Microsoft Bought Skype for the Brand

Ben Bajarin - May 10, 2011, 11:54am CDT
Microsoft Bought Skype for the Brand

The fact that Skype has been in sale mode hasn’t been a total secret. When Ebay sold off a massive chunk of the company, and the IPO kept being delayed, it was evident Skype was in need of a suitor. I was quoted quite a bit on the news that Ebay bought Skype in 2005, and many of comments questioned the value of Skype to Ebay. Here we are nearly 6 years later and it seems Skype is now in the right hands.

A Three Screen Solution
We have an analysis series that we give upon request to our clients, which goes in depth about the three screen ecosystem. The premise is that there are three primary screens that consumers spend the most time with: the PC, the TV and the mobile phone. Each screen has a robust hardware, software and service ecosystem, and understanding where you are in that ecosystem is important.

A company like Microsoft has a strategy to bring a Microsoft-centric experience to all three screens. There aren’t many in the industry who can pull off a three screen strategy, but Apple and Google definitely fall into the discussion. The point is, partnering or acquiring key parts of the three screen ecosystem become important for these vendors to stay competitive.

Skype brings a already mature solution to Microsoft as a part of their three screen strategy. Integrating Skype into their operating systems is where they have an opportunity to differentiate.

The Brand Brings Credibly
Skype has great technology but Microsoft could have developed something similar. Skype does more for Microsoft as a brand that lends credibility to a video communication solution. Consumers and business alike are either already Skype customers or well aware of what Skype is and does. Microsoft needs a credible video communications story, particularly for consumers. Skype’s credibility as a brand and its brand awareness is one of the more valuable things Microsoft acquires toward their strategic goals.

That is not to discount the sizable Skype installed base, which is the other key element of value for Microsoft but the mobile element will be the next frontier for Microsoft and Skype.

Carrier Relationships Is Another Key
Even though we emphasize the importance of the three screens the mobile device is probably one of the more significant of the three. That is mostly because it’s extremely personal and the brand or vendor ecosystem the consumer trusts for their mobile device could lead to longer brand loyalty. You have heard the saying that “the way to a man’s heart is through his stomach”, and the technology equivalent is “the way to a consumer’s heart is through their mobile phone.”

Skype had decent relationships with the carriers, but that was strengthened even more when they bought Qik late last year. Qik may play a very important role in Microsofts long term strategy and could also be a key reason they bought Skype. Microsoft is in a desperate position to strengthen their offering in mobile and in particular mobile video communications.

Apple has strength with FaceTime and Google has some of their own video solutions that they can further integrate into Chrome and Android. Microsoft in Skype has added to their ecosystem an key part that both their partners and their customers need.

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