eBay bought an internet phone company. Here's what it didn't buy.
In 2005 eBay paid about $2.6 billion for Skype instead of pouring capital into PayPal and auctions. It wrote down $1.4 billion in 2007. In 2008, Amazon's enterprise value outgrew eBay's.
Transcript
In September 2005, eBay agreed to buy Skype, an internet phone company, for about $2.6 billion in cash and stock.
eBay's theory was that buyers and sellers would want to talk before they traded. The option it did not take was closer to home: pour capital into PayPal, which it had bought in 2002, and into the auction format it already owned.
In 2007, eBay wrote down $1.4 billion of Skype. In 2009, eBay sold 65% of Skype at a valuation of $2.75 billion, below what it had paid.
Meanwhile, in 2008, Amazon's enterprise value outgrew eBay's.
One deal did not cost eBay its lead on its own. But capital and attention spent on a new theory are not spent on the advantages you already own. Before a big acquisition, name what it takes from.
The records behind this video
Every figure in the video comes from this Decision Record, each with its sources.
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