Seven thoughts on Microsoft buying Skype

It is easy to be negative about Microsoft and their acquisition of Skype. Here are some thoughts that are generally upbeat. Yes, Microsoft has Live Messenger, but as Tom Merritt said the other day, nothing else does everything Skype does as well as Skype does.

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Seven thoughts on Microsoft buying Skype

1. I have to confess that I had an inkling something was up when I suggested that Microsoft buy Skype in the newsletter a couple of weeks ago. I'd been hearing from some of my sources that the two companies were talking, I just didn't think it'd happen quite so quickly -- or even at all given the interest Skype was also getting from Google and Facebook (and probably some other names that haven't emerged).

2. Microsoft probably overpaid -- but it's too early to tell. $8.5 billion comes out to about $50 per active user (they claim about 170 million "connected users"). That's a lot of value to have to try and extract given that most Skype users don't pay anything at all to use the service. Even so, the strategic value in owning Skype is considerable and not to be underestimated. It's just going to be a challenge to justify the price that was paid unless they're really aggressive in -- and especially successful at -- leveraging both the technology and the social network to create new revenue opportunities. There are the obvious things they can do to integrate, but, given that we're just at the cusp of this big transition to IP-based communication, it's hard to tell just how large those other opportunities could be and, as a result, it'll be a long time before we can tell whether Microsoft spent too much.

3. This is good for Facebook. It was hard to imagine a pre-IPO Facebook doing such a large deal anyway, and now given, Microsoft's investment and partnership, it seems likely that they'll be able to piggyback on the purchase and get the kind of deeper integration with Skype they were looking for. Plus now they don't have to worry about Google snapping Skype up and using it to build some sort of competitive social offering.

4. This is great for Windows Phone and Nokia. Microsoft will be able to layer Skype into its mobile OS in ways that weren't possible before, and I'm sure Nokia, which has always been partial to Skype (see what they did with Skype and the N900, for example), will be happy to market a phone that appeals to heavy Skype users.

5. Of course, the carriers are going to be wary. They already don't like Skype -- because, well, they don't like anything that might lead to them becoming simply dumb pipes -- but with Microsoft's weight (and buckets of cash) behind it, Skype might very well be able to make inroads here. It'll be interesting to see how much the carriers push back.

6. Microsoft bringing Skype to Xbox and Kinect is a no-brainer. They've done a good job turning the Xbox into more than just a gaming console, and adding Skype video calling to the mix only adds to its appeal. This probably would have happened anyway, but now it'll probably happen more quickly and the integration with Live will be better than it would have been otherwise.

7. It's harder to tell how this will impact Skype users more generally, but Microsoft says it's committed to keeping Skype on non-Microsoft OSes, and I honestly think they'd be crazy not to. (Want an easy way to impress everyone? Improve the horrible Mac client Skype released recently.) In fact, there's really no point to buying Skype if Microsoft isn't going to use it as an opportunity to evolve how it thinks about its products, and so, if anything, they should expand the number of products and platforms for which Skype is available. The opportunity here, at least as I see it, isn't just the access to Skype's userbase and technology, it's that it gives Microsoft a way to embrace the multiplatform world I described in that earlier newsletter. To put it another way: Microsoft needs to become more like Skype. Yes, bringing Skype to Outlook and the Xbox like that will be good, but the wider implication for Microsoft is in how Skype thinks of itself as a product, i.e. one that becomes more valuable the more devices and platforms it works on. Read more at gdgt.com

 

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