Skype Means Money

Maybe eBay (Nasdaq: EBAY  ) didn't overpay for Skype after all. As a foothold into Europe -- where Skype is royalty -- the leading online voice and video chat platform is helping eBay grow into a global powerhouse.

eBay's PayPal service now has nearly 35 million accounts in Europe, and it's hard to imagine that happening if it wasn't for Skype. PayPal is the preferred payment of choice for long-distance calling in Europe, and thousands of merchants there are now accepting PayPal as a more cost-effective alternative to the high transaction fees charged by credit card companies. $8.4 billion of the $37.8 billion in payments that PayPal processed last year were in Europe.

Where do we go from here? Let's just say that Western Union (NYSE: WU  ) is in the crosshairs. A story out of Reuters yesterday had Skype's CEO indicating that the service would soon allow users to send money electronically to other users through PayPal. A company spokesman told Reuters that the offering would be unveiled within a month.

"A lot of people using Skype are people who have friends and family on the other side of the world," Skype CEO Niklas Zennstrom said.

It's a good point, but the real goldmine here may be in transactions between strangers. Hiring a website programmer or settling up with an exporter of tropical fish may be a whole lot easier with a Skype-PayPal combination. One can only imagine the implications for the adult entertainment industry ... but I'll leave that one alone.

When eBay first acquired Skype, the knee-jerk reaction was to believe that the leading online marketplace would be transformed into a vibrant flea market where buyers and sellers are perpetually window shopping and haggling. It would be just one more way for eBay to stand out against smaller auction sites being run by Overstock.com (Nasdaq: OSTK  ) and Yahoo! (Nasdaq: YHOO  ) . That hasn't materialized on a grand scale, but we are now seeing the value of Skype as a way for eBay to shoehorn its other subsidiaries overseas on the coattails of Skype's buoyant presence in Europe and Asia.

Did eBay pay too much for Skype? I don't think so. In a few years, we may look back at it as the new economy bargain of the decade.

Yahoo! and eBay are active recommendations for Stock Advisor subscribers. Western Union is an Inside Value newsletter service selection. Try a free 30-day trial of either newsletter.

Overstock is a former Rule Breakers selection.

Longtime Fool contributor Rick Munarriz is an eBay fan, with a 171 positive feedback-rating to show for it. He does not own shares in any of the companies in this story. He is also part of the
Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 524216, ~/Articles/ArticleHandler.aspx, 7/25/2014 1:47:00 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement