Thursday, January 06, 2011

Skype's Acquisition of Qik - it's all about the paid services

Skype closed a deal today to purchase the mobile video broadcasting startup Qik, for a reported 150M$. I actually had to do a double take on this one as I couldn't quite figure out why Skype would want Qik - outside of both companies being in video on mobiles the obvious synergies end pretty quickly.

After a bit of thought I see a strategic move by Skype's new CEO Tony Bates here. As an ex-Cisco VP., Mr Bates understands a few things really well - the buy vs. build argument and the business services market. Qik represents a few things to Skype: a quick add of 60 really talented engineers, some killer IP, and most importantly some traditional brick and mortar highly scalable infrastructure, which is something that Skype sorely lacks.

This lack of traditional server infrastructure limits Skype ability to add new premium services, and as a direct result its ability to increase revenue especially in the business arena which is Mr. Bates bread and butter and something that Skype has failed miserably on since its inception.

The audio conferencing market is huge, but the video conferencing market is just starting to explode and has the potential to be much larger. The highly profitable premium services that are attached to traditional audio conferencing centre around recording and storage/sharing, businesses love to record and store conference calls - and they pay for the privilege. NO ONE is recording and storing video conferencing in any sizable scale, this is a very tiny market but IMHO will be the number 1 paid service that will accompany video conferencing, especially in business. Skype, with the aquisition of Qik, is now poised to be the global leader in not only desktop videoconferencing but also the paid for services that will accompany it.

This is why they bought Qik - its gives Skype the ability to innovate and not only create the global desktop video-conference market but also the ecosystem of services that will surround it, starting with recording and storage and innovating from there.

It is a very smart and bold move, Skype's new CEO is starting off with a big bang. Well done.