Apple should buy Skype
December 14, 2008
Recently I ran into a poll at wired.com asking what people thought Apple should do with their 22 billion cash horde. Some suggestions were wacky (GM,Microsoft), some where unimaginative (Adobe?). I said Skype, and it got a few votes but within a few days it was off the top 10. I wish I could find the article now, but Wired’s search is useless (searching for ‘apple’ returns zero articles!).
If you’d asked me last year I would have said they needed a studio so they could fasttrack their move to the living room. It has been slow-going, but nowadays they seem to be working out their differences even with NBC, although I still think they could use taking minority positions (with just enough leverage) in smaller independent players, even foreign ones. The AppleTV could be so great delivering niche content, even before the majors embrace it.
Skype is a case of a great product that has been largely underutilized by its owner. Whatever synergies with eBay Meg Whitman foresaw never materialized. The fact that it continues to thrive and grow without any strategic leadership is a testament to its intrinsic value and position in the market. But Apple could really unlock its true potential.
Short term Skype would allow Apple to start breaking the chains of the AT&T contract: Skype on the iPod Touch + Skype-In would make an excellent free house phone (and remote control, and nightstand email-checker, etc.). It would also offer another avenue for Apple to reach Windows users and bring them into its bubble.
And one thing .Mac/MobileMe has demonstrated is that Apple can charge where others must give away. With a little product differentiation, smart marketing and polished features, along with its network effect advantage as the space leader, Apple could start adding some paid premium features with healthy margins.
Skype can easily beat Vonage on a feature basis today. But Vonage’s paid base grows faster because it devotes half its revenue to adverting. Apple could trounce Vonage with a fraction of the marketing budget just on the basis of its name, sizzle, and traffic at its stores.
Strategically Skype could add a fifth leg to Apple’s stool: telephony. What about the iPhone you say? The days of the phone as such are numbered. Convergence and voip mean that by 2012 an iPhone and an iTouch will be one and the same, them and all other smartphone devices connected via 3G, 4G, WiFi, etc. And as people continue to talk (and videoconf) more and more through their computers, and start doing so from their TVs as well, Skype can be the glue that brings all communications together.
Sure, Apple could grow iChat into this role, but that would be time consuming. Skype would be turn-key. And eBay would probably let it go for pennies on the dollar, which would amount to a fraction of Apple’s chest.
So while phone and cable companies are investing heavily to delivery ‘triple-play’ packages, Apple could swoop in and deliver entertainment and communication through their dumb pipes.