Three Types of Maps That Could Have Saved eBay From the Skype Acquisition Failure
Learn how mapping eBay’s customer experience could have prevented the M&A headache with Skype
History of Bidding and Messaging
Travel back in time with me to March 2000. The dot-com bust has begun, and tech companies are quickly collapsing, leaving behind a massive graveyard of corporate fossils to be excavated as case studies for years to come. During this turmoil, there was one fledgling startup that asserted itself as the most profitable e-commerce platform. Not even Amazon could compete with them at the time. eBay was king. A few years later, another company emerges from the peer-to-peer boom that has thrived during the dot-com debacle.
Skype then gets acquired by eBay two short years later. It might’ve seemed like a match made in Bidding and Messaging Heaven, but this brief union came at a detrimental cost. If eBay and Skype might’ve heeded the warnings of Jack Welch’s Six Sins of Mergers and Acquisitions (M&A), both parties would have begun to avoid traveling down the road to perdition. But it would take more than Jack Welch’s wisdom to prevent what would end up being a significant acquisition failure.
Jack Welch’s Six Sins of M&A¹
- Merging with an equal company — Invitation to a power struggle.
- Misaligning the cultural fit — Bring on the culture wars.
- Making too many concessions — The buyer becomes the hostage.
- Failing to integrate within 90 days — Operations will stall (or get costly).
- Conqueror syndrome — Talent pool will get bloated.
- Overpaying for the deal — Enter the Buyer’s Remorse.
The M&A Sins eBay Committed
It is difficult to neatly categorize the eBay-Skype acquisition under any of Jack Welch’s Six Sins of M&A. The obvious choice would be Sin #6: Paying too much for an acquisition. eBay bought Skype for $2.6 billion, and then two years later, they took an impairment charge of $900 million, which means “Oops, we seriously overpaid.”² The root of the failure was eBay’s lack of due diligence to understanding their customers’ journey and Skype’s active customer segment. At the time, Skype was popular with students and those who made international calls.³ In 2005, eBay’s largest demographic was between the ages of 35 and 45.⁴ There was likely a demographic discrepancy at play here. eBay wanted to expand the range of its customer segment but might have failed to anticipate if Skype’s younger demographic would readily adopt the online auction platform.
eBay Misunderstood Its Customers
There is, however, a more significant issue at stake. eBay’s own customers did not care for an improved way to communicate with buyers. eBay was losing business and figured that adopting new technology would also result in improved user satisfaction¹ while also adopting new customers — Skype’s customers. This never materialized. eBay did not fully understand their customers’ end-to-end experience to give them what they wanted. When I consider Craigslist’s web design, it screams for a UI makeover.
Nevertheless, it has leveraged the same design since the 90s and is still in the top 15 websites in the US and amongst the top 50 globally!⁵ It is because Craigslist understands why people use their online classifieds website: “enabling a user to post something and enabling a user to find something.”⁶ Craigslist’s UX has informed its UI design to remain as text-based and straightforward as possible — similar to the classified ads section you’d find in a newspaper.
The 7th M&A Sin: Lack of Understanding
If organizational culture not only encompasses values but behaviors that make a company’s environment unique, then eBay did not understand their own online culture, let alone the culture of Skype and its user-base. So I would also add Sin #2: Misaligning the cultural fit between the two companies. When you combine Sins #2 and #6, you get a non-mathematical #7. And the 7th Sin would be, as my MBA strategy professor puts it, “a lack of understanding.”
Understanding Customer Experience is Key
How do you gain a deep understanding of your customers? Well, it’s not merely developing a customer journey map. That’s the lazy answer. Not every scenario needs a full-blown customer journey map, but you will need a map. You will gain a better understanding of your customers by choosing the best map tool to empathize with their total experience — from when they pick up the phone, sign in with an SSO, or pull into your parking lot.
Here are three kinds of maps you can use to begin making customer-first decisions.
1. Use Big Data to “Map” Your Customers Behavior
eBay could have understood their customers’ behavior more accurately if they paid attention to at least three factors: 1) The feedback they were receiving in the support forums, 2) How users were engaging with the current messaging feature, and 3) What users were actually saying throughout the transaction. Were most of them finding creative ways to do business off the platform and still leaving great reviews? Many of us have seen the “name [at] email [dot] com” in our messages. And many of us have transacted an auction successfully by breaking this standard Terms of Service. If eBay paid closer attention to this massive amount of information and data-mined specific behaviors by developing certain algorithms, they would have realized that over-paying for the “Ferrari of instant messengers” at the time was not a priority or even a desire for eBay users.
Big data, however, is useless if you collect it and do nothing or, worse, misinterpret the information. Many of your companies use the power of artificial intelligence (AI) and machine learning (ML), so this mitigates the fallacy of “reading tea leaves” or just getting the narrative wrong. And that’s the point of leveraging big data correctly. You must find the story. Mine the data points, but connect the dots appropriately to find the story of your customers.
2. Leveraging A Simple Empathy Map
An empathy map takes your data points and humanizes your customers. But you don’t need big data for this type of map. You need to “get out of the building,” as Steve Blank would say, and talk to your customers. Draw a side profile of a face on a sheet of paper and ask these questions:
- What are they hearing? What are they saying?
- What are they thinking?
- What are they seeing?
- What are they doing (jobs to be done)?
- What’s preventing them from doing it (obstacles)?
- How does this make them feel (frustrations/pains)
- What do they want to accomplish (desire/goals)?
If you don’t want to draw anything and get straight to it, here’s a printable template from @Dave Gray. The goal of the empathy map is to get you out of your head about your customers and do the work of observing, listening, and, yes, empathizing with them. Don’t cram every job-to-be-done into one map. Use as many maps as necessary to get an understanding of your customers. And if you want to get even more accurate data, use one map per customer and then combine similarities and differences based on the same jobs-to-be-done with your product or service.
3. Developing a Customer Journey Map
Here is the map you’ve been waiting for — the tried-and-true customer journey map. I like the Nielsen Norman Group’s breakdown of what a customer journey map is and how to use it. Think of the customer journey map combining the two maps above but laying it out in a way that tracks the customers beginning and ending of achieving a specific goal with your product or service. Sarah Gibbons defines it this way:
A journey map is a visualization of the process that a person goes through in order to accomplish a goal.
Here are the seven components of a customer journey map:
- Customer Persona: This includes all of your empathy map work, but written concisely — here you describe them as a person, not a set of demographic data points.
- Scenario: What is the context of the user in this journey?
- Goals: What are they seeking to achieve (not necessarily with your product, but in general within the context).
- Phases/Stages: The journey through your product/service will be broken down into specific steps, similar to the Hero’s Journey. It’s easier to move your customer to the next stage when you know where they’re actually located in the story.
- Quotes: What do they see during each phase?
- Emotions: This is typically demonstrated as a line graph that runs through the entire map. Up is happy, Down is frustrated, Middle is neutral.
- Opportunities and Internal Ownership: I believe this is one of the most critical parts of the map. Once you can pinpoint the gaps and frustrations in your customer’s journey, you will document ways to fix it and assign those potential solutions to team members.
Maybe the Problem Was Skype All Along?
In retrospect, eBay wasn’t the only one at fault. If Skype mapped their own customer’s journeys, they might have realized the acquisition would have made more sense with a company like, say, Microsoft (which is what happened in 2011)? Even that’s debatable. Some believe it was a successful acquisition, and others believe it was a failure. After assessing Skype’s hardship with eBay and now Microsoft (minus the recent growth because of COVID-19), I think it’s safe to say that Skype is the common denominator in making acquisitions difficult. And perhaps a big data and extensive journey mapping might begin to reveal the complexities of the messaging platform.
- Welch, J. (2016). The six deadly sins of mergers & acquisitions. Retrieved from: https://jackwelch.strayer.edu/winning/mergers-and-acquistions-six-deadly-sins/
- Lewis, A. & McKone, D. (2016). Merger & acquisitions: So many M&A deals fail because companies overlook this simple strategy.
- Deitcher, A. (2008). Skype & eBay — an introduction to and case-study in mergers and acquisitions. Retrieved from: https://blog.atomicinc.com/2008/09/04/skype-ebay-an-introduction-to-and-case-study-in-mergers-and-acquisitions/
- eBay. (2005). Seller central report: How buyers use eBay. Retrieved from: http://pics.ebay.com/aw/pics/pdf/us/sellercentral/buyers.pdf
- Hardwich, J. (2020). Top 100 Most Visited Websites by Search Traffic (as of 2020) https://ahrefs.com/blog/most-visited-websites/
- Sheppard, N. (2019). Craigslist: success without design. Retrieved from: https://www.userzoom.com/blog/craigslist-success-without-design/