Managing the Google/On2 merger at Skype

I don't work for Skype. Here's advice I'd give to senior management on how to respond to Google buying On2, which makes Skype's video engine.

1. It's a threat. It may not have been Google's intent, but Skype should consider this an attack by a rival. While the media and the blogosphere have been focusing on On2's value to YouTube, Google could also apply these resources it to its realtime talk properties (Talk, Voice, Wave) and to the Chrome browser (the better to play/capture videos without an Adobe plug-in).

2. The deal isn't done. I'm sure the lawyers can cook up ways to interfere, contracts and regulatory influence (monopoly power), perhaps raid the company for talent that doesn't want to move. The low road. Better to engineer your way out of this exposure by making/buying the talent/technology/IP so you no longer rely upon On2 products.

3. It changes the video codec industry. Google hasn't had a strong competence in codecs. Until now. They have the potential to promote On2's codecs by licensing them freely or open sourcing them. That's how industry de facto standards are made. Two effects: This could drain the swamp as all the small video codec makers starve, going out of this business. Frozen standards may also limit Skype's ability to innovate around video codecs or strike interoperability deals as Google assumes industry leadership in that technology.

4. Act yesterday. While the deal's effects are not immediate, Skype's learning curve may be substantial and you'll want every day possible to own your core IP. I'm sure you've started already.

5. Keep focus. Skype has a diverse product portfolio. An audio/video/signal engineering initiative (a center of excellence? a subsidiary that licenses the technology?) (The Skype Immersive Reality Institute?) could take resources and attention from other strategic investments. Keep balance. The right workflows around product lifecycles and product mix should help keep balance.

6. Short term, this may be a time to negotiate a better deal with On2. You can always leave them behind, but you may want to secure promises of technical support, ongoing maintenance, best prices, continued improvement in the product, etc.

What advice would you add?

tags: skype, video, m&a, google, on2, googletalk, googlevoice, googlewave, adobe, googlechrome, competition, strategy, management

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