George Soros recently owned up to having purchased 647,000 shares of Ebay between March and June.
Now a $30M bet isn’t that much to a guy who spends that on gas for his yacht but Soros rarely buys tech (he was badly burned in the 2001 crash) unless he has a compelling reason.
Perhaps he was bargain hunting after the stock tanked from $60 all the way down to $30 (I picked up some myself) but I think Soros, with his international view thinks the Skype deal is good for Ebay.
The purported $4Bn price tag made people scamper away from Ebay’s stock but that price tag is 33% performance based and it looks like Skype is going to be performing at Google-like growth levels. According to Merrill Lynch, Skype is downloaded 650,000 times a day!
Come on Phil, you say, 650,000 times a day? That’s outrageous!
Yeah, I thought so too, I mean how many people do I even know who use this thing. Well, thanks to George I realize I am just another silly American analyst who needs to spend less time in front of my trading screen and more time on the actual planet where all the “business” is actually done.
By the planet, I mean the Earth by the way, not going to the mall and seeing a movie – that just doesn’t count. If I travelled the planet like Mr. Soros I might have noticed something. I might have noticed that 70 Million people are using this thing around the world every day. If just 10% of those downloaders turn into regular users, that means they are adding another 20M a year (good growth) and Americans haven’t even heard of this thing yet!
But China has! Hey, isn’t China a place that Ebay is laser focused on? Must be some sort of coincidence…
Skype is about to wrap up a deal to provide a pay service in China called Skype-out, that will effectively make them the national Internet phone company of China. What is Skype-out? Well, in a nutshell it allows a Skype user to call regular telephones for a very small fee. In a very Google-like way though, those small fees multiplied by a Billion calls a month can actually add up to some profits!
I’m not going to go into the virtues of Skype other than to say it’s the Napster of the telephone world – all the hip people will have it soon and you will be wondering why you aren’t getting all this cool stuff for free! Unlike Napster, Skype is working WITH the phone companies to make a model that might just work for everyone (but mostly for Skype).
So at some point about a Billion people will be retrained to talk on the phone while they are on-line (hey I know how to do that already), very likely with video available too, and while their phone is on the screen they can check out thier Ebay auctions and see a few ads.
Next to TV, the phone is your #1 media outlet and people want those eyeballs. Ebay made a $2.5bn downpayment to advertise on a show that already has 70M viewers every day and is growing at 30% annually. $2.5Bn will buy you exactly 500 minutes of Superbowl advertising, possibly the only thing in the media that can deliver 70M eyeballs these days.
So Ebay will be getting 70M views a day (from just the kind of customer they might want to target) for, lets say, 10 minutes a day – that’s 3,650 minutes a year, more impressions that you could get if you sponsored the entire Superbowl for 60 years
So George knows math, and he knows that Ebay is making all the right moves in the international market. As much as we love our own economy and measure everything against what we see in the US markets, we need to broaden our perspective and start looking at things on a more Global scale, like George does!
