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EBay Wants to Get Online Buyers and Sellers Talking

Posted on: Wednesday, 14 June 2006, 09:00 CDT

By Elise Ackerman

LAS VEGAS -- Do people who buy and sell things on the Internet want to talk to each other?

EBay is going to find out by adding a little blue "SkypeMe" button to certain items on its popular auction site that allows for instant -- and free -- communication.

The test, announced Tuesday night at a conference for eBay users in Las Vegas, could prove key to the San Jose company's future, as expansion of its online marketplace begins to slow.

Last year, eBay placed a multibillion-dollar bet on the transformative power of free Internet phone calls, spending $2.6 billion to buy Skype, a Luxembourg-based company that provides free computer-to-computer calls over the Internet. The SkypeMe feature will only work if a person has downloaded Skype's software.

By adding communication to its online auction and payments business, eBay Chief Executive Meg Whitman said eBay would be able to give customers the basic building blocks of a life online.

EBay, PayPal and Skype -- shopping, paying and communicating -- are powerful businesses on their own, Whitman said.

Yahoo angle

"Together, however, we think these three business can make even greater things happen," she told 15,000 people attending eBay Live.

But analysts and investors aren't so sure about the value of Skype.

Since the acquisition, the value of eBay's stock has fallen 23 percent. Philip Remek, an analyst at Guzman & Co., said he is skeptical that eBay will be able to recoup Skype's purchase price. EBay expects to earn $200 million from Skype-related services this year, primarily from charging for computer-to-phone calls placed in countries outside the United States and Canada. Skype currently boasts 100 million users in 200 countries.

"If enough people download the software, a large portion of the calls will be free," Remek said.

That means Skype will have to boost eBay's business in other ways to justify its purchase price.

Whitman said Skype could encourage eBay's 200 million registered users to dramatically increase buying and selling in the company's 30-plus online marketplaces, including in the United States, Germany, Italy, South Korea and Mexico.

In addition, eBay could use Skype to launch a "click to call" advertising business, in which an advertiser would pay for customer leads generated by eBay's marketplaces.

On Tuesday, Whitman said eBay was exploring such a business with Yahoo as part of a recently announced partnership between the largest online marketplace and the most visited Web portal.

Sellers will be able to include the SkypeMe feature on Monday to 14 categories of products ranging from cars, beds and NBA basketball cards to "Lost in Space" collectibles and real estate.

Mixed response

The feature will not cost anything. Sellers can choose if they want to communicate through text-based chats or phone calls or both.

Reaction to SkypeMe was mixed among eBay users attending the fifth annual eBay Live conference. Some loved the idea of talking to potential customers. Others weren't as enthusiastic.

"It sounds like it would be more of a burden," said Craig Sengstock, who operates an online store called Time Rewound that sells fashion accessories and games.

Marc Barach, chief marketing officer for Ingenio, a leading provider of technology that lets potential buyers place Internet calls to advertisers, said the San Francisco-based company ended up providing America Online with 1-800-like phone numbers instead of an Internet "click-to-call" icon.

"Our goal is to connect buyers and sellers, to reduce friction, not to create friction," Barach said, noting that using a computer as a phone is "newer" behavior that has not yet been widely adopted.

Google, the leading Internet search engine, whose business increasingly competes with eBay, is also testing a "click-to-call" advertising service.

Separately, Bill Cobb, head of eBay North America, announced Tuesday that eBay would begin hosting blogs and wikis, documents that are co-written by multiple people sharing their expertise about an issue.

Cobb also unveiled a new service called "eBay alerts" that will notify buyers of the status of their bids via a call to their cell phone and give them the opportunity to increase it.

Contact Elise Ackerman at eackerman@mercurynews .com or (408) 271-3774.

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Copyright (c) 2006, San Jose Mercury News, Calif.

Distributed by Knight Ridder/Tribune Business News.

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