There have been some extraordinary events in May that makes me feel it will be seen as a defining month for the cloud (as opposed to evidence of a second internet bubble as some have been saying).

Firstly, we had the Microsoft acquisition of Skype for $8.5B – more than three times what the previous investors paid only two years ago and around 10x 2010 revenues. Whether you think Microsoft overpaid for Skype or not (and only time will tell – see my post) what it does show is the huge value they placed on internet-based voice and video communications of which Skype is not only the clear leader but also the verb that’s used to describe it. It also showed the huge cash reserves the big technology companies have and how much of it they’re prepared to spend to stay competitive in world that is moving more and more into the cloud – a world that is in danger of passing them by.

Secondly, we had LinkedIn’s IPO delivering results that exceeded virtually all expectations. Their shares opened at the higher end of the expected range at around $40 and reached $94 at the end of the first day reflecting a 109% increase. The company’s valuation had reached almost $9B and nearly 20x current year revenues (expected to be in the $450-500M region). Whether this is sustainable or not (probably not) it shows the level of excitement and belief in the potential of social networking and, more broadly, of cloud computing.

Lastly, we saw Salesforce, the leader in the SaaS market, report record quarterly results with revenues up 34% to $504M and on track to be the first SaaS company to exceed $2B for the year. Marc Benioff, Salesforce’s outspoken CEO, talked about being a top 5 software company overall showing how cloud companies are now starting to measure themselves against the whole market rather than just within their category; he also had some sharp words to say about Microsoft:

‘Customers continue to want visionary products that give them a competitive advantage, not the me-too Zune-type products locking them into these old, proprietary, desktop-driven platforms that are dying off.’

There has been so much talk recently about the new generation of social network companies and how they are not only attracting huge user bases but also huge valuations. On the one side, there is talk of multi-billion dollar valuations and on the other that this signals the start of another bubble with valuations expected to come crashing down in the not too distant future.

So I thought I’d try to break down the numbers and look at six of the hottest companies side by side to see what we can learn. I’m not interested in looking at each business individually – that’s been done to death. What I want to do is to look at the numbers relatively to see how they compare against one another and what can be learned from that.

I believe there is no doubt that some of these companies will justify their huge valuations and go on to be very large public companies and a brand that is part of our lives for many years to come. But there will be others that will be exposed as unsustainable and will end up either being sold or their growth trajectory will come to a grinding halt as they are either unable to scale or are overtaken by a competitor they didn’t see coming. I think it’s only in comparing these companies that we can start to predict who the lasting brands will be and what these businesses need to do to live up to the hype.

I’ve taken six of the most highly valued social network companies and looked at both user and revenue numbers and then followed that through to value. In all cases I’ve tried to take data that has been released by the business itself, but in the absence of that, I’ve used the most credible sources I could find or a blended version of various numbers.

While these numbers are still only estimates, and are also changing rapidly, I think it is still interesting to look at them alongside each other and there are various points that stand out for me.

I think that $8.5B is a lot to pay for Skype. My understanding is that Microsoft didn’t have a competing offer for anything approaching this number so I’m not sure why they felt compelled to pay so much. It clearly suggests that they want Skype very badly and see it as strategically important to their future, as based on financials the valuation doesn’t stack up at all. They are paying around 10x last years revenues of $860M which is a very high multiple – plus the revenues are all for their local calling product from Skype to any phone and this is low margin revenue that costs a lot to support. Skype does have a very large user base of around 650M, higher than any of the other social networks, but the problem is people don’t go to Skype to ‘hang out’ – they go there to make free calls. Indeed only 1-2% of Skype users have upgraded to the chargeable services and that’s the issue they face.

That said, there is definitely a great deal of value in Skype. They have a huge number of users, a strong brand that has become a verb and is synonymous with internet-based calling and they are absolutely the dominant player in the fast growing market for IP communications. But I wonder whether Microsoft can really integrate the service with their various different ‘fiefdoms’ of Exchange, Office, Xbox, Mobile and MSN groups and at the same time retain the creative, entrepreneurial qualities that have been so central to Skype’s success. I have to say I very much doubt it.

But if Microsoft is able to pull this off it would give them a communications platform stitching together their various products and provide them with a much more connected and social element that would be very powerful. This is especially true if they were able to take it a stage further and use the Skype platform to reconcile a single set of user ID’s across their whole on-line environment. And they have Skype’s very large user base to tap into to sell other Microsoft products and services. But there’s a very long way to go if they are to make the acquisition a successful one and Microsoft has not shown us in the past that they are able to successfully marry third party technologies with their core products.