Skype, A Rare (And Big) Stumble For eBay

News hit this week that eBay plans to take $1.4 billion in charges related to Skype -- $530 million to complete the 2005 purchase and the rest for goodwill impairment due to eBay's lowering of its long-term financial outlook. The company also announced a management change. Investors reacted by pushing up the company's stock about 1.4%, indicating that Skype's poor performance had already been figured into the stock's price.

Journalists are postulating what happened and what should/could come next. An Internet analyst at RBC Capital Markets told News.com that it's not a management problem and that free just doesn't work. "It's a business model issue." Information Week lists five reasons why Nokia should buy Skype (long story short: Skype needs mobile and Nokia needs to get serious about VoIP). The Wall Street Journal thinks MySpace or Facebook could achieve more synergies with Skype (because they "connect groups of like-minded individuals quickly and efficiently"). The Globe and Mail goes as far as to say Skype's overvaluation could make things hard for Facebook, a rising Web 2.0 company that many believe is overvalued.

So what went wrong? eBay wanted to branch out from its traditional business and saw huge upside in Internet-based calls. Like the analyst said, it's a business model problem. Vonage, as BusinessWeek.com pointed out, is another Internet phone company that isn't living up to expectations, and SunRocket recently announced it is shutting down operations. People are increasingly familiar with VoIP but are decreasingly likely to pay for it. The business model hinges upon an "upsell" to the free customers, getting them to pay for calls made to phone lines, or selling them on upgraded features.

The bottom line: Other than a niche group of international callers, who is going to opt for a subpar service when long-distance rates are fairly reasonable and most cellular plans have an abundance of available minutes?