How Microsoft And Skype Embarrassed Google

If Microsoft put together a welcoming committee for Google’s new CEO Larry Page as Page assumed his new job recently, it couldn’t have done a better job.

First the Redmond, Wash.-based software giant took the wraps off its Office 365 beta, which turns out to be far and away better than any single aspect of Google’s Google Apps offering.

Now, Microsoft announces it's buying Skype for $8.5 billion, and Page and Google have never looked weaker and more vulnerable from a solution perspective. The information technology world is changing faster and more meaningfully than it ever has, and Google now is far behind Microsoft in key areas and could rapidlty lose its advantage in another.

To wit:

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Microsoft now has potential to embed Skype audio and video calling into Office 365, Outlook and Web mail products. While Google has for some time integrated audio and video into Gmail, it hasn’t picked up momentum in this space -- largely because Skype has maintained fierce user loyalty. Microsoft now has that 170 million Skype installed base in its column, and that’s one big bat it can use to beat up Google;

Once this deal closes, Microsoft will immediately have a presence on tens of millions of smart phones that now have Skype Mobile -- the powerful video-and-audio calling that works even at 3G speeds. That presence will even include Android phones -- which had previously been Google’s playground.

Skype Mobile now becomes a gateway on Android phones into Microsoft’s Office, SharePoint, Exchange and even SQL Server. That means Microsoft’s current installed base across all products need not abandon its IT investment regardless of which smart device platform it selects to reach the edge of network.

Microsoft, as part-owner of Facebook, is now positioned strongly to drill Skype deep into the world’s largest social networking platform. Facebook with voice and video baked in would be a more powerful Facebook, and it will bear watching to see if a Microsoft-Skype duo becomes a trio with Facebook;

And, for Microsoft Chairman and CEO Steve Ballmer, here’s the beauty part: Microsoft can now integrate its Bing search technology into Skype on both the desktop and smart platforms.

Next: Microsoft's 'Search' Beachhead

That means Bing, through Skype, could be in front of hundreds of millions of eyeballs that would otherwise default to Google for search and search advertising. And, as we all know, search advertising is the secret sauce that keeps Google hot.

Until today, Microsoft could never really obtain beachhead in search. The operative phrase, here, is ’until today.’

Ballmer and Skype CEO Tony Bates emphasized, repeatedly, during a press conference Tuesday morning that they intend to leverage the Microsoft-Skype marriage to score big with advertising – including video- and rich-media-based ads.

Ballmer and Bates also made it clear that the real bullseye for them in this deal is the commercial IT space -- where the marriage of VoIP and video have at times been pricey and integration with multiple platforms has at times been complex.

A Microsoft-Skype bundle for communications -- if executed correctly with Microsoft’s solution provider channel, which must sell and deliver the deal to the IT marketplace -- will be a game-changer. It would enable text, voice, video, collaboration and communication from the smart phone to the back office to the cloud.

In other words, for $8.5 billion, Microsoft gets its money’s worth. And Google and Page get a choice. They can respond with aggressive R&D, marketing and vision, or they can call the anti-trust lawyers and hope the courts can save them from a Microsoft-Skype union. Microsoft executives say they expect the regulatory process to finish up by year’s end. (It’s safe to say they are somewhat familiar with the process.)

Microsoft and Skype, together, are each stronger and leave Google much weaker. From a solutions perspective, MicroSkype comes at the perfect time with the perfect weapons in its arsenal.