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Summary:

Facebook wants to mesh communications and community together, which explains why Facebook Phone is in the cards. If Skype wants to become the communication console of tomorrow, it needs to embrace newer forms of communication. It’s logical for Facebook and Twitter to come together.

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Photo of Skype CEO Josh Silverman By Phil Wolff via Flickr

Ever since Skype was freed from the shackles of eBay, I’ve marveled at the company’s management team led by its CEO, Josh Silverman. Sure, it has a whole lot of powerful backers, but in the end, it’s the team and their strategy. For now, Skype’s strategy is very simple: omnipresence.

As we’ve outlined before, Skype is trying to embed itself in every conceivable connected device. Whether it’s an LG television or an iPhone, the new team wants Skype’s IM, voice and SMS services to be embedded as an API, a strategy they successfully learned from my other favorite company, Netflix. More Skype in more places means more opportunity for them to capture dollars from folks looking to make calls to traditional phones.

Skype Pokes Facebook

Last month, for instance, the company announced Skype Connect (Formerly Skype for SIP), which would allow it to work easily with other PBX systems. This technology will bear fruit with Skype’s partnership with Avaya, which will be announced today. There’s also news that the company is working closely with Facebook and integrating with the social network’s experience. (It has a similar arrangement with MySpace.)

Kara Swisher reports that the deal involves integration of Facebook Connect, SMS and Voice Chat:

  • You can call and SMS Facebook friends from Skype
  • Skype is building Facebook Connect into its system.
  • You can videochat with Facebook friends.
  • It will be part of Skype 5.0 beta, likely to be released in a few weeks.

Facebook, Buy Skype. Seriously!

Facebook wants to mesh communications and community together, which explains why Facebook Phone is in the cards. Skype has become a dominant force in Internet telephony over the years, and if it wants to become the communication console of tomorrow, a vision outlined by CEO Silverman, then it needs to embrace newer forms of communication such as Facebook and Twitter.

It’s logical for Facebook and Twitter to come together.

I propose Facebook should just pony-up and buy Skype, even before they go public.  There have been rumors that Skype might be up for sale. Skype and Cisco have been mentioned in the same breath, but to me, a Facebook-Skype deal makes more sense, considering both are software-driven, social-centric, communication utilities and not hardware-centric like Cisco.

Sure, this would be a big, hairy merger, but look at it this way: In one swoop, Facebook would dominate what I’ve maintained is both the new age and classic social networking. They have people’s credit cards; they have their real-world phone information; and in the end, they have a better, more useful, social graph than Facebook itself.

The Skype-Facebook client on the desktop would mean both Facebook and Skype will be jointly in people’s faces, and take time away from other web services, such as Google. A simple search box inside the Skype client, and the two companies are starting to take attention away from arch-nemesis, Google.

To be honest, for our readers, this marriage won’t be a new idea. In 2008, Dan Berninger, one of our guest writers, proposed the need for a social directory:

The social directory represents a far more elegant solution than that of spamming friends with requests to update contact information through services like Plaxo. The social directory could make a social circle accessible via clickable links while hiding the actual contact information. Rather than giving out a telephone number or email address to a new acquaintance, users of a social directory would associate their listing with keywords (such as “plumber” or “dog lover”).

As the number of communication options increases, so does the burden of managing contact information, yet Internet-enabled directory options remain lacking. Riches await the infocom company that achieves gatekeeper status for the Internet’s communications applications.

Need we say more?

2+2=22

With over 560 million folks who’ve signed up for Skype, and revenues touching nearly a billion dollars, Skype is nearly as big as Facebook itself, though its value is less than Facebook, mostly because it’s monetized its vast base of users poorly in the minds of some. Facebook has over 500 million members, and is said to be doing a billion dollars in sales every year. How much should the deal be worth — no idea, but say if its five times next 12-month revenues, Facebook, which is a valued at $33 billion should pony up around $7 billion-to-$7.5 billion in its stock for Skype.

Now if the two companies come together, that would be one intimidating combination. Given that Marc Andreessen sits on the board of both Skype and Facebook, thanks to his investments in the two companies, he may get them talking!

Related research from GigaOM PRO (subscription required):

  1. Three years ago (12/2007), when Skype was languishing with eBay, I suggested Facebook should acquire Skype (http://www.martinsuter.net/blog/2007/12/facebook—uc-for-the-web-20-crowd.html), building a unified communications platform on top of Facebook…

    “….Isn’t Facebook really the communications portal for kids today? I’m guessing most kids today have never used Outlook, and why would they?

    Facebook contains their contacts, admittedly the “social” subset of what would be in my Outlook contact cards, but it is moving towards providing different views/access levels by categories. It offers “Presence”, rudimentary today, but that will change. Kids don’t use email anymore, they send Messages in Facebook. It’s similar to email but different, with real time notification (find me, follow me) and with the ability to respond via SMS. It has asynchronous chat via Wall postings and video communications (non-real time) through SuperWall. It allows me to stay on top of my communications via RSS feeds and SMS notifications.

    Facebook is a social unified communications platform….

    However, for all of its considerable strengths, Facebook’s biggest shortcoming today is real time, or synchronous communications, which is where my epiphany comes in.

    Facebook should buy Skype…

    …Email is dead.

    Telephony is dead.

    The transport layer is irrelevant.

    Facebook + Skype is UC for Web 2.0.”

    That’s my .02!

    Martin Suter

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    1. Nice one Martin. Now I wish I had read your post :-) But now the time seems to be right for the deal to happen.

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    2. I don’t think you give kids enough credit. I’m guessing those kids will grow up one day and get a job and at that job probably use Outlook. Also email is one of the biggest uses of mobile. I think kids will learn to use whatever medium they need to to get the message across. That’s their benefit of growing up now. Digital adaptability.

      I’m so tired of hearing sensationalistic things like “Email is dead”. You predicted that in 2007 and it still seems to be doing just fine. Facebook has 500+ million accounts. How many email accounts are there? At the minimum one for every facebook account. Anyone that thinks email is dead should stop using it and see how well they can conduct their life. I guess you’ll have to stop using facebook too though since you need that email account. I’m not trying to attack you personally, people have been saying email is dead for ten years now and it’s still flourishing.

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      1. Erik – I appreciate your comments, and won’t take them personally. Yes, I agree that the number of email accounts > Facebook accounts, but the point I was making is that email, for the younger generation, is no longer the go-to, de facto messaging tool. The volume of messages that are being sent using modalities other than email appears far greater than those sent via email (excluding Spam).

        I realise it’s dangerous extrapolating from a small sample size, but my 2 sons (16 & 18) send thousands of SMS messages/month, yet use < 60 mins each of voice minutes/month. Yes, they both have email accounts, but I have never received an email from them, other than a Facebook generated email advising me that I have a Message.

        Of course email has a place in the corporate world, but I find it fascinating to see the evolution that's underway in communications, both realtime and non-realtime, and I look to today's "kids" for clues on where things are going…

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      2. @Martin Suter – I think the use of email for younger people is changing to more of a consumption tool instead of 2-way communication. I too send 1000’s of text messages and don’t really like talking on the phone. I don’t send as many emails as I did 5-10 years ago because there are other (better?) means of communicating. I do, however, use email daily, mostly to see when someone DM’s me on twitter or friend’s me on facebook or updates to linkedin. (After people friend me on facebook I’ll usually send them a message saying if they want to talk to me send me an email or call cause I never check facebook) I also use email for newsletters, registering to sites, and to get deals online. And again email works really great on mobile. While I can see email dying a slow slow death in the future it’s not in the foreseeable future to me(at least 5 years-ish+). There’s nothing acceptable for me right now to replace it. I don’t like or trust facebook, which is also why I hope they don’t buy Skype.

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  2. This is a horrible idea until Facebook cleans up there contact system, or lack of a contact management system. As it is now it is deliberately difficult to manage those people Facebook forces upon you as “friends”. The last thing I want is a ton of strangers having direct line access to me. That would be like giving all your Twitter followers your cell phone number. Why the heck would I do that? Why would I even enable a service like that? Well, look at the bright side, chances are if Facebook purchased Skype that direct line of access would be on by default until I was able to navigate the maze of settings to turn it off.

    God I miss the old Facebook!

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    1. Look at it the other way: how about this is an opportunity for them to create a better contact system based on what Skype has learnt in the past. I guess, Skype can impose a layer of “privacy” on the so-called FB friends.

      PS: What do you mean by Facebook?

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  3. I think Skype is great right now, but I’m not so much a fan of Facebook. Personally I’d quit using Skype if it became part of Facebook. I’m not sure what privacy setting I’d have to opt out for if they acquired them, and I’d rather not be surprised to find out later.

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  4. Skype has great prospects and probably most Skype combinations make sense
    Skype + Cisco
    Skype + Facebook
    Skype + Google
    Skype + Apple

    I don’t understand why carriers are aggressively pushing for LTE. It’s is going to bring IP to the mobile handset and give an opportunity for Skype or Google to eat their voice business.

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    1. They are pushing for LTE because they can nickel-and-dime us for data charges. :-)

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      1. Bandwidth is one the most difficult thing to price-up. Ask Level3, GlobalCrossing etc..Mobile carriers will be soon dumb(wireless)pipes providers.

        They are just killing they business with LTE. In few years I will have to chose between a Google / Apple /Skype mobile subscriptions. I won’t even know who is the pipe provider.

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  5. I guess that 500+ million Facebook users and 500+ Skype users mostly correlate. Now, if we are in the mood of marrying companies, let’s make a hypothese of Apple shelling some of its cash on buying out Skype. They would integrate their FaceTime to Skype and suddenly they would penetrate desktops of millions PC users. And sell mad amount of iAds.

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  6. I disagree, Skype is in a semi-mature business more or less its integration with the web is secondary and leverage is uncertain fruition wise. Assuming they make a profit of around 150(ultra generous on my part) before taxes paying over 3 bil is insane. Skype is not as big as Facebook users have to actually use the service for it to be valuable.

    My feeling Skype will go public and slowly collapse valuation wise, due to debt overhang. Maybe even bankrupt in the future.
    Best guess is they get valued at 1.5-2.5 bil on market cap + debt and go down from there.

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  7. Clearly skype is a jauggernaut, but they are Not alone anymore… Little truphone has more to offer than only IP Voice, Video and IM Communication . It is also a growing and powerful global Carrier, with some signifikant advantages. Facebook got the 500m Users truphone has the Way to monetize them….

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  8. I am skeptical of this one. Skype’s strength is that it has a simple focus on communication, a business model that is not ad driven, and is heavily used for business communication.

    I don’t have anything against Facebook, they’re both great companies, but they’re each viable independently of the other, so why try to cram them together. A partnership that makes posting updates from Skype to Facebook easy, or making Skype calls from within Facebook, would have the same benefits in terms of incremental revenues, without all of the risks and costs of a full merger.

    I’d like to see Skype remain independent for a long time, and ideally, for them to start buying mobile telcos and make some serious change to the way the telecom industry operates.

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  9. Who would you call when your phone calling services goes down? Skype or Facebook? This is more than a marrying of technology and user bases; it would make Facebook a service provider. You know what happens after that…meeting FCC requirements.

    Also wasn’t Skype’s valuation when eBay jettisoned it at like $1.5B. Where did you come up with $7 – 7.5B in valuation?

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  10. Are you hinting at a modified version of Metcalfe’s rule (besides notes being organized around people, therefore limiting the number of connections), with the added modifier that the (social) net becomes more useful with the number of ways to communicate?
    When does over communicating/multi-tasking, kick in?

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