Five Reasons Skype Looked Good to Microsoft

The acquisition gives Microsoft a much better foothold in mobile communications

3 min read

Five Reasons Skype Looked Good to Microsoft

Microsoft's purchase of Skype for a surprisingly large sum of money (US$ 8.56 billion: Microsoft's biggest purchase in years) has brought it plenty of criticism in the tech press.

But there's still a lot to like about Skype--and, more to the point, for Microsoft to like. In particular, the acquisition seems like a good way for Microsoft to narrow the head start Google and Apple have in the mobile communications market.

Skype has a Strong Brand that's Growing:
Skype is one of the few tech companies of the last decade to be verbified. Just as Google has become synonymous with search, I've heard people--and not just Silicon Valley types--talk about "Skyping" each other. For many people on a limited budget, Skype is the go-to service for cheap calling, especially internationally. In fact, Skype say that it now handles a quarter of all international voice minutes.
And smartphones have only increased Skype's appeal: in March, the service set a record with more than 30 million simultaneous users

Skype Adds Voice to Microsoft's Strong Messaging Platform:
It's true that Microsoft already has voice communication built into its Windows Live Messenger service and corporate Lync service. But comparing Skype to those is a bit like comparing apples and oranges. Skype can inter-operate with landline and cellphones, which makes it useful well beyond a typical messaging service. If Microsoft can integrate the services, it will provide a superior alternative to Google Talk and Google Voice.

Skype Adds Peer-to-Peer Prowess to Microsoft’s Code Base
While Lync has peer-to-peer elements already, Microsoft’s strength—and occasionally Achilles heel—has been server-based software. While the Skype network has its occasional glitches, it’s about as close as it gets these days to an industrial-scale peer-to-peer platform. Its peer-to-peer nature means lower latency, and is the main reason users generally prefer Skype's call quality. And as the cloud grows in size and importance, continuing to throw more servers at it won't necessarily be the best solution.

Skype has a Big Footprint on iOS and Android phones:
Skype has faced numerous challenges since it emerged in 2003, but customers keep choosing it. On smartphones, many users have set up the Skype app to conserve their carrier-based cell minutes. At first, Skype use was often restricted to WiFi connections, but today, many carriers allow it on their 3G and 4G networks, too. This is a big turnaround from the initial VoIP backlash.

For Microsoft, Skype's mobile footprint is like having a spy behind enemy lines- even if Windows Mobile 7 is playing catchup to Apple and Google, Microsoft now controls one of the biggest voice apps on both platforms.

Skype Gives Microsoft Video Calling:
Skype recently made a pretty important acquisition of their own: in January, they bought the mobile video provider Qik. Qik was one of the first companies to embrace the fact that a smartphone--with a camera and a 3G connection--could create its own live videocast. When Qik started, its software was a bit ahead of hardware and network capabilities; now it's all coming together.

Qik is currently one of just a few companies that offer cross-platform mobile video conferencing (between Android and iOS phones). Qik has always been rough around the edges--this year, for instance, I tried using it to cover the Consumer Electronics Show, and the results were very disappointing. But it will give Microsoft a boost in catching Apple's FaceTime.

The potential for synergy at eBay never really looked that promising--Meg Whitman just saw an undervalued company and bought it. Similarly, Skype probably wasn't an ideal fit for Google. But at Microsoft, it seems a good fit, and maybe, just maybe, will turn out to be a good buy.

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