Cisco and Microsoft both made good buys when they jumped into video conferencing, according to Don Dodge, director of business development on Microsoft’s emerging business team.
On his blog, Dodge dissected the deals and explored whether Microsoft should have acquired WebEx. Instead it bought Placeware, a company whose team was willing to relocate to Redmond. Placeware also fit better, he said:
Microsoft’s business model is to sell software products for a license fee. WebEx was all about selling a hosted service on a dollars per minute basis. This is a great business model but it didn’t match with anything else Microsoft was doing, and certainly didn’t fit with the Microsoft Messenger / Live Meeting strategy of the time. It was probably easier to acquire Placeware for $200M and make it fit the Microsoft model than it was to spend $750M for Web-Ex and not optimize their existing revenue model.
Cisco’s purchase was probably smart, he said:
They paid a lot more than they would have four years ago, but in the long run it will probably work out. But why didn’t they save several billion dollars and acquire them earlier? Good question, but my guess is that Cisco was not looking to get into this business four years ago.
On Google’s $1.6 billion purchase of YouTube, Dodge said, “Cisco looks like a genius in comparison.”
You might recall that I have been talking about Mobile Search and Local Search as two of the most lucrative search markets still up for grabs. It should be no surprise that Microsoft made this acquisition to go after these markets. Great move!