GenuineVC David Beisel's Perspective on Digital Change

September 8, 2005

With today’s buzz surround the rumor of eBay’s potential acquisition of Skype, I was struck by what the larger implications of this move would be. One of my readers, Zbigniew Lukasiak, recently brought to my attention an article which I read last weekend. Written by Andrew Odlyzko, “Content is Not King” maintains “that connectivity is more important than content.” Citing historical industry revenue figures, Odlyzko makes the point that “spending on connectivity [point-to-point communications] is much more important for communication services than spending on content can ever be.” Though the article is a little long and somewhat dated, it is a good academic argument supporting this thesis.

If these eBay rumors are indeed true, it represents a significant departure from the company’s current main business lines. And at a speculated multibillion dollar price-tag, the deal would certainly be valued at more than its most recent acquisition, Shopping.com, a “content” site. While the latter deal makes sense to me strategically, the Skype one for me is a stretch. Certainly there are other more strategic content companies out there for eBay to acquire. Given a blank slate to spend suspending strategic considerations, eBay’s possible move re-raises the question – is connectivity worth more than content?

  • http://tachophobia.com Rick

    I think that it’s an important shopping component for buyers and sellers to be able to connect via IM and phone. eBay lacks this component.

    However, to pay a high price for Skype just to satisfy a need for buyers and sellers to communicate is kind of strange.

  • http://orangehues.com/blog Manu Sharma

    It’s exciting to see someone else too relating Odlyzko’s connectivity-more-important-than-content argument to this sector. I think this is the fundamental reason why VoIP is going to be huge very soon and why Google’s entry into communications will overtake search in their respective contributions to its total revenues.

    There are other indicators too. Add up market cap of all the companies in the Media & Entertainment related industries and that of companies in the Telecom and Communication Industries, you’ll find that the sum of later is thrice the sum of former! There’s a lot of money to be made here.

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