MicroSkype
Microsoft to acquire Skype
In case you live under a rock, Microsoft announced today 10th May 2011 that they were acquiring Skype for $8bn. The chequered history of Skype is not worth repeating, but this is significant and important for Microsoft strategy watchers. Especially given the strategic alliance with Nokia Corp.
Imagine a NokiaSkypeMicrosoft Phone that doesnt need a mobile network operator. I bet Ballmer and Elop can imagine that! What that does is the holy grail of mobile - disintermediating the network operator.
"We will continue to support multi-platform development because it is fundamental to the value proposition of communications". - Steve Ballmer
Inevitably "microskype" is the twitter hashtag. Skype is a verb said Ballmer. Microskype is not.
Massive gamble
Ballmer might well do well in one of those celebrity poker tournaments. This is the gamble of the century so far. $8bn is twice what IBM paid for Lotus all those years ago. For an app which Microsoft already has most of the components.
ebay failed with Skype. Skype failed with Skype before that. They have just released a new Mac version that has been derided and universally panned for the backwards steps it took in usability for complex tasks. The Skype roadmap is not a clear one.
There is a whole slew of competitors and alternatives including three or more existing Microsoft products and strong alternatives like Google Voice, FaceTime, Yahoo/AOL/iChat/Live Messenger, OoVoo, BBM, PalTalk, TeamViewer, TinyChat and more (see below).
Why did they buy it then? Presumably to stop Google or Facebook getting it or indeed to neuter Skype itself as a post IPO threat. Microsoft bought the company for the "engaged user base" said former Skype CEO and now Ballmer Direct report Tony Bates.
A secondary reason might be the desire Microsoft has had for decades to push the telcos much harder. They are Microsofts biggest single customers and a formidable but slow channel to market. Ballmer could be forgiven for thinking that telcos stand in the way of greater Microsoft revenues through slow reaction and poorly executed Microsoft based product strategies. Microsoft has the clout to work through the regulatory issues around being a worldwide telco or indeed to force change upon them. I would be nervous if I were in a Microsoft business unit in a Telco right now.
What will happen now?
1) Microsoft will form a new division - 'Skype division'
Ballmer stated that he and other execs would "visit" Skype locations worldwide over the coming weekend. I hope that goes well.
Of course Microsoft want a payback, which will be in the form of new premium real-time and "non-real time" opportunities and advertising. We suppose that means paying to watch recordings made in Skype. He also talked about home page and other advertising in the client software.
Ballmer "Not everybody is doing video participation from their phone" Interesting that this fills a gaping void in Microsoft products then. Perhaps that was the driving point.
Microsoft products were falling behind here compared to Facetime and Skype. That just got fixed.
Skype is focused on the intersection point in the above chart where social meets mobile and video. Billions of people opportunity says Bates.Focus remains on the brand, and the multi-platform end point strategy.
Synergies, pointed out by Microsoft CFO are about Lync and Skype, Increased distribution opportunity and differentiation across multiple devices.
"Billions of users..." said Ballmer, with a rather fiery gleam in his eye. He likes that word.
Question we would like to have asked
Q. Why couldnt Microsoft develop their own solution out of Live Messenger, Office Communications Server, and Lync when they have this technology and R&D in abundance?
Alternatives
Google Voice - Not available in the UK
FaceTime for Mac - 59p from the Mac App store, free on iPhone 4 and iPad 2
FaceTime for Mac makes it possible video call iPhone 4 iPad 2, and iPod touch users as well as other Macs from your Mac. FaceTime for Mac automatically uses your Address Book contacts so there’s no need to create special buddy lists, and it works seamlessly with the built-in camera and mic on Mac notebooks, iMac® and Apple LED Cinema Displays.
It is beautiful to use, and really a wonderfully simple set of software. The trouble is, although I have all of this hardware not everyone I know has an iPhone 4, iPad 2 or a Mac. Many do, but I might just want to talk to someone who does not.
Yahoo Messenger, iChat, AOL, Live Messenger
Grand daddy of them all, Yahoo Messenger is still around. It runs on Windows, Mac OS X, iPhone, and the web browser. Not all features are on all platforms however. It supports instant messages, photo sharing, file transfer, voice calls and webcam video.
Yahoo Messenger may not have a very business oriented focus, but it is pretty well tried and tested.
iChat, AOL, and Live Messenger are variations on this theme. They havent done it before and they dont seem to be in a position to set the business world on fire now.
OOVOO
ooVoo is FREE multi-person video calling. Like Skype but yellow. You can join their community to find friends on ooVoo: http://modw.oovoo.com/ It uses the On2 video codec which we are fans of, but it remains a little garish to use compared to Skype and FaceTime.
Also call me old fashioned but I do not like a company that is so elusive about where it is really based (privately held, New York is all that it says but that just seems a placeholder), how many employees it has, etc. Still we are giving it a try.
BBM
Requires a BlackBerry, especially a BlackBerry Playbook, seems weak to only be able to talk to BBM users.
BBM video chat just arrived with the latest Playbook software update so not very many people have it yet.
PalTalk, TeamViewer etc
Not really business solutions. Consumer and 'Adult' focus. Windows only
TinyChat
Quick and easy to set up. Consumer focus
Conclusions
In the end, Skype is a pretty good piece of software. But it has not advanced much in the past few years. The ebay acquisition was a disaster and really killed Skype Corp 1.0. Skype Corp 2.0 was heading for an IPO. Many of the people inside will have been wired up that way. It will be interesting to watch the body count.
Previously, so the apocryphal story goes, the only person kept from the FoxPro acquisition was the accountant! Microsoft internal people will be sharpening their tools to protect their positions jobs and equity.
One wonders how they will cope with the inevitability of Microsoft assismilation. Microsoft track record with similar acquisitions is that they languish a little - see PlaceWare (which became Live Meeting) Years later it languishes still. If that happens the market will quickly soar past. Skype Corp 3.0 was not to be - instead we have Microsoft 'Skype Division'.
The reality is that Skype is not in the least bit integrated with Microsoft Enterprise solutions. Enterprise Skype was a project but never seemed to get out of the door. Perhaps an AD integrated Skype would be useful - but then what happens to Office Communications Server / Live Meeting / Lync? Consumer VOIP is here, does that mean Windows Live Messenger is dead? I am already Confused?
And what of Nokia. One can only imagine being invited to a senior management meeting where Nokia, Microsoft and Skype joint handset and market opportunity strategy is worked out. Disguised under a 'roaming ot other networks' agreement a Nokia Skype Microsoft phone could become the biggest trojan horse since the original one.
Imagine being Ballmers most senior Voice Product guy. "Here be demons" my road-map would say as it tried to make sense of all the existing Microsoft products and bring them together. It wouldn't be a good presentation. I would be expecting an angry kick the waste basket round the room atmosphere.
