eBay buys Skype in massive deal

eBay has bought phonecall over the internet company Skype for $2.6bn (£1.4bn).

The online auction house said it hopes that offering calls through Skype to its 157 million registered users will increase the number of transactions as well as open up other business opportunities.

eBay's president Meg Whitman said the purchase would not change eBay's focus as an auction site. Rather, she said, the company would look to grow Skype in three areas.

Firstly, by integrating Skype onto eBay's auction site the site may able to cut costs and increase the number of transactions. eBayers send each other up to five million emails a day and any reduction in this would lead to cost savings for the site.

Secondly, eBay said it wants to make sure Skype retains its top position in the Voice over Internet Protocol market. Skype has more than 50m users and as it grows more and more people with bring in friends and family.

Thirdly, there is a market for sales leads using Skype - generating money in a similar way as pop-up ads do now. Ms Whitman said that with US firms paying between $2 and $12 for leads, then the market could be worth up to $3.5bn (£1.9bn) a year.

While Skype users can make free calls to other Skype users, they pay to call traditional phonelines and eBay said it is looking into ways of using PayPal as a way to pay for Skype's fee based services.

Other internet companies are also racing to get into the broadband telephone market - with both Google and Microsoft's MSN launching new services last month.