Skype Brings Texting Startup GroupMe Into Fold

Skype is buying GroupMe, a startup that provides group messaging on smartphones, in a move designed to make the Internet telephone and video service more of an all-purpose communications hub for social and business interactions.

The company, which announced the acquisition of the one-year-old New York-based startup Sunday, did not disclose the terms of the agreement. A source told the Wall Street Journal that the deal was for about $80 million, while GigaOM sources placed it at around $85 million. Spending millions on a startup was probably not a big deal for Skype, which is itself being acquired by Microsoft for $8.5 billion.

GroupMe, which has previously raised $11 million in two rounds of venture funding, lets its users text and make conference calls among friends or colleagues and business associates, free of charge.

In a company blog, Skype CEO Tony Bates described the GroupMe team as providing an “incredibly sticky group-messaging experience” that works across multiple platforms and said the acquisition is “another step towards our vision to provide a global multimodal and multiplatform communications experience.”

The move will “enable users to connect, share locations and photos, and make plans with their closest ties,” said Bates.

Competitors in the same space as GroupMe include Apple’s iMessage, Google’s Huddle, and Facebook Messenger, all of which offer smartphone messaging services that include group messaging. Facebook started its Messenger service after purchasing a group messaging startup called Beluga, back in March.

The growing rivalries from big tech companies in the space have some observers saying that it was a smart time for GroupMe, which has 20 employees, to sell. On the other hand, others point out that GroupMe could have become a competitor to Skype if it kept on growing and added video services itself, but Facebook's new offering, Messenger, especially probably spooked the small company into the sale. [And, incidentally, all of the free messaging services have some tech experts declaring the end of SMS (Short Message Service) texting, which is bad news for phone carriers, which generate about $25 billion in fees for such services in the United States and Canada.]

Founded in 2010 at the Techcrunch Disrupt Hackathon by Jared Hecht and Steve Martocci, GroupMe was one of a number of startups building wireless services that let people communicate in private groups over mobile phones. The company said its service currently sends about 100 million messages a month.

"There is a natural affinity between Skype and GroupMe and our goal is to continue developing tools that make it easier for people to communicate, share, and stay in touch with their close and important ties," Hecht said in the release.

Steve Martocci, GroupMe's other cofounder said the integration of GroupMe into Skype "accelerates the execution of our vision tenfold.”

For now, Bates told the Journal, the two companies will operate independently, and GroupMe's mobile applications will continue to exist. But down the road they will combine their technologies.

In the meantime, Microsoft’s deal to buy Skype for $8.5 billion is still awaiting regulatory approval. The Federal Trade Commission has already approved it here in the United States, but the purchase of Skype, which is based in Luxembourg, also needs an OK from the European Commission.

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Teresa Novellino writes for Portfolio.com