So Microsoft recently acquired Skype for $8.5B.
I love Skype and I'm not the biggest fan of Microsoft, so I've had trouble figuring out my view on this.
What was interesting from a PR perspective was how lackluster the coverage was. This kind of announcement back in 2000 would have generated endless feature stories with larger-than-life headlines about whether Microsoft was going to wipe out carriers from around the world.
However, while this story was covered just about everywhere, the articles were hum-drum at best, four-or-five-paragraph articles that simply articulated the details around the acquisition. The blogsphere actually had much more interesting commentary where people delved in to what this might mean.
The reason for this in my opinion is that Microsoft is a place other companies go to become assimilated (sort of like the Borg from Star Trek). It's the exact opposite of excitement and new possibilities and fulfilling whatever vision or mission they had in the first place. So the media simply doesn't get excited when they hear about Microsoft acquiring a company, no matter how much it cost or how important the implications are (and I think the Skype acquisition has huge implications).
As to whether the acquisition is good or bad, I flip flopped on this issue. At first I thought it was a horrible acquisition - yet another instance where Microsoft already basically has the technology to do what the company they acquired does (in this case MSN Messenger is not much different than Skype) yet because they've failed they acquire the other player simply to absorb their user base. So technologically I didn't understand the acquisition and I sure don't understand paying $8.5B for them (in a space where the ultimate winners is far from decided - let's face it, 95% of the world still doesn't use a softphone).
In addition, I use Skype for long distance calling (it costs me $2.99 for unlimited North American LDC). Yet, now that I know its part of Microsoft, I'll be keeping my eyes peeled for alternative options (google voice perhaps?) because something about Microsoft and VoIP just doesn't sit right with me as a consumer. So while Microsoft may view the acquisition as enhancing their brand by buying a leading-edge innovator, I actually see it as the opposite, they simply weaken the Skype brand, creating an opening for competitors to move in on Skype's current customer base.
So that's what my original thought process was, that this was a bad acquisition.
Then I thought about something. Right now in Canada you can't get a Canadian telephone number for use with Skype. When I call out from my Skype, if the other person has caller ID, they simply see 'unknown number' or they see some randomly generated number that isn't the same the next time I call.
However, with Microsoft at the helm, perhaps this will change. Microsoft has the lobbying power and market weight to demand that bodies such as the CRTC lift regulations that prohibit the growth of Skype. In addition, Microsoft may also have the resources to boost Skype's level of call quality. Heck, maybe they even have the weight to make the carriers leave Skype alone as it grows (because it's not hard to imagine that were Skype to ever start significantly eroding carriers' customer base that they would simply find a way to degrade Skype traffic crossing their network). With Microsoft in play, carriers will think twice about messing with Skype traffic and putting their relationship with Microsoft in jeapordy.
If Microsoft can pull these things off... get Skype numbers available around the world, increase call quality and keep carriers from interferring, then this may actually be a great acquisition and may be worth the trade off to brand equity that comes with any assimilation a company undergoes with Microsoft.
From a PR perspective Microsoft was smart to put
Skype's CEO in charge of the Skype division over at Microsoft. That maintains a degree of continuity and interest in future announcements around Skype.
What they need to do going forward though is not let Skype lose its individuality. Skype doesn't look or behave like any other Microsoft product, and that's a good thing. If suddenly we start hearing Microsoft noises coming from Skype when you start it up, or start getting advertisements for Microsoft products in Skype's interface, it's going to cheapen the product and strip away any brand equity that Skype has amassed over the years.
On a side note, this whole space is such an odd space. Skype itself is not mind-boggling technology. I use to work for a company years ago called CounterPath and as far as I'm concerned their softphone was way easier to use and was 'cooler' than Skype is. The difference though is that Skype is hosted in the cloud whereas CounterPath requires the user to have an account with a SIP provider (or at least that's how I remember the case being).
My point is though that anyone could start up a Skype overnight by simply building out a giant server farm with connectivity to the various carrier networks around the world (ala Vonage). OK, it would take more than overnight, but it wouldn't be that hard either. I'd love to see CounterPath do something like that. While Vonage is interesting, it's a swap-out play - ie. replace your existing phone with a Vonage phone - whereas I think a pure-softphone play more interesting (let me DUMP my landline and switch to a mobile + softphone set up already).
In the future we'll all be tossing our landlines and using a mobile phone in conjunction with a softphone on the PC/laptop. So Microsoft is smart to snatch up the technology that will be essential to that model, but I question whether Skype is so unique that they are worth $8.5. Right now the answer is that yes, they are that unique, but there's no reason their dominance couldn't be undone over night by the right companies and products. RIM had the playground all to itself as well, until Android and the Iphone decides to join in, and we've all seen what a historic beating RIM has taken as a result.
Getting to the top is one thing. Staying at the top is another.
I love Skype and I'm not the biggest fan of Microsoft, so I've had trouble figuring out my view on this.
What was interesting from a PR perspective was how lackluster the coverage was. This kind of announcement back in 2000 would have generated endless feature stories with larger-than-life headlines about whether Microsoft was going to wipe out carriers from around the world.
However, while this story was covered just about everywhere, the articles were hum-drum at best, four-or-five-paragraph articles that simply articulated the details around the acquisition. The blogsphere actually had much more interesting commentary where people delved in to what this might mean.
The reason for this in my opinion is that Microsoft is a place other companies go to become assimilated (sort of like the Borg from Star Trek). It's the exact opposite of excitement and new possibilities and fulfilling whatever vision or mission they had in the first place. So the media simply doesn't get excited when they hear about Microsoft acquiring a company, no matter how much it cost or how important the implications are (and I think the Skype acquisition has huge implications).
As to whether the acquisition is good or bad, I flip flopped on this issue. At first I thought it was a horrible acquisition - yet another instance where Microsoft already basically has the technology to do what the company they acquired does (in this case MSN Messenger is not much different than Skype) yet because they've failed they acquire the other player simply to absorb their user base. So technologically I didn't understand the acquisition and I sure don't understand paying $8.5B for them (in a space where the ultimate winners is far from decided - let's face it, 95% of the world still doesn't use a softphone).
In addition, I use Skype for long distance calling (it costs me $2.99 for unlimited North American LDC). Yet, now that I know its part of Microsoft, I'll be keeping my eyes peeled for alternative options (google voice perhaps?) because something about Microsoft and VoIP just doesn't sit right with me as a consumer. So while Microsoft may view the acquisition as enhancing their brand by buying a leading-edge innovator, I actually see it as the opposite, they simply weaken the Skype brand, creating an opening for competitors to move in on Skype's current customer base.
So that's what my original thought process was, that this was a bad acquisition.
Then I thought about something. Right now in Canada you can't get a Canadian telephone number for use with Skype. When I call out from my Skype, if the other person has caller ID, they simply see 'unknown number' or they see some randomly generated number that isn't the same the next time I call.
However, with Microsoft at the helm, perhaps this will change. Microsoft has the lobbying power and market weight to demand that bodies such as the CRTC lift regulations that prohibit the growth of Skype. In addition, Microsoft may also have the resources to boost Skype's level of call quality. Heck, maybe they even have the weight to make the carriers leave Skype alone as it grows (because it's not hard to imagine that were Skype to ever start significantly eroding carriers' customer base that they would simply find a way to degrade Skype traffic crossing their network). With Microsoft in play, carriers will think twice about messing with Skype traffic and putting their relationship with Microsoft in jeapordy.
If Microsoft can pull these things off... get Skype numbers available around the world, increase call quality and keep carriers from interferring, then this may actually be a great acquisition and may be worth the trade off to brand equity that comes with any assimilation a company undergoes with Microsoft.
Skype's CEO in charge of the Skype division over at Microsoft. That maintains a degree of continuity and interest in future announcements around Skype.
What they need to do going forward though is not let Skype lose its individuality. Skype doesn't look or behave like any other Microsoft product, and that's a good thing. If suddenly we start hearing Microsoft noises coming from Skype when you start it up, or start getting advertisements for Microsoft products in Skype's interface, it's going to cheapen the product and strip away any brand equity that Skype has amassed over the years.
On a side note, this whole space is such an odd space. Skype itself is not mind-boggling technology. I use to work for a company years ago called CounterPath and as far as I'm concerned their softphone was way easier to use and was 'cooler' than Skype is. The difference though is that Skype is hosted in the cloud whereas CounterPath requires the user to have an account with a SIP provider (or at least that's how I remember the case being).
My point is though that anyone could start up a Skype overnight by simply building out a giant server farm with connectivity to the various carrier networks around the world (ala Vonage). OK, it would take more than overnight, but it wouldn't be that hard either. I'd love to see CounterPath do something like that. While Vonage is interesting, it's a swap-out play - ie. replace your existing phone with a Vonage phone - whereas I think a pure-softphone play more interesting (let me DUMP my landline and switch to a mobile + softphone set up already).
In the future we'll all be tossing our landlines and using a mobile phone in conjunction with a softphone on the PC/laptop. So Microsoft is smart to snatch up the technology that will be essential to that model, but I question whether Skype is so unique that they are worth $8.5. Right now the answer is that yes, they are that unique, but there's no reason their dominance couldn't be undone over night by the right companies and products. RIM had the playground all to itself as well, until Android and the Iphone decides to join in, and we've all seen what a historic beating RIM has taken as a result.
Getting to the top is one thing. Staying at the top is another.
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