Gartner: VoIP Security Uncertain in EBay/Skype Deal

In another twist on the eBay/Skype deal, a research firm cautions big businesses should steer clear of the combined companies' technology. The problem: lackluster VoIP security.

September 17, 2005

3 Min Read
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Skype Technologies SA, the Internet telephony vendor that online auctioneer EBay Inc. plans to buy, is unlikely to offer a business-class system anytime soon, and enterprises should avoid deploying the company's technology, a research firm said Friday.

EBay's $2.6 billion acquisition of Luxembourg-based Skype won't solve the biggest problem in the latter company's voice over Internet protocol service -- security, Gartner Inc. said. While that may change in the future, Gartner has advised businesses to stay away.

"Don't use voice services based on proprietary protocols like Skype while on corporate networks, because of network security issues," the firm said in a research note.

While it's possible that Skype under EBay could release a business-class product, "I don't think that drove what (EBay) did, so I wouldn't look for that overnight," Gartner analyst David Smith said.

Many analysts see Skype's VoIP technology as improving EBay's e-commerce platform by offering shoppers a "click-to-call" option for reaching merchants. While Smith sees the same, he also expects EBay to open up its platform by offering voice services that web developers can integrate into their own applications.For quite awhile, EBay, based in San Jose, Calif., has offered application programming interfaces for its e-commerce services, turning its Web site into a kind of platform for application development.

"We're in the beginnings of a new generation of applications made up of services over the Internet, and some of those services will be VoIP," Smith said.

In addition, EBay, which could end up paying as much as $4.11 billion, if Skype meets certain financial goals, could also build a huge advertising network, Smith said. Since 2003, Skype software, which is available for at no charge, has been downloaded 163 million times globally.

As a marketing channel, VoIP offers much more than voice. It's a technology that encompasses email, instant messaging and video conferencing. EBay, of course, has its own web properties, which could become part of the advertising network, Smith said.

Indeed, Victor Schnee, analyst for Probe Financial Associates Inc., said there's only about a 1 percent overlap between Skype and EBay subscribers, opening up a big opportunity for each company to tap each other's customers."This is almost a virgin audience (for each company)," Schnee said.

He believes the acquisition will have its biggest impact on cable companies, which are building VoIP services into their broadband products. Cable operators expect to see diminishing growth opportunities in the broadband market over the next few years, and see VoIP as picking up the slack, Schnee said. The companies, however, are charging on average about $40 a month for the service, a model that can't be sustained, given that Skype and others offer the service at no charge.

"We think (Skype) is cutting into the cable audience," Schnee said. "It's just a fantasy on (cable's) part (to charge a monthly subscription)."

Voice, Schnee said, will eventually become part of a package of Internet services, and won't have much value as a standalone service.

Smith, on the other hand, sees platform expansion as the key benefit for EBay."The fact that they bought (Skype), and for a significant price, would indicate that either they're embarking on a platform play, or we're entering into another era of silliness (as in the dot-com years)."

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