James Perrin

Was Microsoft’s Purchase of Skype Really That Savvy?

7th Jul 2011 Social Media, Facebook, News, Industry News, Social Media 2 minutes to read

Microsoft LogoAs we said yesterday, something big was about to happen to rival Google+ [See: Is Bing’s Battle with Google Finally Heating Up?], and that came in the form of the Skype/Facebook deal that’s been filling column inches on blogs and articles across the globe.

For Microsoft, their agreed acquisition of Skype back in May was surrounded by questions [See:  Microsoft close to Buying Skype] and whilst this announcement has put their agreed acquisition into a bit of perspective, it would be too easy to say this justifies the $8.5 billion they agreed to pay.

For some, the Microsoft deal proved to be a shrewd move, and many are saying they’re the biggest winners in the new Skype/Facebook alliance. On one hand, the $8.5 billion they have agreed to spend could be viewed as an investment in Facebook and its users – all 750 million of them. The deal of course still needs to be ratified.

On the other hand, Microsoft agreed to pay over the odds for the communications software as they were hell bent on outbidding Google, who were also interested in it. For anyone paying that amount of money, they will be looking for a return on their investment, but where is this going to come from considering Skype is a (largely) free service?

Skype themselves were making money through their corporate and business services, which have proved to be particularly popular. However Skype and Facebook aren’t going to be charging their users to use the service, so where’s the money going to come from? Advertising? Well it will be hard to compete with the advertising revenues of Google, as Facebook don’t make anywhere near the same amount that the search engine giant does – meaning it may take a while before they start to make money on their  $8.5 billion down payment.

Skype’s 600 million user base combined with Facebook’s 750 million does soften the blow for Microsoft, but it strikes me as a company desperate to compete with Google, so desperate, they’re willing to pay well over the odds just to get a sniff of the action. It’s the same in sports; some teams who are desperate to compete with more successful teams will pay over inflated prices for players (the difference in sports is there’s a sure fire way to get a return on your investment).

Whatever way we look at it, Microsoft, Facebook and Skype have a deal in place to rival Google and their new Google+ social network format. There’s no doubt this means the start of the social networking war between Facebook and Google. Whether users will take to Facebook’s video calling is another thing; at the moment it only functions as a one-to-one, whereas Google +’s Hangout service allows up to 9 video callers at once.

But this is more than just Facebook Vs Google, well for Microsoft at least, who have hedged their bets on the success of Facebook. It’s so difficult to see how this will play out. Will the acquisition come back to haunt them, and will Google have the last laugh? We will have to watch this space.

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