Skype ID will be a slipstream online login for Microsoft

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I found the news that Microsoft is acquiring Skype interesting. Major acquisitions like this have all sorts of unexpected implications and ripples across many markets.

The blogosphere has been alive with the discussion over whether the acquisition makes sense or not and the sorts of things that Microsoft might do with the Skype technology, much of which is pretty cool, but in general somewhat hopeful. There’s also been some discussion over Microsoft ‘buying’ customers. While the acquisition is certainly multi-faceted, I suspect that buying customers is just about sufficient to justify the deal.

First, consider the value of an online customer for various types of business – the chart above gives some ideas – I’d tend to assume that the annual value of a given online user to Microsoft is somewhere between Google and Yahoo, both being advertising driven, let’s say $10 annually. Given which, it is well worth spending somewhere well North of $10 for each customer acquisition.

Skype apparently has 107m users who use the service at least once a month, and 663m registered users. Microsoft is paying $8.5b for the privilege of access to these users. Microsoft is paying as little as $8 per active user. However, conversion rates would dictate that only a portion of these users come across to the Microsoft services (if 10%, that’s $80 per user!).

However, I think that the conversion rate could be much, much higher. If we consider that one of the major challenges to customer acquisition is the effort involved in setting up a new account on a new service (I’ve called this friction in my last post).

Imagine if Microsoft were now able to do away with that process for new users. Rather the user, many of whom stay logged into Skype 24×7, is automagically provided access to the Microsoft online properties as a result of their Skype authentication. Indeed, one might modify some elements of Skype to make this an easy and perhaps natural extension of the Skype experience.

Notice that this scenario not only builds the user/customer base for the Microsoft online properties, but it also gives Microsoft a new way to compete with Google in creating data profiles of very large numbers of users.

Does this make sense to you?

About Michael Harries

Technologist - emerging technologies, machine intelligence, foundational tech - startups and more.
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