In 2007, Microsoft invested $240 million to buy 1.6 percent of Facebook (preferred stock purchase; FB has yet to go public). The deal bought Microsoft closer access to Facebook’s ad revenue; at the time MySpace was still the largest online social network.
Facebook attracted 30.6 million U.S. visitors during September [2007] compared with 68.4 million at MySpace. Microsoft’s entry in the social networking arena — “Windows Live Spaces” — attracted 9.8 million U.S. visitors, according to comScore Inc.
Fast forward to 2011. Microsoft announced it was buying Skype (subject to regulatory approval) for for $8.5 billion in cash. Ostensibly, the purchase was for Xbox and Kinect, enterprise integration, maybe Windows Phone.
But the Facebook-Skype integration announced today (“totally awesome” says Zuck) suggests the purchase was made with Facebook in mind. How else to explain the astronomical sum?
In 2005, eBay bought Skype for $3.1 billion. In November 2009, a group of investment firms bought Skype in a deal that valued Skype at $2.8 billion. Eighteen months later, Microsoft was willing to pay three times that sum. It wasn’t because Skype suddenly became profitable. In 2010, Skype lost $7 million on $860 million in revenue.
Analysts at the time — not quite two months ago — hypothesized that Microsoft was willing to pay the enormous sum to keep Skype out of Google’s hands. Last week’s introduction of GooglePlus and its “Hangout” feature should nix those hypotheses. (Also, Gmail has had video chat since 2008.) Google+ allows people to use a web browser to connect 10 people at the same time, a group video chat that also allows participants to watch (and comment on) the same YouTube clip. You know talking about documents will be next.
Google+ Hangouts allow free one-to-one or group video-conferencing. What many stories left out (or buried) is that the Facebook-Skype integration — one-to-one only — is free. But multi-person video chat is currently $5 – $9 per month. Is the integration of an existing service a cause for celebration by the Facebook masses?
If a significant percentage of Facebook’s 700 million users sign up, I supposed that could put Skype in the black and make the proposed Microsoft purchase a shinier deal for stockholders. Somehow. I’m not sure how; Skype was losing money in 2009 with 560 million users and that was before widespread video chat.
In other words, I think this feature creep is, in the main, a yawn.
That’s because I’m not convinced that we — the larger, global we — really want video chat as an everyday kinda thing. I mean, who likes to watch talking heads on TV, and they tend to have better makeup and lighting?
In 1956, AT&T first demonstrated a phone call with video (2 frames per second). AT&T began pushing video conferencing at the Seattle world’s fair was in 1962 … and we said no thank you, no thank you, no thank you. About 30 years later (1992) AT&T envisioned a world with video conference payphones in its “You Will” commercials.
Although Skype and Gmail have had video conferencing for quite a while and Apple iPhone customers have Facetime … when was the last time you video-chatted? Mine was a video interview with The Weather Channel (a good use of these tools but one that doesn’t require FB integration.) Streaming a live event, joining a celebration across the country or globe? That’s a different story (although the technology may be similar). It’s episodic, not routine; it’s group, not one-to-one.
Another argument against routine use of video chat: our communication model is has begun to privilege asynchronous communication (email, Facebook status updates, Twitter, texts, blog post comments, web forums, Quora, etc) over synchronous communication (phone calls and IM).
But should the deal be ringing any alarm bells? Sam Diaz at ZD thinks so:
But it’s what Facebook CEO Mark Zuckerberg said during the Q&A at today’s press conference that really made me pause. He mentioned the “longstanding” and “really good” relationship Facebook has with Microsoft, which invested $240 million in Facebook in its early years. He suggested that Microsoft and Facebook have worked together on other things in the past, like search, ads and Bing. (His examples, not mine.)
Then he said, “I would have been fine with (a Skype deal) when it was an independent company, too.” But now that it’s owned by Microsoft, “there’s a sense of stability that we’re going to be with a company that we can trust.”
Screeeech. Hold on for a second there, Zuck. When Bates took the microphone away from Zuckerberg, he was very quick to point out that Skype is not yet owned by Microsoft. “We haven’t closed yet. We’re very hopeful.” And then he mumbled something about regulatory approval…
Now, at some point, Tony Bates and Steve Ballmer “came to see Mark,” Bates said at the press conference, so they could talk about the Facebook-Skype deal. “If anything, it just got stronger. We really aligned on this.”
At the press conference, Skype CEO Bates said, “The day we announced, we definitely came to see Mark… It was for both of us, Steve and I, the most important strategic relationship.”
A meeting … but the first meeting? I doubt it.
I don’t know what it all means, other than an obvious attempt by Microsoft to align itself with something that might give it traction against Google. And I think today’s announcement was a hurry up call (the bugginess is a clue) due to Google+ (and maybe Twitter’s presidential town hall).
So, celebration, yawn or alarm? I vote for yawn with a sprinkle of caution.
Known for gnawing at complex questions like a terrier with a bone. Digital evangelist, writer, teacher. Transplanted Southerner; teach newbies to ride motorcycles. @kegill (Twitter and Mastodon.social); wiredpen.com