Random acts of weirdness
Eager to justify, if not surpass, their ultra-billions in market capitalization, eBay and Google have been engaging lately in what only can be described as random acts of weirdness.
The corker was the announcement that the normally well-disciplined eBay is shelling out $2.6 billion to $4 billion for Skype, a nifty online phone service that produced $60 million in sales in the last 12 months. On the high end, the transaction is valued at 666 times sales, the devil's own PIN.
Even after CEO Meg Whitman explained the tenuous rationale for the deal, it is unclear how Skype will help eBay sell more Beanie Babies.
The idea, she says, is that eBay will encourage visitors to sign up for Skype and then click a "Skype Me" button so they can speak directly to merchants selling stuff on eBay. Meg believes this will help eBay build a business brokering real estate, autos and other high-end products.
Assuming, arguendo, that this actually could help sell more Hummers or McMansions, why not create an 800-number using the standard phone system? For one thing, everyone already has a phone and knows how to use it. For another, eBay could test the idea before deciding whether to spend $2.6 billion to $4 billion to see if it works.
If the phone idea clicked, eBay wouldn't have to buy Skype. If it didn't, which it won't, then Meg could spend the $2.6 billion to $4 billion on a more worthy cause.
Over at Google, where there must be an equal or greater amount of hubris in the water supply, somebody hatched the idea of buying ads in magazines and then reselling bits of the pages to the merchants who pay 7 cents a click for Ad Words.
This piddling effort somehow is supposed to help Google diversify its $4.5 billion in sales. But I don't get it.
The good news is that this soon-to-be-proven-futile exercise will cost Google far less than the $2.6 million to $4 million that eBay is paying for Skype.
The problem with the eBay and Google projects is they illogically overreach the demonstrated capabilities of the companies and the scope of their brands.
The irony is that eBay and Google have tons of opportunity to build value by partnering with people who urgently need the know-how they can provide.
Specifically, eBay and Google ought to be working with print publishers and broadcasters to create rich online auction and advertising environments that will extend their reach and revenue. Although this will build audience and sales along the way for the legacy media companies, that's OK. The old-line companies represent no real competition to the online upstarts.
Not only would the partnerships create more business for everyone without cannibalizing anyone's existing sales and share, but it also would deter eBay and Google from making costly and embarrassing digressions into markets where they don't belong.
Until cooler and wiser heads prevail, however, it looks like hype, as in Skype, will carry the day.
The corker was the announcement that the normally well-disciplined eBay is shelling out $2.6 billion to $4 billion for Skype, a nifty online phone service that produced $60 million in sales in the last 12 months. On the high end, the transaction is valued at 666 times sales, the devil's own PIN.
Even after CEO Meg Whitman explained the tenuous rationale for the deal, it is unclear how Skype will help eBay sell more Beanie Babies.
The idea, she says, is that eBay will encourage visitors to sign up for Skype and then click a "Skype Me" button so they can speak directly to merchants selling stuff on eBay. Meg believes this will help eBay build a business brokering real estate, autos and other high-end products.
Assuming, arguendo, that this actually could help sell more Hummers or McMansions, why not create an 800-number using the standard phone system? For one thing, everyone already has a phone and knows how to use it. For another, eBay could test the idea before deciding whether to spend $2.6 billion to $4 billion to see if it works.
If the phone idea clicked, eBay wouldn't have to buy Skype. If it didn't, which it won't, then Meg could spend the $2.6 billion to $4 billion on a more worthy cause.
Over at Google, where there must be an equal or greater amount of hubris in the water supply, somebody hatched the idea of buying ads in magazines and then reselling bits of the pages to the merchants who pay 7 cents a click for Ad Words.
This piddling effort somehow is supposed to help Google diversify its $4.5 billion in sales. But I don't get it.
The good news is that this soon-to-be-proven-futile exercise will cost Google far less than the $2.6 million to $4 million that eBay is paying for Skype.
The problem with the eBay and Google projects is they illogically overreach the demonstrated capabilities of the companies and the scope of their brands.
The irony is that eBay and Google have tons of opportunity to build value by partnering with people who urgently need the know-how they can provide.
Specifically, eBay and Google ought to be working with print publishers and broadcasters to create rich online auction and advertising environments that will extend their reach and revenue. Although this will build audience and sales along the way for the legacy media companies, that's OK. The old-line companies represent no real competition to the online upstarts.
Not only would the partnerships create more business for everyone without cannibalizing anyone's existing sales and share, but it also would deter eBay and Google from making costly and embarrassing digressions into markets where they don't belong.
Until cooler and wiser heads prevail, however, it looks like hype, as in Skype, will carry the day.
posted by Newsosaur at 4:39 PM
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