2011-05-23 Microsoft takes on Google with Skype buy

Intelligence Report - 05/23/2011
By Mark Glaser & Desiree Everts




Microsoft takes on Google with Skype buy

So much for Google or Facebook buying Skype. Just days after the Internet was abuzz with rumors that both Net giants were interested in either acquiring or partnering with the popular voice-over-IP (VoIP) company, Microsoft threw its hat into the ring and announced a $8.5 billion acquisition of Skype, the most it's ever paid for a company. Some industry watchers were quick to raise eyebrows at the hefty price tag, with TechCrunch's Steve O'Hear suggesting Microsoft paid far too much. According to his anonymous sources, Google came in second place in the bidding with $4 billion, meaning Microsoft could have bought Skype for a lot less. However, GigaOm’s Om Malik speculated that Facebook and Google were never seriously in the game, saying that with Google Voice, Google doesn't need Skype. “In essence, I feel that Microsoft was bidding against itself," he wrote. PCWorld's Tony Bradley disagreed, saying that Google could have bought more experience in VoIP and made it a leader in the space, he said. "Now, it will have to continue doing things the old-fashioned way, and go head to head with a revitalized Microsoft, and -- by proxy -- Facebook." So what does Microsoft get out of the deal? Skype's voice, video and sharing capabilities give the software giant a leg up in the enterprise collaboration market, according to GigaOm's Malik. Plus, Microsoft will be able to sell more digital advertising through Skype's video services. Skype's services "span hot markets -- online socializing, mobile phones and digital video -- where Microsoft has been struggling to catch up with Facebook, Apple and Google," according to AP writers Michael Liedtke and Peter Svensson. And most importantly, Skype would give Microsoft an answer to Apple's Facetime and Google Voice. TechCrunch's Mike Butcher notes that Microsoft is an investor in Facebook, and the social network already has ties with Skype. "With Facebook integration, Skype will not be so heavily linked to an actual device -- as Facetime is with Apple devices," he said.


LinkedIn's big IPO more about pent-up demand than bubble

In one of the more hotly anticipated initial public offerings in recent years, business-oriented social network LinkedIn made its debut on the stock market Thursday, and shares shot past even optimistic expectations, closing nearly 110% above its opening price of $45. The IPO made LinkedIn founder Reid Hoffman a billionaire, with his personal stake now valued at $1.6 billion, according to the Wall Street Journal's Robert Frank. The big question is whether this means the return of the Internet bubble (now with a social angle). But as MarketWatch's Mark Hulbert pointed out, if this were so, it would take more than one IPO to "create a frothy market." Despite LinkedIn's red-hot IPO, the stock market is "nowhere near as overheated today as it was in the latter stages of the Internet bubble in 1999 and early 2000," he added. But it does offer up the prospect of heady future offerings from the likes of Facebook and Twitter. "LinkedIn's meteoric rise reflected pent-up demand for hot social-networking companies, whose stock up to now has only been available to the well-heeled," wrote San Jose Mercury News' Peter Delevitt. Others questioned whether the private market incorrectly valued the company. As Business Insider's Henry Blodget said, "LinkedIn executives should be questioning if the bankers 'wildly' underpriced the deal and sold LinkedIn's stock to institutional clients 'way too cheaply.'" The WSJ's Shira Ovide agreed: "This is wacky. LinkedIn is now valued at $10.5 billion, or 43 times its 2010 revenue." But is the company really worth it? GigaOm's Mathew Ingram notes that LinkedIn has succeeded more as a jobs board than as something social. "LinkedIn is still a kind of Web 2.0-style job board," Ingram wrote. "That’s not to say job boards can’t be good businesses, and LinkedIn has shown that it is a good business, generating revenue of $243 million last year and even turning a profit to boot." The problem is when you compare these lofty valuations to companies like Apple and Google. Anyone who expects returns similar to those tech giants' is "on the fast train to heartache," according to Ingram.

California bill puts social networks in privacy crosshairs

Social networking giant Facebook, which recently came under fire for hiring a PR firm to churn out negative stories about Google's privacy issues, is now spearheading opposition to a proposed privacy protection bill, dubbed the "Social Networking Privacy Act." The company, along with Net giants Google, Yahoo, Twitter, Skype and others, last week sent a letter to the California Senate, expressing concerns about the bill, proposed by State Sen. Ellen Corbett, saying it would severely limit the industry. The proposed law would require social-networking sites to let users establish their privacy settings when they register on the site instead of after they join. The sites would also have to set defaults to private, and users would select which information they want to make public. Each infraction of the law would result in a $10,000 penalty. "You shouldn't have to sign in and give up your personal information before you get to the part where you say 'please don't share my personal information,'" Corbett told the San Francisco Chronicle. Tech giants argue that the proposed legislation violates free speech. "By hiding from view of all existing usersʼ information until they made a contrary choice, the state of California would be significantly limiting those users ability to 'freely speak, write and publish his or her sentiments on all subjects,'" the coalition wrote in its letter, according to ReadWriteWeb's Dan Rowinski. Some industry watchers agreed and pointed out that the proposal puts too much power in the hands of the state. "Corbett's social networking bill is not just anti-social," said TechNewsWorld's Sonia Arrison. "It's an attack on the freedom of all technology entrepreneurs to run their businesses." MediaPost's Wendy Davis pointed out that it could also be unconstitutional due to the fact that states are not allowed to regulate interstate commerce, a prohibition that has been "interpreted as preventing states from passing laws that would require companies to operate differently in different states," she said. On the other hand, the proposal could help social networking sites find a middle ground when it comes to privacy, and some believe it makes sense. "What is wrong with locked down by default?" asked PCWorld's Tony Bradley. "It would give users better control over their own information, and it would mean that the decision to share personal data would be a conscious one."


Mags Roundup: iPad subscriptions; Next Issue Media debuts

Just as Apple started to make more progress in wooing publishers to its subscription model, the Android platform had a significant "get" in the magazine world. Next Issue Media, the consortium often dubbed the "Hulu of magazines," launched a preview of its offerings from publishers including Hearst, Conde Nast, Meredith and Time Inc. Some users of Samsung's Galaxy Android tablet will be able to buy digital versions of titles including Hearst's Esquire and Popular Mechanics, Conde Nast's The New Yorker, Meredith's Fitness and Parents, and Time Inc.'s Fortune and Time. AllThingsD's Peter Kafka calls the launch a "cautious first step, with lots of caveats," noting that Next Issue's missed its previously announced goal of debuting early this year. Next Issue CEO Morgan Geunther told Kafka that the consortium will expand its offerings and platforms in the fall, including a version of its app for Hewlett-Packard’s webOS. Wired's Sam Gustin notes that though it's early on and just a preview, it still shows that "big publishers can work together toward a vision that many in the industry view as the digital endgame: a virtual newsstand where readers can pick and choose among titles." With Next Issue, publishers will receive at least 70 percent of the revenue -- the current split with Apple -- and they'll get full access to subscriber data, according to Kafka. Apple's tight control over subscriber data had been a source of unease for some publishers, though now that it's backed off some of its demands, more publishers are jumping onboard. The New Yorker recently announced a subscription that includes the magazine online and on the iPad for approximately $60 a year, and for $1 more per month, subscribers can get the magazine in print, too, according to the WSJ's Russell Adams, noting magazine and newspaper publishers are catching onto the concept of the bundle. "The shift illustrates a broader effort by publishers to move away from their print-centric roots toward becoming consumer brands with many touch points," he said.


Tablets scratch surface of consumer use, make business inroads

Despite all the buzz surrounding tablets, consumer use of the devices is still fairly limited. New Research from Nielsen reveals that more than 95 percent of U.S. consumers have yet to be drawn in by the tablet hype. Just 4.8 percent in a survey of 12,000 people said they owned a tablet in the first quarter of this year. That puts tablets behind most other mobile devices in terms of adoption. Seven out of 10 of tablet owners and 68 percent of smartphone owners use their devices while watching TV, compared with 35 percent of e-reader users. Meanwhile, a study from Dimensional Research found that while iPads are making gains among businesses, most of them lack a clear strategy for using them. In a survey of 448 businesses, 22 percent said they deployed tablets, 22 percent plan to do so this year, and 24 percent plan to next year, according to TabletPC Review's Mark Calley. Although Apple isn't known for its focus on businesses, it rules in the corporate world when it comes to tablets: 83% plan to use iPads, compared with 17% for RIM's BlackBerry PlayBook, 14% for HP's Slate, 13% for Motorola's Xoom, and 11% for Dell's Streak. advertisement

Google rules news traffic, but Facebook shows promise

When it comes to news, Google is still the primary driver of page views, but Facebook is making some gains, according to a recent study from the Pew's Project for Excellence in Journalism (PEJ). The study looked at Nielsen data for the Top 25 news sites in the U.S. It comes as no surprise that Google tops the charts as the primary traffic driver, capturing an average of 30 percent of the traffic to major news sites. But what did come as a bit of a shocker is that second in line – topping both Facebook and Twitter -- is the Drudge Report. According to the PEJ, the Washington Post's website received 15% of its referred traffic from Drudge. But the Post disputed that number, saying that Drudge only drove about 2.5% of traffic in recent months. The Huffington Post's Michael Calderone did some checking with comScore, Hitwise and even the Washington Post's Omniture numbers, and found that they never hit anywhere close to 15% -- but the PEJ stuck with its findings from Nielsen. The other eye-catching part of the research was how quickly Facebook is gaining ground as a traffic driver, with up to 8 percent of the news sites' traffic coming from the social networking site. Plus, it's a top destination after people leave a news site, which shows that people are often using the Facebook Share button in stories. "Google and Facebook are increasingly set up as competitors sorting through the material on the web," the PEJ report said. "Google does so through the power of its search algorithms. Facebook does so through the power of affinity groups and peer sharing." Twitter, meanwhile, was just a blip, sending new sites less than 1 percent of traffic. As far as frequency of visits to news sites, the study also acknowledged a loyal group of "power users," readers who visit 10 times or more per month, though only about 7 percent of users fell in that category.

Of Note

Facebook Hires PR Firm for Anti-Google Campaign (NYTimes.com)
Facebook is being taken to task for trying to conceal its own identity as it sought to coax reporters to write critical stories about Google's Social Circle

Google News Gets Revamp to Reduce Clutter (CNET News)
Users can personalize the page. While the first three stories are culled algorithmically, the remainder can be compiled based on user interest.

The Future of Media: It’s Not Piracy, It’s Marketing (GigaOm)
How a book about getting kids to go to sleep became a bestseller after people took an advance copy's PDF and spread it online

Justice Department Is Investigating Google Advertising (NYTimes.com | Bits)
Company may have to pay more than $500 million to settle problems related to advertising in an ongoing investigation

No Gloom Here: In Latin America, Newspapers Boom (PBS MediaShift)
Newspapers were reporting extraordinary growth in advertising sales from 2005 to 2009: 62 percent in Argentina, 70 percent in Brazil, and 57 percent in Colombia

YouTube Founders Acquire Web Analytics Firm (NYTimes.com | Bits)
After buying Delicious, they nab Tap11, which helps businesses understand what is being said about their companies on social media sites such as Twitter and Facebook


openquoteWe are in this crazy situation where information is available freely online which you are not able to print in newspapers. Technology, and Twitter in particular, is making a mockery of the privacy laws that we have and we do need to think about the regulatory environment that we have.closequote

Jeremy Hunt, UK Culture Secretary, pushing for new privacy laws in Parliament

Privacy law situation is crazy, says culture secretary (The BBC)


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