Now that Microsoft has completed its $8.5 billion acquisition of Skype, one question has to be asked: Is now the time to hang up on the pioneering peer-to-peer VoIP service, which was claiming 124 million connected users a month in mid-2010?
Skype’s historic problem has been its difficulty monetizing what it offers. Its new problem is its ownership by the Redmond, Wash., goliath, a company that has found itself -- despite its pedigree and rich coffers -- on the margin of the platform wars that are shaping the future of technology (Apple versus Google versus Facebook, with Amazon nipping for a place in the fight).
Microsoft has bungled mobile technology. It has no meaningful social networking play, and in a lot of ways, Microsoft still cannot get the Web right (vide Bing).
Its other problem, according to the telecom consultant Rob Enderle, is that there now is “massive” interest in the free and low-cost VoIP space that Skype had come to dominate. Everybody from Google (with Voice)
and Apple (with Facetime) to early-stage companies such as TruPhone and Comwave (with ePhone) wants a piece of this market.
Then there is Microsoft’s tragic history of acquisitions gone wrong, from the speech recognition company TellMe through the mobile software maker Danger and the search pioneer FAST. Search through Microsoft’s past; there aren’t a lot of large acquisitions that have panned out.
Which focuses plenty of eyes on Skype. “People are wondering if Microsoft will screw up Skype,” says Phil Simon, an IT consultant and author of The Age of the Platform.
It might seem a safe bet to say that Microsoft will definitely ruin Skype.
But not so fast. Between technology advantages and one huge ego, there just may be enough support for Skype to retain its lead in VoIP.
For starters, says Enderle, there is the inertia factor. “It is very hard to get people to change any communication product.” He sees the built-in stickiness of Skype (contact lists that have been heavily populated, for instance), along with the allure of free Skype-to-Skype calls, as a powerful draw that will keep many users from jumping to newer services. Competitors also offer free calling to other users. But that’s the rub: Skype has a vastly larger installed base (roughly 660 million registered users as of early 2011).
Another Skype plus: “It has the best voice quality,” says Jim Courtney, editor of the Voice on the Web blog. Skype is better still when it comes to the videoconferencing toolset it now offers, he said, and that will be the next real battleground in VoIP. A lot of companies -- think Apple and Google -- are busy circling around video calls, but Courtney insists that Skype has the lead; he thinks it is Skype’s race to lose.
And then there is the matter of ego -- in this case, the immense ego of Microsoft CEO Steve Ballmer, who increasingly seems aware that Microsoft is on the sidelines of the big tech fights that are shaping tomorrow’s user experience. But Ballmer also sees Skype as a way for Microsoft to make itself heard in the new alleyways of computing fisticuffs. “We have picked our play” in the social realm, he proclaimed
at the recent Web 2.0 confab -– while pointing at Skype.
Some analysts agree, tabbing Skype as Microsoft’s social networking “stealth attack.”
Ballmer also said at Web 2.0: "The acquisition of Skype is a big step down a path that is all about connecting you with other people... Skype actually is more about helping you connect with the people who you are very closest to.”
Study his Web 2.0 comments, and this, plainly, is a man with a new passion -- and the smart money is thinking he just may play this $8.5 billion hand exactly right, as Microsoft makes a new stab at relevance on phone handsets, in social media, and online.
The bottom line: “This is Ballmer’s last chance. He won’t blow it,” says Courtney.
— Robert McGarvey has been online and writing about the Internet for nearly 25 years.
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