What to Expect from Microsoft’s Purchase of Skype
Monday evening Microsoft completed the $8.5 billion acquisition of Skype, the world’s fastest-growing service for Internet communication. Microsoft’s CEO Steve Ballmer led the charge and paid a very expensive price for a company which is not yet profitable. Skype lost $6.9 million last year despite posting revenues totaling $860 million (Skype currently has $686 million in debt).
So…..Why is Skype worth so much?
- Immense user base: 170 million active users and 663 million registered users.
- Well used – Had over 207 billion minutes of voice and video conversation in 2010
- Move to video – 40% of Skype activity is video related
- Skype has a major footprint in mobile communications globally with their offerings
What to expect:
- Skype will be integrated into Microsoft devices and systems: Xbox Live, the Windows Phone, Hotmail, Lync and Outlook, claims Microsoft in an announcement.
- Microsoft has also promised to keep supporting and developing Skype clients on non-Microsoft platforms.
- Skype’s CEO Tony Bates was already working on a Video Advertising plan, but with the acquisition video ads are sure to appear because very few of the 170 million active Skype users are paying customers (debt problem mentioned above).
- Microsoft can now leverage Skype to urge mobile carriers to adopt the Nokia Windows Phone 7 smartphone. Having several carrier agreements in place for the phone’s release in about a year will really help sales.
- Skype with new help from Microsoft will continue to pursue an Enterprise Offering. They have long struggled with business offerings because of a less secure infrastructure (stability and reliability concerns).
It will be very interesting to see how all of this unfolds, but I would expect more ads and having to pay for better service. I hope that a better revenue stream will allow Skype to become more reliable and easier to use globally (see my blog on Skype/ WIFI frustration). We will continue to monitor the social media reaction on this acquisition.
What do you think about this deal? Will it work out for both parties?