With Skype Purchase, Microsoft is Buying A Lot More Than You Might Think

The recently announced plan by Microsoft to acquire Skype for over $8 billion demonstrates that the Ballmer-led software giant isn’t about to give up the game to Google.

What does Google have to do with it? Quite a lot, actually. Consider the fact that Google has its own Web-based telecommunications service called Google Voice – plus a very large stake in the mobile phone market via its Android operating system.

Admittedly, Google Voice currently can’t compete with Skype in several ways. For example: Skype has 30 million users during peak times, Google has less than 2 million users; Skype is a free software download that runs on multiple platforms, Google Voice is a Google Mail add-on; Skype allows free calls anywhere, Google Voice charges for international calls.

With Microsoft’s Skype acquisition, the company immediately gains a major advantage over Google Voice. It also helps Microsoft in another key competitive area – mobile phones. Microsoft’s Windows Phone has been anything but a blockbuster. With the various Droid phones picking up steam and demand for the iPhone remaining strong, Skype could become a major selling point for future editions of Microsoft’s mobile operating system. Nokia is an indirect but important beneficiary, since it is Microsoft’s mobile phone hardware partner.

These are the obvious reasons, but the most intriguing competitive jab at Google may be through an entirely different channel, writes Om Malik of GigaOM:

“The biggest winner of this deal could actually be Facebook. … With Microsoft, it gets the best of both worlds: It gets access to Skype assets (Microsoft is an investor in Facebook) and it gets to keep Skype away from Google.

Facebook needs Skype badly. Among other things, it needs to use Skype’s peer-to-peer network to offer video and voice services to the users of Facebook Chat. If the company had to use conventional methods and offer voice and video service to its 600 million plus customers, the cost and overhead of operating the infrastructure would be prohibitive.

Facebook can also help Skype get more customers for its SkypeOut service, and it can have folks use Facebook Credits to pay for Skype minutes.”

As Malik points out, rumor has it that Facebook and Google might have been interested in purchasing Skype themselves. Now Google loses but Facebook wins, without putting up the cash for Skype, and it gains on Google as the battle between these two wages on.

There is a whole other side to the Microsoft-Skype deal, however, that may be more difficult to resolve. Skype has been representative of net neutrality, and it has paid a price for this, according to The New York Times:

“In Europe, Skype has been the chief litmus test for measuring the openness of mobile networks. The results so far have been resoundingly negative. Most European mobile operators block Skype from their networks or impose arbitrary charges on consumers wanting to use the free service from their cellphones.”

Oops. How will Microsoft deal with this reality, given that it needs to maintain solid working relationships with carriers who could be customers for phones with the company’s mobile operating system?

For now, neither Microsoft nor Skype are sharing any details. But a number of analysts told the Times that they thought Microsoft would find a way to smooth things over with the carriers.

However the issue over Skype’s business model shakes out, it does seem clear that if the Microsoft-Skype deal goes through, it will represent a significant win for Microsoft over Google – and it looks like it will do quite a bit of good for Google rival Facebook as well.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

One Response to With Skype Purchase, Microsoft is Buying A Lot More Than You Might Think

  1. Daily News says:

    It’s a great achievement of Microsoft. Eager to see skipe on Facebook. Really it’s a latest news