Microsoft's Skype Deal Means Monetizing

There's an interesting blog posting from Ben Horowitz, co-founder and partner of venture firm Andreessen Horowitz, detailing what he sees as Skype's competitive advantage over companies like Google and Apple. Of course, he has a vested interest in promoting Skype as the 800-pound gorilla of voice over IP and video conferencing, untouched by its competitors--Andreessen Horowitz was one of the private investors with a stake in Skype, before Microsoft announced the $8.5 billion acquisition this week, meaning Horowitz may have made enough off the platform to buy a Porsche for every day of the month.

First, he cites Google's attempt to market a similar VOIP offering to Skype via its Gmail service. "What was the result of this effort?" he wrote in that May 10 posting. "Skype new users and usage growth has accelerated since Google's launch."

Then he calls out Apple's FaceTime as being unable to blunt Skype's momentum: "How did that impact Skype's usage on the iPhone? 50 million users have downloaded Skype's iPhone product since the release of Apple's FaceTime."

Perhaps unsurprisingly, Horowitz sees Microsoft's acquisition as an unmitigated Good Thing: "By acquiring Skype, Microsoft becomes a much stronger player in mobile and the clear market leader in Internet voice and video communications," he wrote. "More importantly, Microsoft gets a team, ably led by the exceptional Tony Bates, that can compete with anyone."

In 2005, eBay agreed to pay $2.6 billion in cash and stock for the then two-year-old Skype. Four years later, the auction site announced it would resell a majority of its Skype holdings to a team of private investors--including Silver Lake Partners and Andreessen Horowitz--for $1.9 billion in cash.

Pending regulatory approval, Skype will become a Microsoft division headed by Skype CEO Tony Bates, and its services will be meshed with a variety of products in Microsoft's portfolio, including its Lync unified-communications platform, Outlook, and Xbox Live. In a May 10 press conference, Microsoft CEO Steve Ballmer suggested that the deal, the biggest in Microsoft's history, is the sort of bold move needed as his company faces competition on multiple fronts: "This Skype acquisition is entirely in keeping with our ambitious, forward-looking, irrepressible nature."

Microsoft will almost certainly pursue how to monetize its newest addition. "While it's true that Skype has been slow to make money off its service, the potential is there," Forrester analyst Ted Schadler wrote in a May 10 blog posting. "Local phone numbers, three-way video conferencing, business administration, and making calls to real phone numbers are all things that people will pay for."

If Microsoft loads up on for-pay services, though, will that drive users away from Skype to the waiting arms of Google or another platform?

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