This Facebook-Skype deal stinks and it smells like Redmond

This Facebook-Skype deal is just a bit too chummy for me, considering that one that really has potential to gain from it is Microsoft.
Written by Sam Diaz, Inactive

Where was Microsoft CEO Steve Ballmer on Wednesday morning? After all, that big dog-and-pony show at Facebook's headquarters, the one announcing a chummy new relationship between Skype and Facebook, wasn't really about Skype or Facebook, right?

That was a Microsoft news event - even if Ballmer wasn't there in person to announce the news. And it only cost Microsoft $8.5 billion to pull it off.

That's right. It all makes sense now. Back in May, when Microsoft announced that it was acquiring Skype, there were a bunch of raised eyebrows over the price tag. $8.5 billion? For Skype? Skype's not worth that much. Oh no, here comes the next tech bubble...

Back then, it seemed like a lot of money to spend to keep Skype technology out of the hands of other possible suitors - namely, Facebook and Google. But we learned today that the $8.5 billion wasn't so much a price tag on Skype as much as it was a price tag on all 750 million Facebook users - or so it seems. Of course, Microsoft couldn't just buy Facebook for $8.5 billion. Just last month, as Facebook IPO chatter heated up, the valuation number for Facebook was pushing nearly 10 times that amount. Plus, how long would it take to pull off a big Microsoft-Facebook deal, given the regulatory hurdles that such a deal would inevitably face?

Skype, of course, has got to be thrilled that it is now going to boost its user base from some 150 million to a potential 750 million with a Facebook rollout. Skype must also be thrilled to know that Microsoft isn't going to shelf it somewhere and try to build some technology around it. Skype is a new Facebook feature - and that has to make Bates really happy. And probably Steve Ballmer, too.

But it's what Facebook CEO Mark Zuckerberg said during the Q&A at today's press conference that really made me pause. He mentioned the "longstanding" and "really good" relationship Facebook has with Microsoft, which invested $240 million in Facebook in its early years. He suggested that Microsoft and Facebook have worked together on other things in the past, like search, ads and Bing. (His examples, not mine.)

Then he said, "I would have been fine with (a Skype deal) when it was an independent company, too." But now that it's owned by Microsoft, "there's a sense of stability that we're going to be with a company that we can trust."

Screeeech. Hold on for a second there, Zuck. When Bates took the microphone away from Zuckerberg, he was very quick to point out that Skype is not yet owned by Microsoft. "We haven't closed yet. We're very hopeful." And then he mumbled something about regulatory approval.

Oh, right. There's the little technicality of approval from government regulators that Microsoft and Skype still have to get past.

Now, at some point, Tony Bates and Steve Ballmer "came to see Mark," Bates said at the press conference, so they could talk about the Facebook-Skype deal. "If anything, it just got stronger. We really aligned on this."

And that's why this whole deal makes me queasy: Did that conversation between Mark Zuckerberg, Steve Ballmer and Tony Bates take place before or after Microsoft's acquisition bid? Did they work out this cool little backoffice deal where Microsoft would buy Skype and then Skype would partner to bring video chat to Facebook's 750 million users and, by way of acquisition, Microsoft would then have a hold on Facebook's 750 million users in a way that a competitor might not. And maybe, down the road, those 1 billion people (Facebook continues to grow, you know) could be integrated into Microsoft's offerings. After all, Zuckerberg said, he's "not going to rule anything out" in terms of where this technology will go next.

Hey, didn't Facebook just block a tool that would allow Google+ users to export their Facebook friends into Google's newly launched social offering? I wonder if that decision was made in Palo Alto or Redmond.

Something stinks here in Techville and I can't help but wonder if I'm the only one who smells it. I wonder if regulators back in Washington - who haven't yet given their blessing to the Microsoft-Skype deal, even though Zuckerberg seemed to think they already had - can smell it, too?


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