Microsoft's (NASDAQ:MSFT) latest Windows 10 update integrates messaging capabilities directly into the operating system.
The update, released earlier this month, introduces three new Skype apps -- Messaging, Phone, and Skype Video -- to Windows 10. Individually, they don't offer any major functionality that can't be found in the traditional Skype desktop app, but they're far more streamlined and much better suited to a touch-based interface.
Skype remains Microsoft's most expensive acquisition, and while it hasn't wilted under the Redmond tech giant's ownership, newer messaging apps, most notably Facebook's (NASDAQ:FB) Messenger and WhatsApp, may have surpassed it in popularity. Deeper integration with Windows 10 should benefit Skype.
The unbundling of Skype
When it comes to features, the Skype desktop app has few equals. It offers text and voice chat, away messages, call forwarding, and video conferencing. Skype users can share their screens in real time, easily transfer files, and make calls to mobile phones and landlines. The sheer plethora of features has made Skype powerful -- but it may also have alienated some.
Skype made its debut in 2003, and by the end of 2009 had amassed a massive 560 million registered users. That large network might've been expected to produce equally powerful network effects, but alternative messaging apps have been able to thrive in recent years. WhatsApp arrived late in 2009, and as of the end of last quarter, it had over 900 million monthly active users, up 100 million in the last six months. Facebook's Messenger has enjoyed equally impressive growth, and now boasts more than 700 million monthly active users.
Neither offers as many features as Skype, but that's not necessarily a bad thing. What they do, they do well, with interfaces that are more user friendly and apps that are less demanding. Skype hasn't been a complete failure with mobile users, but it's been overshadowed. Skype is currently the 42nd most popular free app on the Google Play app store -- Facebook Messenger is the most popular; WhatsApp is the 10th most.
Microsoft could've given Windows 10 a single Skype app, but it didn't, instead slicing it up into three distinct apps. They offer functionality commensurate with their names -- Messaging for text messaging, Skype Video for video conferencing, and Phone for voice calls. Users can, if they choose, stick to the traditional Skype desktop app, but many may prefer the simplified alternatives, particularly if they're using a Windows 10-based tablet or convertible.
Microsoft hasn't adopted the same strategy for iOS or Android -- at least not yet. For now, a single Skype app remains the only option. But the shift with Windows 10 may suggest a change in how Microsoft views its messaging service.
The business of messaging
Microsoft hasn't regularly divulged the number of active users Skype has since it acquired it in 2011. In 2013, it announced that Skype had more than 300 million active users, but it hasn't updated the figure since. It's probably grown, but WhatsApp and Facebook Messenger have likely surpassed it.
Skype isn't a big part of Microsoft's business, but it has important strategic value. Office 365, Microsoft's subscription-based service for consumers, includes Skype minutes as part of its value offering. Most of the 18 million people who currently subscribe likely do so mostly for access to Microsoft's Office apps, but Skype calling could play some role. The Skype brand itself carries weight with the enterprise community -- Microsoft renamed its business-focused Lync communication service Skype for Business last year.
Facebook's management sees messaging as playing an important strategic role in the company's future, consistently highlighting the growth of WhatsApp and Messenger on its quarterly conference calls. Facebook hasn't monetized either yet in any meaningful way, but could eventually through partnerships with businesses, or by selling access to special emoticons and stickers. And while WhatsApp and Messenger remain fairly simple, they have added a number of new features that put them into more direct competition with Skype. Both added voice-over-Internet calling earlier this year, for example.
Microsoft hasn't been as committed to messaging as Facebook in recent years, but by unbundling Skype and integrating it directly into Windows, it could see greater usage. Windows 10 is now installed on over 110 million devices, and it continues to grow rapidly.
Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Facebook. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.