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Summary:

Microsoft’s mixed history in the digital living room has many thinking the company could botch its deal with Skype where smart TVs are concerned. But leveraging Skype’s social capabilities and integrating the service with key Microsoft products might just prove otherwise.

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Much of the initial discussion surrounding the consumer-market impact of Microsoft’s acquisition of Skype has been focused on taking the latter to the Xbox 360. But what’s perhaps more interesting is whether the deal can help Microsoft plant seeds in the smart-TV market, a place where Skype has made significant inroads but Microsoft has been a big-time no-show.

Skype’s early success in this space was evident at CES 2011, where every maker of smart TVs seemingly had partnered with the company to put Skype video chat capabilities on their devices. This was, of course, a direct result of the groundwork laid in 2010 with Skypekit and the company’s efforts and strategy to diversify away from the PC and Mac market into the CE space.

But does Skype’s early-leader position in smart-TV video chat mean anything today, particularly in a market most would still categorize as embryonic? Not yet, but as they say, every acorn will be a tree — at least until poisoned by corporate incompetence or delusions of grandeur.

And no doubt, Microsoft’s mixed history in the living room has many thinking the company could botch this deal with Skype. For every Xbox Live success Microsoft has ever had, there’s been a Media Center, or a Windows Home Server, or WebTV. So how can it smoothly leverage Skype in smart TVs?

First, Microsoft should realize Skype’s current place is the smart-TV space is limited and sitting atop a non-Microsoft OS. Any efforts to use Skype as a wedge-strategy play to displace other underlying platforms such as Android will, in all likelihood, fail miserably.

Second, Microsoft employ a gradual grow-by-extension strategy of connecting Skype with key Microsoft platforms over time. While it’s a corporate market success, the work Microsoft has done integrating its Lync product with other video and unified communication products shows Microsoft understands how to join different products together.

Third, it needs to play up the social hooks of Skype, as most TV OEMs don’t have an answer for social TV. Skype is, in a sense, a huge social network,  and it could provide underpinnings for a number of social-TV services.

Is all this enough to fight off the grander vision set by Google with Google TV? Perhaps not, but Microsoft needs a place to start in smart TVs; by showing it can grow Skype, TV OEMs will likely want to offer other Microsoft-branded services directly on their TVs, such as light versions of Xbox Live or the Skype Qik video messaging offering. But Microsoft can only do this after it proves it can let Skype flourish post-acquisition.

If you’d like to read more about how Microsoft can leverage Skype in the living room, read my weekly update at GigaOM Pro (sub. required).

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  1. I’m betting that in a frenzy to “monetize”,they will botch this

    1. Microsoft, like many companies, usually finds strategic best interest at odds with those vested in the company on near-term financial basis. Where they’ve made the right strategic moves long term (like investing in Xbox 360), Wall Street pounds them because it hurts near term financial metrics. We’ll see if they can resist the urge to monetize too quickly on Skype in order to please Wall Street and instead maximize long-term strategic potential of Skype (over long time horizon, strategic and financial interests converge, but not on near term).

  2. Considering how long time Skype has been working on their platform strategy (forever!!), I would not say they have moved very fast. And they won´t move faster with MS as an owner, that is for sure.

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