FBlog

Some say it’s a tactical move, some say it will ruin their favourite service, and some aren’t saying anything at all – yet.

Friday’s announcement (18.06.11) by the Federal Trade Commission that they have finished their review of Microsoft’s largest acquisition ever – the buyout of VoIP service Skype – puts Microsoft one step closer to purchasing one of the most popular Internet communications services.

Since the news broke around a month ago that this deal was on the table, the Internet has been rife with rumours about, and reasons for, the acquisition, as well as fears about what the deal would mean for many people’s favourite online service. Many industry commentators believe that Microsoft’s motive is to block Google from buying Skype. Google, the dominant, future-focused, tech giant is constantly creating new and exciting ways to connect with its users (they have hundreds of initiatives that many of us aren’t even aware of). In many ways the Google-Skype pairing would have been a better match, but in an industry where speed is everything, Microsoft showed their intent quicker and thus the early multi-national, corporate, technology company caught the…er…popular voice over internet protocol service …okay, so that doesn’t have the same ring to it but you get my point.

Others believe Microsoft bought Skype in order to integrate it into its Windows Live/Hotmail service. The Windows live/Hotmail service is hugely popular amongst Internet users and has been radically developed by Microsoft since it acquired Hotmail back in ’98 for around $500m. So, could they integrate it into Windows Live, which already has its own chat & video services, Or into Xbox/Xbox Live? The Xbox is slowly but surely integrating more ‘apps’ into its OS (currently offering services such as Sky player, Netflix and Zune), perhaps they will integrate Skype as another one of these apps and allow users to use it in its normal manner in Xbox’s dashboard and reinvent they way gamers connect online, who knows?

Will Microsoft ruin Skype? In short, no. Microsoft did not spend $8.5bn (their largest deal ever) to then ruin the very service they spent all of that money on. It would not make sense on any level to buy they service and then ruin it; Skype is too much of an asset on too many levels to do that and Microsoft are too smart!

So why are Microsoft buying Skype? Yes the profitability of Skype is obviously an attractive feature (I was surprised to find out that Skype brought in revenues of around $800m last year), but Microsoft doesn’t need the money. The access to Skype’s 663 million registered users (2010) is also a major bonus for Microsoft, but for me, this acquisition is Microsoft’s attempt at buying brand loyalty. My favourite quote from the array of commentary on this topic comes from Richard Blackden of The Telegraph… “we Skype, and we Google, but never in 36 years has anyone Microsofted”. To me, this sums up Microsoft’s perennial problem; they have never been able to generate enough of a connection with consumers to create the same type of relationship that makes consumers love a brand like Apple. This is what Microsoft truly desires and perhaps they have bought Skype because of the amazing affection consumers have towards this brand. People love Skype because it allows you to stay in touch with loved ones the world over, for free or at next-to-no cost. Skype’s very nature is to create an emotional bond; they are doing what Nokia used to do – connecting people, and Microsoft wants some of the love!

Skype is the polar opposite to Microsoft, non-corporate, dynamic, cool and loved by its users, everything Microsoft is not. Skype is a brand that wouldn’t be out of place in Apple’s portfolio – it could even pass for a Steve Jobs brainchild! Microsoft is trying to buy all of these benefits in order to move away from its current brand image.

A short time ago a colleague of mine spoke of how he foresaw a telecoms world where users did not pay for minutes or texts but only Internet usage on their mobile devices, with everything being done through VoIP. Perhaps the Skype acquisition plus the deal with Nokia is Microsoft’s way of putting themselves at the forefront of the future of mobile communications. According to Skype, 95bn minutes of voice and video calls were made in early 2010 – a network of consumers and revenue that Microsoft will want to tap into.

So, of all the possible reasons for Microsoft’s acquisition of Skype, my opinion is that they are doing it to boost their brand image and brand loyalty by absorbing the emotional connection with consumers that Skype has, the same emotional connection that has made Apple and Google the brands they are today.

My question that has come out of all of this is, ‘should Microsoft try and change?’ (probably). Microsoft’s brand has a role to play. In most every office and home around the world, people are using one Microsoft product or another, Microsoft is part of life, is that something they should really be fighting? I have my opinion, what’s yours?

If you don’t want to build brand loyalty, maybe you can just buy it!