarding on and off from my SkypeIn number. I'd also like to be able to get voice messages by dialing in to my SkypeIn account.
• I may not want to give out my phone or cell number. So setting call forwarding and not releasing that info is appropriate. However, the caller may need to know it is being forwarded. It may not be explicit enough.
• leaves open the opportunity for abuse. I open a junk alias and add in three buddy names I want to harass. If the name is attractive (even left on in Skype Me mode) they could be in for a rude set of calls. The result could force me to increase my privacy settings.

Some things Skypers will start experimenting with.

Call Forward and the Small Office: Open a Skype account with your company name. Buy a SkypeIn number or even multiple numbers. Then forward to three Skypers (you can see a work groups account coming here can't you!) Any one of the four can answer the calls. For some companies you could forward multiple Skype International numbers to your PBX number. If you are in one of Skype's 30 flat rate countries this could be interesting.

Global Calls to Mobile: Even if your wife doesn't use Skype you can set up an account for her and forward calls to her mobile from whereever you are in the world for almost nothing. She doesn't even have to know how you did it.

Aliases: Set up aliases and then set them to call forward. Your identity is masked on inbound calls while the other person's is visible to you (which could be an alias too). The only thing missing is the presence data for your alias. Still with tags when SkypeWeb launches this possibility will be close.

Test...

Ring my SkypeIn number that is forwarded to another Skype account that doesn't have voice mail or anything. Let it ring. It finally does go back to my Skype account voice mail. It did take a lot of rings. I'd note too that the original inbound number said "Vonage" and then on the call forward it provided an accurate caller ID phone number.