Tuesday, May 17, 2011

How Microsoft Will Change Skype

Lots of questions still surround Microsoft’s $8.5 billion acquisition of Skype.

After Microsoft CEO Steve Ballmer and Skype CEO Tony Bates discussed the deal with the press, we have a better idea of what Microsoft hopes to gain.

After separating itself from eBay in 2009, it was clear that Skype was well on its way to an IPO. But Ballmer saw more value in buying the company outright. Microsoft tendered an unsolicited offer in April. When Bates saw that offer, he made the decision to sell.

So why was it such a good fit for Ballmer? During its press conference, Microsoft reiterated three talking points:

Skype’s immense size — 170 million active users — and growth plan.

The fact that 40% of Skype’s activity is video.

Skype’s role in mobile communications.

It is in this third area — mobile — that Microsoft has the most to gain.

Prepare for Video Ads in Your Skype

A very small percentage of Skype’s 170 million users actually pay to use the service. Skype’s IPO plans indicate that this was not a pressing concern.

But the company was looking to expand video advertising within Skype itself — and CEO Tony Bates mentioned video ads numerous times during the press conference.

Under Microsoft, Skype’s advertising muscle is far stronger. Microsoft has spent lots of time investing into ad platforms with Bing and the Windows brands, and that is sure to extend to Skype.

Skype users — especially those who use Windows — should expect to see video ads and portal homepage information coming to the app in the future. This makes sense. If Google or Facebook had purchased Skype, chances are they would take a similar approach.

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