Major Implications Come with Microsoft’s Biggest Acquisition to Date
You’ve probably heard by now that (pending regulatory approval). This is Microsoft’s biggest acquisition to date at $8.5 billion, and Skype’s second acquisition (it’s already been bought and sold by eBay). Since Skype’s release from eBay, it has been quite busy adding features and functionalities, and even making some acquisitions of its own, such as that of live streaming video service Qik.
Was this acquisition a good idea? Comment here.
Skype has a reported 663 million registered users and 145 million average connected users. The company recently announced a record of 30 million users online at the same time.
The deal has enormous implications, not only for Microsoft’s own offerings, but for the industry at large. There are also plenty of concerns. Let’s get to those first.
Clearly, Skype has a big user base, and users have the right to be worried about what is going to become of their beloved service in the hands of a giant like Microsoft. Especially considering Microsoft’s track record of acquisitions (laid out its graphic nature here).
Marshall Kirkpatrick at ReadWriteWeb brings up some reasonable fears, such as product neglect and malware issues. “Will Skype in 14 years look like Hotmail does today?” he asks. “Malware is already an issue for Skype and of course it’s a well known part of the Microsoft landscape,” he also notes.
How will it affect use across various platforms? Microsoft says it will continue to invest in and support Skype clients on non-Microsoft platforms. Still, this is a little vague, and considering how much head butting goes on between Microsoft and Google, it wouldn’t be an enormous shock to see some issues raised in this area in the future.
On reassuring the continued support of other platforms, Steve Ballmer said at the press conference, “I said it and I mean it. We will continue to support non-Microsoft platforms.”
“We’re one of the companies that has a track record of doing this,” he added. Still, does that mean all platforms?
The fact that this is such a huge acquisition for Microsoft, however, should be an indication that the company will take it very seriously, as it has so much invested in Skype’s future success.
Skype, which has more users than Twitter, should help Microsoft on numerous strategic levels. Mobile would be a major one. Skype will support Windows Phone, of course, and while it remains to be seen what kinds of integrations we can expect, there’s little doubt that it will be an integral part of the Microsoft mobile strategy as it tries to gain ground against Google’s Android and Apple’s iOS.
Also consider that Microsoft has recently made deals with Nokia and RIM that will see Microsoft services heavily integrated on these companies’ mobile devices. It stands to reason that Skype will play a major role here as well.
It doesn’t seem out of the realm of possibility that Microsoft would at some point create a Skype-branded phone.
The Living Room
The living room is one area where Microsoft already has a tremendous edge over competitors like Google and Apple. While the jury’s still out on the future success of Google TV and Apple TV, it’s been pretty well established that Microsoft’s Xbox line is a smashing success. Kinect is doing pretty well too. Guess what will be integrated with both of these.
In its announcement, Microsoft points out its “long-standing focus and investment in real-time communications across its various platforms” including Xbox Live. It also says Skype will support Xbox and Kinect, and will connect Skype users with Xbox Live (in addition to Lync, Outlook and other communities).
PayPal is also coming to Xbox Live. That can’t hurt either.
Let’s not forget about the implications for businesses. Microsoft says the acquisition will increase accessibility of real-time video and voice communications for enterprise users and generate “new business and revenue opportunities”.
Plenty of businesses are already using Skype. How many are using Microsoft products? This could be a huge blow to Google, who is aggressively going after the enterprise market with Google Apps, and soon with Chrome OS. Skype may give businesses another reason to stick with MS. Of course it remains to be seen what kinds of integrations we’ll see.
Competition and Google
There are plenty of areas where Microsoft and Google compete with one another, and Skype could go a long way in helping Microsoft with maybe all of them. That includes the areas we’ve already discussed – mobile, the living room, and the enterprise. It also includes the communication services Skype provides on its own.
Google has been doing more and more in this area, whether it be in the form of Google Voice or video chat via Google Talk and Gmail (email being another prime example of where Google and Microsoft already compete). How about live streaming video? Skype recently bought Qik for this, and YouTube recently announced its own YouTube Live (both a viewing destination and a platform for streaming live video).
YouTube is also doing plenty of other things to cement its position of being THE online video destination. This week, the company announced new partnerships with movie studios, the doubling of its catalog of movie offerings (including new releases), and increased investments in original content from partners. This comes back to the living room discussion, but I’m guessing we will continue to see overlap in the offerings from these two companies here.