Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
If you watched last Thursday’s “American Idol” (James Durban should have won), you probably noticed that Microsoft Corp. ran a product placement commercial in which the Idol contestants used Microsoft Live Messenger to communicate via live audio and video with their families. Clearly, Microsoft wanted to demonstrate Live Messenger audio and video services and show everyone that it worked just like Skype. What is puzzling is that Microsoft had just announced on Wednesday that it was acquiring Skype Ltd. for $8.5 billion. This begs the obvious question: “Why would Microsoft want to acquire Skype if its product could already do everything that Skype does?”
Answer: Customers and brand. Skype has approximately 600 million customers and is growing. At any one time, Skype typically has 18 million to 20 million people online that conduct computer-to-computer calling, hold a video chat session, exchange files and conduct text instant messaging.
And, although Microsoft has its own version of messaging, the benefits of acquiring Skype usurp the costs of having two messaging services. Why? With Skype, Microsoft adds the most successful global messaging and VoIP calling product and brand to its portfolio. Microsoft could try to convert all Skype users to Live Messenger (“Congratulations! Your Skype account will now become a Live Messenger account”) strategically, it is more advantageous for Microsoft to leave Skype as an independent brand, much like what IBM did when they acquired Lotus. Instead, Microsoft can leverage the 600-plus million Skype users and offer other Microsoft services as well as integrate Skype in Windows and Office.
One of the most significant benefits of having Skype in the Microsoft product portfolio is the integration of Skype into the Windows Phone 7 mobile platform. While Skype had dabbled in mobile via a relationship with Verizon Wireless, it was limited. If Microsoft enables the Skype platform to all smartphones, the world will finally have a universal instant messaging client that will enable IM chat between billions of people, most of them on cell phones.
Microsoft should pre-install Skype on all Phone 7 smartphones and make it very easy for Phone 7 customers to use Skype regardless of whether they are connected via Wi-Fi (default) or 3G/4G wireless broadband. Phone 7 subscribers could use either Wi-Fi or 3G/4G to conduct IM, make VoIP calls, conduct two-way video links and transfer files. And, Microsoft should aggressively license Skype to other phone manufacturers to position Skype as the most dominant messaging platform in the world.
It also would be a natural for Microsoft to integrate Skype into Outlook (“Click here to talk or conduct IM with your associates”) and integrate it into their online services.
Microsoft should add enterprise security, manageability and audit to provide capabilities in Skype that will meet enterprise IT requirements. This would let enterprises easily set up calling groups both inside and outside the organization.
Microsoft’s focus should be to grow Skype as a universal communications client, which would eventually allow third parties to build value-added services on top of Skype. Not only will Skype get integrated into other applications, but other applications will be integrated into Skype: gaming companies could develop Skype games or social networking sites could allow social networking automatically via Facebook and Twitter. This strategy could make Skype more widely adopted than any other Microsoft product, including Windows and Office.
One final piece of advice: please, Microsoft, don’t rename Skype “Microsoft Skype.” Simply stick with Skype.
J. Gerry Purdy, Ph.D. is Principal Analyst, Mobile & Wireless, MobileTrax L.L.C. As a nationally recognized industry authority, he focuses on monitoring and analyzing emerging trends, technologies and market behavior in the mobile computing and wireless data communications industry in North America. Dr. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices.
