Microsoft’s purchase of Skype a good move?

Microsoft has got it right: Videoconferencing is the future. High definition (HD) endpoints are virtually ubiquitous (excuse the pun) and bandwidth is cheap (but apparently not in Canada/North America yet, probably in part because of geographic expanse, see image at end of post).

Videoconferencing has a bad rap. It is one of those technologies that was slow to take off in the marketplace because of glitchy transmission, poor sound quality, dropped calls, transmission delays, grainy image, and difficultly to use. But videoconferencing is the future. Try one of Cisco’s immersive telepresence meetings and you will be sold. People are life-size in front of you, and it is the next best thing to meeting in person. A study at UCLA indicated that 93% of communication is non-verbal. Let’s be conservative and say that you only get half of that 93% in a telepresence meeting; then you get 46.5% plus your 7% verbal, which is 53.5% of the message or 764% better communication than a phone call that has only verbal cues.

Take that same telepresence capability and put it in every home and office with broadband internet and a high definition TV screen or high definition monitor, and you have a communication revolution. Gradually, video will replace audio as the leader in the communication market.

Why Skype?

170 million loyal users are why. Skype is the world’s most popular videoconferencing service, and Microsoft has just bought the market. And Skype is arguably in its infancy. What Microsoft, and millions in R&D, can bring to Skype is reliable transmission, improved audio and video quality and compression, fully-integrated cloud and collaboration services, and ultimately a much better product. Skype is years away from telepresence quality, but Microsoft is more than capable of making the change.

This brings me to my last point. I wonder about the business model for Microsoft. After spending $8.5 billion, how does Microsoft plan to make money with Skype. As it sits now, Skype does not make a profit. Microsoft cannot charge for Skype or users will flee to another, free one. Microsoft will have to add value, providing telepresence-like quality, additional cloud services (such as collaboration, translation and/or videoconferencing recording) and then charge for that additional service. For Microsoft, it is a bold move, but standing still is not an option in this ever-changing technology landscape.


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