Josh Silverman is on the defensive. As the head of eBay’s Skype unit, he’s happy to talk about his company’s more than 330 million users and six straight quarters of profitability. But the topic he has been asked to address more frequently in his six months at the helm is how eBay could have so grossly overestimated Skype’s value when in 2005 it paid more than $2.5 billion for the Internet calling service. “There is this perception gap related to eBay and what people thought eBay would do with Skype,” Silverman says.
The gap is more than just a matter of perception. Executives at eBay bet Skype’s cheap and easy-to-use Internet calling tools would help eBay users land more sales. But it turns out many of the small business owners who market their wares on eBay had little time to sit by the phone to take questions, and in October, eBay was forced to concede it overpaid, recording expenses of $900 million.
Silverman’s task now is to ensure that Skype earns its keep, giving eBay executives reason to retain the business rather than sell it to the highest bidder. So far, eBay Chief Executive John Donahoe says he’ll keep Skype. “We know Skype is a great stand-alone business that’s experiencing explosive growth in terms of its financials and in terms of its user base,” Donahoe said during a conference call with analysts earlier this year.
Growth Slowing Down
Yet, even as Skype grows at a faster pace than eBay’s core online shopping business, it accounts for a sliver of total sales. And like its parent, Skype is undergoing a growth slowdown. Skype’s revenue rose 51 percent in the most recent quarter, vs. more than twice that pace a year earlier. Donahoe could jettison Skype to focus on bigger areas of need. Analysts have speculated…