Microsoft Acquires Skype for $8.5 Billion – A Game Changer or The End of Skype As We Know It ?

Microsoft Acquires Skype
Microsoft Acquires Skype

Microsoft announced today that they have acquired Skype. This is huge news and a nice windfall for 30% owner eBay.   There had been serious speculation that Skype would do an IPO this year.  But having posted a net loss of $7 million on total net revenues of $860 million they had still not cracked the profitability model for the business.  Most of the 668  million registered users were still using the free services with only 8.8 million users buying into the value added services. This move could be really interesting  or it could mean the end to Skype as we know and love it.  Microsoft at least has more potential to do something big with this acquisition than eBay.  Plus they can now put some of that cash that have been sitting on in foriegn subsidiaries ( $42 billion in foriegn subsidiaries)  to work on an interesting business extension.


Microsoft CEO, Steve Ballmer says he wants to position Skype into everything and everywhere Microsoft currently has a foothold including PC’s, TVs -Microsoft  Xbox and Kinnect Console devices. So Skype may be coming to your living room soon.  I think the potential is outstanding. It all comes down to how it is executed.  It also will depend heavily on the business decisions that accompany the go-to-market strategy. 

If Microsoft continues to offer the  basic Skype video conferencing services as a free value added service with up-sell options for multiple video connections and inexpensive phone calling that is one thing.  But if they decide to start charging for all of the services then this will open up room for competition such as the yet  unofficially announced AOL new video conference offering slated to be announced shortly under the name “AV” which is suppose to be a really easy to use  Skype like competitor. See the link below to an unofficial anouncement on TechCrunch: 


Another possibility is that they fund the service through ad and sponsorship models which also has its pros and cons from a user perspective.  With a registered user count in excess of 668 million by the end  of 2010 that would be a pretty nice base of customers to market to using the extensive Microsoft Ad sales team.  I would think Microsoft would be smart enough to leverage the growth model that grew Skype into it’s market leading position and continue to offer at least the base line services for free in an ad supported model. they could learn some lessons from how how Facebook operates  to keep their audience coming back and then add extension strategies from there.  


I work a lot in the Cloud space, no jokes about my mental state please,  so I started  thinking about the acquisition in a whole new direction which is;  what if  Microsoft could use this acquisition to launch an entire line of consumer Cloud based solutions under the Skype brand?  or at least on the Skype Platform.  Think this through with me,  Skype is already a known, trusted  and loved online brand byover 668  million consumers worldwide. That has a huge value right there from a consumer brand perspective.    Second, the platform has proven to be stable as  both U.S. and international communication platform. Third the platform has crossed both gender and age demographics with young and older age groups using it on a weekly basis. Fourth it has transended both the business community and the home consumer community.  Fifth, Microsoft has a  robust line up of collaboration tool offerings including the newly enhanced SharePoint which is now moving  more aggressively into the Web content Management space, along with Office365 and Linc. What would stop them from adding extra SaaS based services to the platform and growing the market that way. overall the acquisition has huge potential.


Picture this if you will, Your logged into your skype account and your dashboard now has access to your various email accounts, your schedule and perhaps even your other online services that you use ranging from banking to,  Classified Alerts to MLS services while your home hunting etc.. I see a lot of potential for Microsoft to leverage the consumer and business reach of Skype.  Then you tie into your Microsoft suite of tools and you could create content to share, publish it and communicate about it with their tools all within the Skype domain.

Let me know what you think.

Posted by Warren Raisch – May 10, 2011


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