Why Facebook + Skype Is Not a Bad Idea

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Did you hear that both Google and Facebook are looking to either partner with Skype or simply buy it? Funny, because back in the day when Skype was in play (before it was acquired by eBay), Google had a chance to buy it, but Larry Page and Sergey Brin nixed the idea.

Today, some are speculating that Facebook might be a better suitor than Google, though I bet none of the sources quoted in the Reuters story  have any first-hand knowledge of any deal. Reuters pegs the price of Skype at between $3 and $4 billion, roughly three to four times Skype’s annual revenues, which are in the $1 billion range.

Here Is Why Facebook Should Buy Them

People laughed at me when I suggested back on September 29, 2010 that Facebook should buy Skype. Here’s what I wrote then, and I still think that is the real reason for a Skype-Facebook deal:

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.

Since then, Skype is much bigger, has more revenues and has a lousy new desktop client. Facebook has taken huge strides towards owning “communications” and online “interactions.” When Facebook launched its Social Inbox, I pointed out:

For the first three years of its life, the company was merely a social network, but then it transformed itself in quick succession into a social web platform and then a social aggregator of the web. Today, the company launched its “social inbox,” a new kind of messaging system that is the first public manifestation of the new new Facebook. Facebook’s newest core competency is communications — a way to become even more indispensable in our daily web lives.

There are many other reasons why this deal makes sense, the biggest being Marc Andreessen, the web wunderkind turned über-VC who sits on the board of Facebook and has investments in both companies. It would be Christmas in summer for his fund if this deal goes through.

Is Skype Crazy to Sellout?

What isn’t clear to me is why Skype wants to sell. Sure, everything has a price, but boy, if there’s one company that can go public, it’s Skype. Frankly I am surprised that Skype would settle for such a low number. Why sell for four times their revenues? Is there something that doesn’t meet the eye? Has the juggernaut slowed? Six months ago, I suggested that Facebook should pay between $7-to-$7.5 billion.

I am even more surprised that Skype would not shoot for a public offering — which is crazy because it is precisely the kind of company which can go public.

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