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Meg Whitman's $2.6bn spam goof?

Giving VoIP a bad name

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Analysis "eBay looks less fearsome when you're upside down," says the young CEO behind the online auction house's great Chinese rival Jack Ma. To encourage new hires at his Alibaba.com, Ma asks them to perform handstands. Maybe that won't be necessary for much longer, as eBay is a lot less fearsome - and a lot poorer - after splurging $2.6bn on Skype (and $4bn in total if Skype hits the numbers).

Couldn't eBay have done something more sensible with $4 billion - like give the money back to its shareholders - or to the Katrina relief fund?

Skype is the poster child of VoIP, and has very nearly become a household name with 50 million users world wide. There are more than twice as many registered Skype users than there are iPod owners. But the negatives are long. Skype has yet to turn a dime's worth of profit. Nor, in the standards-based world of SIP calls, does its proprietary connectivity offer any 'secret sauce'. AOL, Microsoft, Yahoo! and Google have all integrated SIP calls into their instant messenging clients. Verizon and AOL offers a monthly plan.

Compared to Vonage, Skype's connections to the traditional POTS network are notoriously lousy, and its billing systems are held together with string: a patchwork operation that relies on eBay's own PayPal. So all Skype can offer is its brand and its user base - shades of AOL all over again.

Not to mention that the incumbent operators have taken note of the VoIP threat. In the US, you can snap up a long-distance calling plan that's better value than a VoIP + DSL deal: which is good enough for most people.

From this perspective, Skype looks like a great bargain

However it's eBay's initial explanation of how it intends to use Skype that will give even VoIP's most passionate advocates the willies. eBay hopes to monetize the user based by selling their account details to junk callers, at $2 to $12 per lead. Whether Skype users even get the chance to opt-out from this new form of "voice spam" remains to be seen, but eBay's Whitman could have chosen a better example of 'synergy'.

As we've seen with the internet, with its junk email, blog comment spam, and machine generated pages stuffing the search engines and diluting the search results - anything left open and untended simply becomes the next technological arms race. Closed networks rarely have this problem. Now eBay is handing the beleagured incumbents a marketing gift.

The global telcos can also relax for another reason. Had Skype continued its success, they may have been tempted to pool their resources and 'do an Orbitz'. Orbitz was the online ticketing venture started by five US airlines and designed to counter the threat of Expedia and smaller upstarts, and protect their Sabre database. Now they don't have to.

Skype's potential as a money earner for eBay depends on the average computer user's appetite for regulation - and the example of recent years augurs poorly. When Congress passed its first anti-spam bill, the well-funded right-wing think tanks chorused that it wouldn’t work. More red-tape, they snarled. These naysayers aren't so sure now that spammers are being arrested, and those who abet them facing real jail time. Spam hasn't gone away, and the internet still needs infrastructure-level fixes to combat the problem effectively, but it's a measure of how the libertarian rhetoric of the 1990s has cooled.

An even better example is the success of the Do Not Call Registry, administered by the FTC. The registry has made tens of millions of American households more peaceful, and accepted its 100 millionth number three weeks ago.

If eBay wants to go down in history as the company which made spam talk, it's paid a lot of money for the privilege. ®

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