What Facebook and Instagram Can Learn From Microsoft and Skype

A giant tech company buys a hot start-up for a lot of money and loyal users are fearful that the new owner will crush the company's soul. Sound familiar?

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A giant tech company buys a hot start-up for a lot of money and loyal users are fearful that the new owner will crush the company's soul. Sound familiar? We're not talking about Facebook and Instagram, but Facebook might want to take notes. This story is about Microsoft and Skype, as detailed by The New York Times' Nick Wingfield.

Since Microsoft's $8.5 billion acquisition of Skype, the Internet communications network has flourished, but Microsoft hasn't really used Skype to its advantage. "The idea that Skype can give Windows and other Microsoft products an edge is the only way the company can justify the high price it paid, analysts say," writes Wingfield. Microsoft hasn't quite gotten there yet. (Neither has Facebook.)

With Skype, Microsoft has taken the same approach Facebook has elected for Instagram, letting the cool kids do their thing inside the big company's rich infrastructure. "We’ve kept our identity and our autonomy," Skype President Tony Bates told Wingfield. For example, Microsoft has let the Skype team operate out of Silicon Valley, instead of at the Microsoft headquarters near Seattle. Bates uses an Apple computer, a scandalous thing considering that same company has banned Siri from its company. And, Microsoft has even given the Skype team their own special badges.

Both Microsoft and Facebook have chosen the hands-off approach to their acquisitions, fearful of sucking the value out of the start-ups. With too much pressure, these beloved programs could turn off users. As Wingfield writes: "When Microsoft announced plans to acquire Skype a year ago, some skeptics feared it would be just a matter of time before Microsoft began turning Skype into a communications network for its own products, treating all the smartphones, tablets and other non-Microsoft devices that Skype ran on as an afterthought." And remember all that Instahate after the Facebook deal?

But so far, both Microsoft and Facebook have maintained these companies' independent spirits. For Microsoft, the autonomy has translated to success -- for Skype. The company, staying with its mission to connect people through multiple devices, has continued to grow over the last seven months, with the number of people signed-up growing 26 percent each month, notes Wingfield. With Instagram untouched by Facebook's hackers, users have yet to flee.

So far, so good, but only for the little guys (and users). Neither Facebook nor Microsoft have proven their billion plus dollar buys were worthwhile. Facebook just went and released its own Instagram clone -- a baffling move considering the company just bought that very thing for 1 billion dollars. And, as Wingfield notes, Microsoft hasn't used Skype to its own advantage. Many video chat on PCs, but it's also available on Android and iPhone platforms. "It’s still promising and intriguing, but we really haven’t seen it rolled out across the products," Bill Whyman, an analyst at ISI, an investment research firm told Wingfield.

Microsoft plans on changing that, of course. With its anticipated Windows 8 release, Microsoft will also put out a preliminary version of new Skype calling software. It also plans Lync and Xbox 360 integrations. And we've already seen the app show up on Windows phone. But, as Wingfield notes, that didn't go too well, with it receiving disappointing reviews. Facebook, earlier on in this life-cycle, has yet to do any sort of anything with Instagram. (Besides, it can't really yet, as the deal hasn't closed.) But, it's a tricky road ahead. Microsoft hasn't proven this type of relationship can work. Who's to say Facebook will have better luck?

This article is from the archive of our partner The Wire.