Could Skype Be Microsoft's YouTube?

Image representing Skype as depicted in CrunchBaseImage via CrunchBaseThe Skype founders did not have what it takes, or they would not have done the selling, twice. And that is a surprise to me because Skype is just wonderful. Skype hit 500 million users way before Facebook did. But somehow the monetization did not happen. A nine billion dollar exit is a decent monetization, would you say?
Fred Wilson: Skype Out: Big companies mostly mess up entrepreneurial companies when they buy them and it really is best that companies like Skype stay independant and run by their founders if that is possible. ...... Skype filed to go public last year but the offering never came. ..... Maybe the company was having difficulty growing its revenues as fast
Image representing Microsoft as depicted in Cr...Image via CrunchBase as the public markets wanted. Maybe the investors lost confidence in the management's ability to continue to build and grow Skype as an independent company. Whatever the reasons, Skype's experiment with being independent is over and I am disappointed. ...... We use Skype every day in our office. It is our videoconferencing system and increasingly our phone system. It works amazingly well. ...... Skype brought VOIP to the masses and I'm very certain that someday we will all be communicating by voice and video over IP, maybe via Skype, maybe be other services. It is the future for sure. ..... I'm not particularly inspired by the idea that Microsoft will do something great with Skype. But I do think they are a better corporate owner than eBay. The second acquisition of Skype isn't likely to change our daily usage of the service. But it may be an inspiration to VOIP entrepreneurs everywhere to think big and create new services that can someday be as big or bigger than Skype.
Microsoft missed out on the smartphone, Microsoft missed out on the tablet, and Microsoft is on its way to being hammered by Google on both Windows and Office. Although Microsoft has done decent in gaming, and it has made some early, smart moves in 3D computing.

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Could Skype be Microsoft's YouTube? Or is this a MySpace story? A sexy company bought by a big company simply because the big company had the muscle and the money? A sexy company that then went down the tube?

Murdoch's MySpace, Cisco's Flip

Or is Skype the Friendster of VOIP services? My proposition has been that you should not need carriers. You should not have to pay monthly fees. You buy a smartphone, make your one time payment, preferably 100 dollars or less, and that's it. Because you always have access to free Wifi, you use a Skype like service to make and receive phone calls. And if an independent Skype could not move in that direction, what are the chances Microsoft can?

Smartphones: Cheap Is Good
David Noel: I’m impressed by the price tag but unimpressed at all to see Skype go to Microsoft. Skype is one of the world’s biggest consumer applications and Microsoft doesn’t really have a proven track record in the consumer space...... knowing that Skype for Mac never really improved in the two years after spinning out, I’m disappointed...... Skype as a communication’s backbone in Xbox Live and Windows Mobile? Likely. Exciting? Not so much.
I am giving Microsoft the benefit of doubt. If Microsoft bungles this acquisition - and we will know fast, in a year max - then that will be a sign Microsoft truly has become a has been company, still a giant, but way in the background.

Or maybe it will manage a deep integration of Skype with its own phone. And finally, for the first time, Microsoft will have become a contender in the all important smartphone space. And, by extension, the tablet space. This acquisition is Microsoft's boldest attempt yet to become a post PC company. Will it succeed? I don't know. Only time will tell. But I am not sure it can afford to fail.

Ben Horowitz: Microsoft Buys Skype: Shortly after we started Andreessen Horowitz in mid-2009, we, along with our partners at Silver Lake Partners and Canada Pension Plan Investment Board, bought majority ownership of Skype from eBay for slightly more than $2B. The investment generated a tremendous amount of controversy for us. Marc and I were known as angel investors, so investing $50M of our new $300M fund in one deal surprised people. ...... Microsoft announced that it was buying Skype for $8.5B 18 months after we bought it from eBay. ...... With a company as complex as Skype, investors draw different conclusions about the same facts. In this case we had the same data as everybody else, but we had a radically higher opinion of Skype’s founders and employees than the doubters and naysayers. ........ Niklas and Janus, two of the preeminent technology entrepreneurs of our time ....... In a direct attack, Google offered a free competitor to Skype’s US paid product and a heavily discounted competitor to Skype’s international product. Google then aggressively promoted these cheap products to their enormous Gmail user base by forcing every Gmail user to view Google’s Internet telephony advertisement before allowing them to access their email. What was the result of this effort? Skype new users and usage growth has accelerated since Google’s launch ....... On the mobile front, Apple built video calling right into the iPhone, making their Facetime product the default offering for iPhone users. How did that impact Skype’s usage on the iPhone? 50 million users have downloaded Skype’s iPhone product since the release of Apple’s Facetime. ...... , we found that Skype had a core group of engineers who were completely dedicated to the mission. They stayed through the eBay acquisition and were hugely determined to make Skype the communications company of the future. Over the past decade, this team consistently introduced groundbreaking technologies ranging from highly resilient and scalable peer-to-peer networking to radically higher sound quality through dramatically superior codecs. In doing so, Skype out-innovated the competition in the most important areas. When combined with its powerful network effect—how valuable is a video calling service if there is nobody to call?—Skype became a formidable competitor. ...... Today, I tip my hat to an old rival, Microsoft. By acquiring Skype, Microsoft becomes a much stronger player in mobile and the clear market leader in Internet voice and video communications. More importantly, Microsoft gets a team, ably led by the exceptional Tony Bates, that can compete with anyone.
This move by Microsoft will also push Google to do way more in the VOIP space. Maybe it will be Google and not Microsoft that will help us get rid of the evil carriers. Maybe it is the Do No Evil company that will help get rid of the evil carriers. Put up with no evil. Android is more powerful than Skype as a piece of software.

Nexus S: The Best Phone Out There

Microsoft: Microsoft to Acquire Skype: $8.5 billion in cash ...... Microsoft will continue to invest in and support Skype clients on non-Microsoft platforms. ..... Steve Ballmer. “Together we will create the future of real-time communications so people can easily stay connected to family, friends, clients and colleagues anywhere in the world.” ...... Skype will become a new business division within Microsoft, and Skype CEO Tony Bates will assume the title of president of the Microsoft Skype Division, reporting directly to Ballmer. ..... introduce new ways for everyone to communicate and collaborate ...... excited about Skype’s long-term future with Microsoft, as it is poised to become one of the world’s most dynamic and comprehensive communications platforms.” ....... Founded in 2003, Skype was acquired by eBay in September 2005, and then acquired by an investment group led by Silver Lake in November 2009. Skype has made impressive progress over the past 18 months under Silver Lake’s leadership, increasing monthly calling minutes by 150 percent, developing new revenue streams and strategic partnerships, acquiring the intellectual property powering its peer-to-peer network, and recruiting an outstanding senior management team.

GigaOm: 5 Key Takeaways From the Microsoft-Skype Press Conference: Microsoft likes that Skype is a verb. ..... Skype has more than 100 million users every month, and those users spend an average of 100 minutes a month talking on the service. ...... Skype will be integrated across multiple Microsoft businesses.There’s plenty of room for Microsoft to create optimized apps for Skype in its Windows Phone 7 products, as well as integrating it with Xbox Kinect. But in addition to the consumer business, Microsoft sees a big opportunity to become a part of its enterprise products, like Outlook and its Lync enterprise communications platform. ....... expects to expand the availability of immersive rich media experiences in its products going forward ...... 45 percent compound annual growth from video advertising over the next five years

Mashable: Microsoft Acquires Skype for $8.5 Billion: an expensive one for Microsoft. Not only is it the largest price Microsoft has paid for a company in decades, Skype is not yet profitable..... t user base of 663 million, 145 million of which use Skype monthly

BBC: Microsoft confirms takeover of Skype: Internet auction house eBay bought Skype for $2.6bn in 2006, before selling 70% of it in 2009 for $2bn.

New York Times: Microsoft to Buy Skype for $8.5 Billion: its largest acquisition ever. ..... Microsoft plans to expand Skype’s business and inject its voice-and-video technology across the spectrum of Microsoft products, from consumer offerings like Xbox to its Office productivity software. ...... Skype makes much of its income from a small group of users who pay for long distance calls to telephone numbers. In 2010, Skype recorded $859.8 million in revenue but reported a net loss of $7 million ...... “Microsoft has extremely broad reach, they have a whole product portfolio that Skype can be attached to,” said Mr. Andreesen, whose firm bought a $50 million stake in Skype in 2009. “There’s all kinds of ways Skype can make money.” ....... The company has often been a smart acquirer of start-ups and smaller companies, analysts say, picking off technical teams that are then folded into products likes Windows, Office and Internet Explorer. But during Mr. Ballmer’s tenure as chief executive, beginning in 2000, the company has also made far larger, riskier bids, most of which have been viewed as unsuccessful. ........ In 2004, Microsoft entered into talks to buy the big business software company SAP, for about $50 billion, according to testimony that came out in a court case. In 2007, Microsoft acquired aQuantive, an online advertising company, for about $6 billion, a sizable premium, and some suggested it overpaid. ........ Nearly three years ago, the company made a surprise $48 billion offer for Yahoo. ....... . Peter Klein, chief financial officer, flew down to Silicon Valley and made an unsolicitied offer to the investor there, Silver Lake and Andreessen Horowitz.

TechCrunch: Why Microsoft’s Skype purchase means a Face-off with Apple’s Facetime: owning Skype means Microsoft has a much better positioning in mobile. ..... Since Microsoft is an investor in Facebook, the latter will now have deep access to its investor’s assets. ....... Being able to Skype from within Facebook means Mark Zuckerberg will not have to build his own VOIP communications platform – a seriously complex affair for 600 million users ...... both Microsoft and Facebook now have a stick with which to beat Apple and its emerging comms platform, Facetime.

ReadWriteWeb: Skype Acquired by Microsoft: 3 Fears & 3 Hopes: the companies together could make big waves in two key parts of the future: mobile and the connected home. ..... Neglect of the product is a widespread concern among Skype-lovers. ....... Will Skype in 14 years look like Hotmail does today? ...... Skype for Mac has been several versions behind the Windows version for years and lagged in features such as multi-person video calling. It's hard to imagine that changing much now! ....... With 660 million+ registered users and more than 100 million average monthly users, Skype is bigger than Twitter. ........ It would be great to see Microsoft, Google and Facebook all make strong mobile VOIP plays and take some power away from the big carriers of the world. ...... As one of the world's biggest social networks Skype really ought to be a platform for social-graph based products, services and features. Everyone says that our real social network can be found in our phone address book but Skype has got to be a strong contender as well. The company has done almost nothing with that potential independently. ....... Skype as a developer platform has never been supported or advanced as well as it ought to have been.

ReadWriteWeb: Microsoft Can Take Skype to The Next Level: Mobile & Living Room: there are two key aspects to this deal which will potentially take Skype to the next level: Microsoft's mobile expertise (in collaboration with its mobile partner Nokia) and its enormously popular gestural interface system Kinect....... there are over 10 million "Microsoft cameras connected to television screens in homes around the world" - thanks to Xbox 360 Kinect sensors. This is the future of Skype, now that it's been acquired by Microsoft: Skype will be much more widely used on your mobile and in your home. ..... Skype has 145 million average monthly connected users, most of whom use the service through their PC. However, in case it's not obvious by now, the future of Internet services lies in mobile devices and real world objects (such as televisions). ....... Kinect, perhaps the key to the next version of Windows OS. ...... Video is where the future of Skype lies, which again plays right into Microsoft's hands with Kinect.

TechCrunch: Done Deal! Big Deal. Smart Deal? Microsoft Buys Skype For $8.5 Billion In Cash: The deal was first reported by GigaOM‘s Om Malik ..... many tech industry pundits and analysts will look at this deal from all possible angles and then some, and still only a handful will end up being somewhat accurate when we look back in a couple of years. ...... appointing a new CEO, former Cisco SVP Tony Bates ..... chances for the business to keep growing, perhaps even acceleratingly so, are fairly big. In that sense, it’s a valuable asset to own (and to keep out of others’ hands)...... ambitions of ubiquity, and Skype and recently acquired Qik fit nicely into many of its current product offerings: think Windows Phone (combined with Nokia), Xbox and Kinect, Bing, Office 365, Windows Live Messenger and other Live products, Lync, Outlook, SharePoint, Internet Explorer, Azure, and so on. .... kype’s user base is comparable to that of Facebook in terms of size ....... companies like Google, Cisco and Apple, on the other hand, are not going to be too pleased about it. Not that either of them absolutely needed to own Skype, but in the hands of Microsoft it’s a much bigger threat to them than if it were still under eBay’s wings, or as a separate company.

TechCrunch: Ballmer And Bates Sell The Skype Deal: We Think We “Can Reach Everyone On The Planet”: there are concerns that Microsoft paid too much. ...... “We will move beyond email and text to rich experiences. Talking to colleagues across the world will be as seamless as talking to them across the table” ...... “This allows us to extend from hundreds of millions to billions of people,” says Skype CEO Bates. “We think this is a set of services that can reach everyone on the planet.” ..... integrated into a variety of Microsoft products: Windows Phone, XBox Live and Kinnect, Outlook, Lync, Messenger, Hotmail. ....... 40 percent of Skype traffic is now video. ...... Ballmer imagines Skype and Xbox becoming “like a home video conferencing system, but one that costs just a few hundred bucks.”) Skype is being positioned as sitting at the nexus of mobile, social, and voice. Social is a bit of a stretch, but it does connect you to that “inner circle” of people you tend to talk to the most often. ....... “Skype was on a path to IPO,” says Ballmer. “From our perspective it was better if we owned this company.” The offer was unsolicited, and went to SIlver Lake Partners, the lead investor of the syndicate that bought Skype from eBay 18 months ago.

Some things Skype could do.

(1) Audio tweets. Limit to a minute.
(2) Skype Lite. For feature poor phones.
(3) Skype Text. For feature poor phones.
(4) Talk from any language to any other language. The Skype version of Google Translate.

But the single most important thing Skype can do is weaken the grip the carriers have upon us.

If Skype and Microsoft can help each other become post PC, this deal is a success. If not, all bets are off.

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