Here's how it works:

Get up one morning, check your email on your iPhone. There's a message from PayPal confirming your 100 Euro purchase of services from Skype.

Whoa. I didn't order 100 Euros of anything. And in Euros?

You go to your computer, wake it out of its sleep, and an alert window from Skype is waiting for you.

"Your Skype password has been recently changed. You need to sign in again with your new password in order to use Skype. This is a security measure taken in order to prevent your Skype Account from being abused."

Hmm. I didn't change my password.

You try to login to Skype. You can't. You visit your PayPal account. 100 Euros has been taken out of it to purchase Skype services. You think fast, cancel the agreement you had between PayPal and Skype
to pay a $3 monthly fee for SkypeOut. You send a fraud report to PayPal. You send a fraud report to Skype.

In both reports you summarize the issue: someone hijacked your Skype account and stole 100 Euros (about $142) worth of Skype services from you. Nothing authorized by you at any point. It's called theft. All will be good, right?

PayPal takes four days to make a determination.

Quote: "A PayPal claims specialist has reviewed the case and determined that the claim does not meet the criteria for unauthorized use, so the case is now closed."

Are you kidding? According the the "specialists", theft is not unauthorized use. Skype gets to keep its 100 Euros that was stolen from you.

You think, "I'll just appeal this..where's the 'appeal' link?" You find there is none. You have to write PayPal a letter. Yes, a letter. To Omaha, Nebraska. A letter asking for the documentation they used to make the determination. An Internet company insists you write them a letter.

OK, surely Skype will help out. That is, if they ever write back. They take nearly two weeks to get around to assigning a human to the case.

Skype writes back in 10 days. "Patrick P. is on the case. Patrick says: "In your case it appears that someone has succeeded in fraudulently obtaining your PayPal account and purchasing credit."

You think, "great, somebody understands."

Patrick goes on:

"First, you are not liable for this transaction in any way. "

Sweet. You'll just appeal to Skype and... Wait. You read further.

"We suggest that you submit a Transaction Dispute via Paypal.com."

Great. Back to square one.

Patrick sends another email a couple of days later. It's about that money that was stolen from you to buy services from them that you didn't authorize.

"Skype can not refund the money you might have lost due to this incident. Every user has to take care of his/her security systems on private computers."

"Money you might have lost?" You did lose money...and by the way, it's your fault, loser.

(Photo by Joi)

With video and text chat allowing managers to check in on employees and feed them scripts, as well as cheap international calling and archiving conversations, it can work as a cheap and easy tool for managing remote customer-service centers to close those deals made on eBay and keep the credit card charges flowing into PayPal. In other words, it's about lubricating "transaction friction" by increasing buyer confidence and decreasing credit card charge-backs and complaints. Now if only there was a country with lots of English speakers and really low wages.

The move effectively put Skype on the sale rack, stirring up rumors that companies such as Google and News Corp. would soon offer bids. Of course, if anybody is interested in purchasing Skype, it doesn't look like the price will go up anytime soon.

Here are the highlights, handily pared down from SeekingAlpha's voluminous list:

• JPMorgan: Raises estimates, juiced about surprising revenue and operating profits.
  
• UBS: Raises price target from $38 to $41, still has concerns about erosion in core listings growth.
  
• Merrill Lynch: Reiterates Neutral rating, still waiting to hear if other new investments will flop like Skype.
  
• Goldman Sachs: Raises price target from $43 per share to $51, likes stable growth.
  
• Deutsche Bank: Downgrades eBay from hold to sell, complains about 2 percent transaction volume growth (and potentially declining soon), user disengagement, higher ad costs, declining purchase frequency, rising seller costs and operating margin pressures.
  
• RBC: Raises price target from $40 to $44, but only because they're optimistic about the whole sector.
  
• American Tech: Raises price target from $45 to $47, approves decision to cut auction listing fees.

  (Photo by Ryan Fanshaw Photography)
  

MYSPACE AND SKYPE ANNOUNCE PARTNERSHIP BRINGING FREE INTERNET VOICE COMMUNICATIONS TO MYSPACE GLOBAL COMMUNITY

Partnership Creates World's Largest Online Voice-Connected Community

Beta Version of 'MySpaceIM with Skype' Announced Today

LOS ANGELES/LUXEMBOURG, October 17, 2007 — MySpace, the world's most popular social network, and Skype, the leading Internet communications company, today announced a partnership to empower the MySpace community with voice communications. With more than 110 million monthly active MySpace users and 220 million Skype(tm) registered users around the world, this partnership connects two of the most popular communications platforms on the Internet to create the world's largest online, voice-connected community. The announcement unveils MySpaceIM with Skype, a new product that integrates MySpace's popular IM client—currently the world's fastest-growing IM platform with more than 25 million installed users—with Skype's free, high-quality voice-calling capability. The partnership will also enable users to link their MySpace profiles and photos or avatars to their accounts on Skype. Both products will be available to users starting in November. Launching in 20 countries where MySpace has localized communities, MySpaceIM with Skype will enable millions of users to place free Skype Internet calls to other MySpace or Skype users. The addition of Skype voice-calling to MySpace's instant messaging feature gives users more ways to easily connect with friends and family around the world, and does not require MySpace users to download any additional Skype software.
"MySpaceIM with Skype is a truly groundbreaking product integration and partnership," said Chris DeWolfe, co-founder and CEO of MySpace. "Skype has the leading technology in Internet voice communications and an enormous international user base that we're thrilled to connect with our existing community. Our network has no geographical boundaries — Internet calling is the natural next step for how our members communicate with each other."
Skype is available in 28 languages and is used in almost every country around the world. The ability for Skype users to link their Skype accounts to their MySpace profiles will be available globally, except in Japan, China and Taiwan. In addition to free, high-quality Skype calling, MySpaceIM with Skype will also allow the users of the MySpace network to optionally select Skype's premium fee-based products, including:
* SkypeOut(tm) - To make calls to landlines and cell phones domestically or internationally;
* SkypeIn(tm) - A local phone number to receive calls wherever you are in the world from other people on landlines or cell phones;
* Voicemail - To take voice messages when you're busy or offline; and
* Call forwarding - To redirect incoming Skype calls to a landline or cell phone.
"Both MySpace and Skype have become a part of people's lives by bringing people closer together, no matter where they live in the world. This partnership reiterates that Skype is the platform of choice for Internet communications because we make it simpler and easier for people to place free calls to one another whether they are on Skype or within the MySpace network," said Michael Van Swaaij, interim CEO of Skype.
MySpaceIM with Skype takes advantage of the many personal privacy settings available to users throughout the MySpace network. Users who have a MySpace profile set to "private" can not receive a Skype call from someone who is not on their friends list. Users can also choose to allow only those individuals they have affirmatively added to their Skype personal contact list to call them. Users are empowered to block any MySpaceIM with Skype user at any time, and with the "incoming call window" users can pre-screen incoming callers in order to accept, ignore, or block the call.
Financial terms of the MySpace and Skype deal were not disclosed.

Skype competitor Jajah launched click-to-call buttons that connect potential buyers and eBay sellers, accomplishing an integration into the auction site that Skype hasn't. In response to this affront, eBay last night deleted all auctions with Jajah buttons on them. Reportedly, eBay and Jajah had reached some sort of tentative agreement giving Jajah users the go-ahead to put Jajah buttons on their auctions — but that deal is now clearly dead.

So where does that leave things? eBay screwed up so badly with Skype that some in the Valley say the botched acquisition could burst Facebook's ridiculous valuation bubble. Stifled by eBay's bureaucratic inertia, Skype let a rival beat it on its own home turf.

It's high time for eBay to sell Skype to someone who cares. eBay succeeded with PayPal because it was a natural fit with eBay's customers, both buyers and sellers. But now, the only thing that makes less sense than buying Skype for $2.6 billion is continuing to hang onto it. (Photo by Ryan Fanshaw Photography)

Some people may want to monetize faster, but the key is to figure out what is the right speed of monetization. If you act too aggressively, there is a real risk you will lose the huge active user base.

The risk of losing users because of increased or new fees doesn't decrease over time. On the contrary; users become more and more used to services being free. Attracted by free services, they come to expect it, and chafe at being charged. Acting as if their is some far off date when increased fees are suddenly more palatable belies the fact that Skype doesn't know how, or is afraid, to turn their service into a real moneymaker.

Instead, eBay ended up throwing in its lot with a local competitor, Tom.com, late last year. And even that hasn't helped. eBay's market share in China has fallen by more than half this year. I'd argue that Skype's failure to strengthen eBay in China, more than anything, is why the company had to take a writeoff.

No one is more familiar with the pains of a lowball bid than eBay itself. It tried, repeatedly, to buy PayPal before that startup went public, finally buying it for $1.5 billion after its IPO. In retrospect, that struck PayPal's founders and investors as low, but it was a good price in the depths of the dotcom depression earlier this decade. And most importantly, eBay could have had it even cheaper if it had just bid a bit earlier. That experience surely lingered in Meg Whitman's mind as she negotiated the Skype purchase.

Microsoft, likewise, can look at Yahoo's experience, missing out on chances to buy Google, YouTube, and even Facebook on the cheap. Yahoo today is surely not the better off for having failed to clinch those deals.

So yes, Skype's a good reminder of the risks on the downside. But it would be foolish to think that Microsoft's balance sheet, bursting full of cash, couldn't handle a $500 million writeoff. Or more. The real question: Can Microsoft's executives handle the marketplace's perception of the company's irrelevance, a perception that grows relentlessly with each passing day?

Microsoft has provided countless Windows patches without triggering massive, multiday Skype outages. Skype's engineers did acknowledge that their own software's supposed "self-healing" abilities did not work, that there was a flaw in the software that they have identified and corrected. But a flaw in their own software doesn't make it Skype's fault. "We love our customers too much to let that happen," a Skype spokesperson posted on its blog. Instead, they're "proud" to have "provided a technically resilient communications tool to millions of people worldwide." So resilient that millions of customers who'd come to depend on the service were locked out and kept in the dark for more than two days.

Skype's attempts to downplay this serious incident just raise more questions. What does Skype mean by "resilient"? And what does it mean by "love"?

While Skype has dispelled rumors of a system crash, a cyberattack, and problems with a planned billing upgrade ("We love our customers too much to let that happen, " Skype claims), what was initially defined as a "software issue" has only been clarified as "a deficiency in an algorithm within Skype networking software." How a "deficient algorithm" disrupts a service that was working fine two days ago or how they can identify the problem but only make it "slightly better" remains a mystery.

Why is it that Skype loves its users enough to protect them from outside attackers and acts of God, but not their own "deficient" software? And why would its loved ones ever accept such a lame excuse? Shareholders have already shaved $1 billion off of eBay's market cap, apparently as punishment. Now that's the kind of tough love Skype needs to see.

Valleywag tipster Cyrus Farivar reports from Tallinn, Estonia:

This van belongs to Linnar Viik, father of the Estonian Internet. He now works at Skype. Turns out, he also loves windsurfing, and apparently needed a vehicle big enough to carry his and his buddies' windsurfing gear to reach the best spots. So what did he do? He bought a big, fuck-off SWEDISH MILITARY TRANSPORT vehicle at auction from a colleague who bought it at an auction. Oh, and it has on-board CDMA/Wi-Fi, and power outlets too.

• What will happen now that the Skype protocol has been cracked. Especially since the VoIP service is already free. [Techmeme]
• What blog-tracking service Technorati will do with its new $7.6 million in capital. [Techmeme]
• Whether it's dumb, or really dumb, not to rename your small business when it's called AdSense. [Techmeme]

• Social site rejects mad money: Facebook's not the only social site hubristically turning down generous offers. International site Bebo just said no to a $550 million buyout, according to the blog TechCrunch. The company's holding out for a billion-dollar offer, which it just might get — unless the market tanks this year. Then Bebo will have to wait for a lowball offer, just like Tribe Networks. [TechCrunch]
• More free VoIP services: Skype, which is already providing free domestic computer-to-phone calls on its network, now offers free international calls. The company says it will profit from add-ons like headset purchases — until it starts giving those away. No wonder eBay's market cap has dropped ever since it bought Skype. [Skype]
• Lively dot-com gets a lifeless competitor: See, old-school pet site Dogster is cute, friendly, and human. Newcomer pawspot is cold and forgettable. Guess which one will get more VC funding. [TechCrunch]

Now PayPal president Jeff Jordan is stepping down to "spend more time with his family" (read: kicked out gracefully). He's being replaced by Skype president Rajiv Dutta, whose role will be filled by Skype VP of products Alex Kazim.

It's the sort of half-hearted swap made while biding time. Picture eBay as a treadmiller running backward to exercise different muscles — it may not see where it's going, but since it's headed nowhere, that doesn't matter.

EBay changes execs at PayPal, Skype in shakeup [Reuters]

• Animal Magazine editors sneak into Apple's 24-hour store without waiting in line. Then they pull the classy move of setting its website as the test computers' home page. They also confirm that the SNL staff shouldn't head out without makeup. [Animal Magazine via Blogebrity]
• Boing Boing gets giddy over DRM protestors (pictured doing an Intel ad), because no cause is worth fighting for more than your right to play Beyonce on your iPod. [Boing Boing]
• Web 2.0 jokes make it to the hipster lit comics. LOOK WHAT YOU PEOPLE HAVE WROUGHT. [Cat and Girl]
• Jobster acquires Jobby, making the cutest headline ever. [TechCrunch]
• Streamcast, the guys behind old-and-busted file-sharer Morpheus, have expanded their lawsuit against Kazaa, Skype and Skype's founders to include Skype's new owner, eBay — or as Techdirt puts it, "Streamcast realizes eBay is the one with the money." [Techdirt]

A: Free Skype calls to all landlines and mobile phones within the US and Canada
B: but how do they make money?
A: I don't care! People used to say that about Google
B: dummy, google makes money selling info to the NSA

Remember, when you're witty and need to share it, ping tips@valleywag.com.

Earlier: Om Malik not all over free SkypeOut [Valleywag]

But give GigaOM a break. He does occasionally have real journalism to do as an editor at Business 2.0. And this news is pretty surprising. VoIP provider Skype seems to be turning its cash cow into its loss leader. The SkypeOut service, which lets Skype users call landlines and cell phones from their computers, went from fee-based to free for the rest of the year. And now we all need Om to explain how Skype plans to make money now.

Free calls to all landlines and mobile phones within the US and Canada [Skype blog]

To avoid China's site blacklist, you'll need tools like the EFF's Tor system. For keyword censorship, there's always bad spelling. But this handy code-word list should prove helpful:

• "Falun Gong" = "The 700 Club"
• "Tiananmen Square" = "Lover's Lane"
• Any censored obscenity = "fiddle-faddle"
• "Democracy" = "Free beer"
• "Oppression" = "Toe-stubbing"
• "Dalai Lama" = "Big Bird"

Granted, if anyone in China is speaking in Chinese, you'll have to get your own damn list.

Yahoo accused of helping jail China Internet writer [Reuters]
Skype boss defends Chinese text censorship [Inquirer]
Google in China: The Big Disconnect [NYT]
List of words censored by search engines in Mainland China [Wikipedia]

18. Perhaps they should change the motto to "Don't be stupid."
New Google employee Mark Jen adds a post to his blog in which he says he spent his first day in an HR presentation about "nothing in particular." Apparently, Jen snoozed through the company's strict disclosure rules. In a subsequent post, he reveals that the company expects unprecedented revenues and profit growth in 2005, projections that Google has yet to share with Wall Street. Jen soon receives another presentation from HR: a pink slip.

Jen now works for Plaxo, an address-book service. He promises to be more careful on his new blog. More brilliant moves after the jump.

19. "Don't be stupid" keeps sounding better and better. In July, Google informs CNET that it will prohibit company employees from talking to its reporters for a full year. Why the boycott? In an article about Google's privacy practices, CNET reporter Elinor Mills demonstrated the kind of personal information that can be found online by googling CEO Eric Schmidt, revealing his $1.5 billion net worth, details of his attendance at a $10,000-a-plate fund-raiser for Al Gore, and — gasp! — his passion for flying airplanes. In September, facing criticism for hypocrisy and overreaction, Schmidt cuts short the silent treatment and grants Mills an interview.

26. And maybe the cops come three days later and find you stabbed to death on your kitchen floor.
"If there's a burglar in my home, maybe I send an e-mail or a text message to the police instead of making a call."
— Skype co-founder Niklas Zennstrom, on his VOIP service's lack of 911 access.

40. Just google him. We hear it really ticks him off.
"F—-ing Eric Schmidt is a f—-ing pussy. I'm going to f—-ing bury that guy, I have done it before and I will do it again. I'm going to f—-ing kill Google."
— Microsoft CEO Steve Ballmer, in response to the departure of Mark Lucovsky, a former Microsoft "distinguished engineer" who left last year to work at Google....punctuated by the tossing of a chair...

43. Good news, kids: You can flunk out of kindergarten and still grow up to become the CEO of a major tech company!
"We're grabbing that word and saying, of anybody, we own the word 'share.'"
—Sun Microsystems CEO Scott McNealy, discussing his company's open-source strategy.

101 Dumbest Moments in Business [Business 2.0]