Why Microsoft buying Skype makes total sense

10th May 2011 | 10:07

Why Microsoft buying Skype makes total sense

This could be big. Really, really big

On the face of it, Microsoft's purchase of Skype seems insane.

Skype's had a For Sale sign on its windscreen for ages, and both Facebook and Google had been spotted peering at the mileage, kicking the tyres and looking for dents.

It seems that Microsoft saw them, decided it wasn't going to be outbid, and started with an opening bid of "all the money in the world".

It's the biggest purchase Microsoft has ever made, eight and a bit billion dollars for a service eBay bought for two and a half billion and subsequently sold for two billion. Does Microsoft have more money than sense?

Phones and Facebook

Microsoft isn't stupid, and it's not going to throw around eight billion dollars for a laugh. So what's it up to?

There's been some speculation that Microsoft wants to combine Skype with Kinect, but while the prospect of an unholy Xbox Chatroulette makes me laugh - and more sensibly, I can see the appeal of connecting Kinect users to Skype's enormous user base - anything Xbox is a sideshow here.

It's about two things. It's about phones, and it's about Facebook.

Phones first. Speech is moving to voice over IP - it's why Google has Google Voice, and it's why Apple has FaceTime - so buying Skype gives Microsoft a proven and popular VoIP service for consumers (it already has one, Lync, for businesses). Having Skype on every Windows Phone handset could help sell a lot of phones.

It's important for corporate phones too. Merging Skype and Lync could make Microsoft's offering more tempting for big enterprise customers, many of whom use Skype's conferencing features, and merging Skype and the enormously popular Windows Live Messenger system could be a good move in the consumer market.

A winning position

And Facebook? Don't forget that Microsoft owns a stake in Zuckerberg's business. Integrating Skype with Facebook would be a win-win situation for Microsoft and Facebook alike, with the former gaining access to Facebook's massive user base and payment system and the latter getting a voice and video system without having to spend any money building it.

Assuming Microsoft doesn't mess it up - alienating key Skype engineers, offering to pay for the whole thing in Microsoft Points - a successful acquisition of Skype and integration between it, Windows Phone, Windows Live, Lync and maybe even Xbox Live could be very interesting indeed.

8 billion dollars is a lot of money, but if Microsoft gets it right it could prove to be one of the smartest - and most successful - investments the firm has ever made.

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