Ebay & Skype: A Resource-based View
Assignment 12 involves two articles from last fall about Ebay's acquisition of Skype: Why Ebay may make a $3bn call to Skype and EBay Will Pay $4.1b for Skype. What follows are the remarks I provided to one of the resource-based write-ups by a student in section 2. These questions are not necessarily ones that should have been answered. Rather, they are ones I would likely pose in class.
Student: If eBay does in fact acquire Skype, it will once again be a great leap ahead over all its competitors. Is Skype a valuable resource to eBay though?
This suggests to me that so see Ebay as behind at least one of its competitors? Is this actually the case? Perhaps this move could move them further ahead? Who do you see as Ebay's competitors?
Student: In order to answer that question, one must answer Barney’s four questions regarding resources. First the question of value, this asks whether a resource allows a firm to respond to environmental threats and opportunities. What are the threats or opportunities eBay faces? As one article suggested, eBay members exchange 50 million emails a day through the site. If eBay does acquire Skype, it would make it easier for members to actually speak to one another, and not have to send emails and wait for responses.
The assumption is a good one- people will be able to exchange information more quickly. Whether or not auction participants find this valuable remains to be seen. Once people are able to speak with one another the nature of the interaction may dramatically change. We also have to wonder if Ebay sees any other applicability for Skype’s resources and capabilities. Do you suppose that Ebay will only apply Skype functionality to auctions? Do you see any peer to peer options?
Student: The question of rareness, this asks how many competing firms currently possess the same resource, eBay will be the first internet auction site to offer an application that allows VoIP telephone calls, so no other firm currently has that resource. It is rare.
VoIP is not rare. Auctions with VoIP will be. Any other business line to which Ebay can add Skype functionality will also be rare. One question that should be asked here is whether or not by adding VoIP functionality Ebay is becoming more like a regular auction house, many of which for year have allowed people to submit bids over the phone and which increasingly are allowing online bidding.
Student: The question of imitability, this asks whether the said resource can be imitated, at a cost disadvantage, by other firms. Apparently Skype uses technology “that is generations ahead of where the new entrants are”.
Consider the source. Meg Whitman, the Ebay CEO, has the incentive to say just this. Do you believe it? There are so many Internet telephony software programs and competing protocols out there right now. What, if anything, makes Skype the best? One thing that may be happening here is that by throwing its weight behind Skype, Ebay may be making a play to determine which of the many technologies and newtorks will later dominate the market.
Student: One must assume that any competitor to either eBay or Skype would have to invest heavily in research and development in order to come up with something that’s remotely close to Skype.
Given the large number VoIP offerings, it is not clear to me how or why another auction company or e-business service provider would have trouble adding this functionality.
Student: The last question, the question of organization, this asks whether or not a firm is organized to fully exploit the resource it possesses. eBay seems to be exploiting Skype, in fact there is a link you can go to and download the application from right from their front page.
What does the fact that the two Skype founders will retain their positions tell you? What does it tell you when you see that in one place we are told that the founders are building an “independent company” and that they will keep their positions while in another that Skype functionality is to be integrated into existing auctions
Student: As you can see, eBay should be at what Barney calls “sustained competitive advantage”, until someone else comes up with a better auction site, or a current auction site comes up with something similar to Skype. Even if this does happen, eBay will have the first mover advantage, and the fact that its currently the largest auction site on the internet, should help it stay ahead. The only question which remains, is Skype actually worth $4.1 billion? Will it generate this much in sales or profits? This question, only time will answer.
Some other questions to ask are these: What, if anything, does Skype see that everyone else does not? For what is it resource or capability of Skypes is Ebay willing to pay so much money? Why are the financial markets consider the asking price too high?
Tags: resource based view I ebay | skype | VoIP | auctions | Online Auctions