Can Ebay and Skype improve the online shopping experience?

There has been a great deal of debate both in the popular press and in the classroom about Ebay’s acquisition of Skype, a VoIP technology. While most of the initial debate centered on Skype’s business model and the exorbitantly high purchase price they were paying, there were rumblings of strategic fit, which seemed to me to be of even higher concern.

At first glance, I was a bit confused as to why Ebay would be venturing into the telecom space, given their lack of expertise in this arena and thought this opportunity seemed more appropriate for Google or Yahoo. Skype didn’t seem like a compliment to Ebay’s current business and the very stage of the acquisition target made me wonder whether Ebay was planning on using this for its own operations. Was this for diversification reasons? Was this the result of a maturing business losing focus and trying to jump on the latest technology bandwagon? Was this case of Ebay not knowing what it was truly good at or was this the move of a visionary company attempting to improve its customer experiences?

Rather than debate the financial merits of the deal, I think it is interesting to speculate on the impact having VoIP integrated into Ebay’s current offering might have upon the customer experience.

Ebay’s business model is rather simple. It is a forum in which buyers and sellers can come together to exchange goods. By providing liquidity to a market that otherwise never had it, Ebay has been able to build a highly successful company and a powerful online network. They have leveraged the internet to its fullest capacity to aggregate the marketplace into one large store. Ebay helped pave the way for online retailers by allaying consumer’s fears about shopping over the internet making it natural, predictable, exciting and acceptable.

What is unique about Ebay is that it had to create a means by which the transaction-oriented nature of its business is protected against fraud. The anonymity that e-commerce provides is a potential hindrance because some semblance of trust must be established between the buyer and the seller in order for frictionless transactions to occur. The ratings system Ebay introduced, as simplistic as it is, is the means by which buyers and sellers police themselves. And through this system, the anonymity that e-commerce provides is counter-balanced by the power that the buyers and sellers have in maintaining discipline within the marketplace.

When looking closer at the Skype acquisition I began to question why it is that Ebay would want to acquire this firm:

1) Ebay has been moving more towards selling higher end items (e.g. automobiles, fine jewelry, and furniture) that inherently have more risk from the buyer and seller’s standpoint.

2) Ebay is increasingly becoming global in scope and not all cultures are as comfortable nor capable of conducting transactions via the computer.

3) VoIP technology strongly benefits from a large number of users. If there is any firm that has taken advantage of the power of the network effect in recent time, it is Ebay. Therefore, beyond integrating Skype into Ebay’s current offering, there is a potential for Ebay to help Skype establish itself as a leader in communication, not just VoIP.

Therefore, by introducing VoIP into its system, Ebay is hoping that it will allow users that wish to have a more “traditional” consumer experience, will be able to do so. This may enable Ebay users who are not comfortable with transacting with an anonymous party to have the ability to inexpensively and relatively unobtrusively have communication with each other. Moreover, as the transactions become bigger and more complex – it is increasingly necessary for people to communicate directly.

But what about anonymity? Ebay is hoping that VoIP will help bring buyers and sellers closer together, which will simply strengthen the community further and encourage those who were weary of buying or selling over the net to join the Ebay community. Will this be appealing for everyone? In a world where identity theft is increasingly becoming a problem, having strangers have access to your computer, not just your email address, is risky. Additionally, there are other logistical considerations to consider (ie. time zone differences and hours of operation). Would sellers be required to establish times when they could be reached by buyers? Would this new service eliminate the 24 hour nature of these auctions? If a seller opts not to conduct business via the phone, will buyers take this as a signal that the buyer has something to hide? Will a seller receive poor feedback because he wasn’t responsive to the buyer? Will introducing this technology become a hindrance in conducting what should be rather simple transactions?

VoIP is a nascent technology that is difficult for many to understand and connections get interrupted and lost, and the quality of communication is severely hindered. Will introducing VoIP create technical issues that will take away from the Ebay experience?

Much of the success of blending VoIP into Ebay will be in how Ebay pushes the service onto its customer base as well as how Ebay masters the technology and services its customers. Is it going to simply be another way in which to bring those together who choose to interact that way? Or will it be a device that will end up polarizing the Ebay community into users and non-users? Will it frustrate people as they attempt to use this relatively new technology or will this application drive the adoption of this new technology? It is impossible to say at this juncture.

Regardless, this is a bold move Ebay is making and a risky one given the fact that it might “cannibalize” the very online shopping experience it has pioneered in favor of traditional telephone-like communications. Just as consumers become comfortable with the new way of doing business through the internet, Ebay is changing the process again. Either way, this development indicates that Ebay wants to be recognized as more than just an auction business. Only time will tell if Ebay, the master’s of networked communities, will be able to master another medium.