Skype is being shut down by Microsoft after 21 years of operation. This is how competitors in video calls outperformed it.
Microsoft declared on Friday that the 21-year-old message and phone service would cease operations on May 5. Users of Skype are being urged to switch to the free Teams app by the software provider.
Skype gained popularity in the 2000s by enabling free phone calls, but it faltered in the mobile era and didn’t see a significant uptick in use during the epidemic. With so many alternative options for calling and talking, some individuals have forgotten that it’s still available.
In an interview with CNBC, Jeff Teper, head of Microsoft 365 collaborative apps and platforms, stated, “As we’ve evolved teams over the last seven to eight years, we’ve learnt a lot from Skype that we’ve put into Teams.” However, we believed that this was the right moment because, by concentrating on teams, we could make things easier for our clientele and the market and produce more innovation more quickly.
According to a blog post, Microsoft will begin enabling users to access Teams using their Skype login credentials in the coming days, and Skype contacts and chats will be transferred across. Additionally, users can export their Skype data.
Users who have credits can continue to use Skype on Teams, but the business will no longer sell monthly subscriptions.
“We’re obviously very grateful in many ways, and this is a big, big moment for us,” Teper stated. “For many, many people, Skype was the first to introduce audio and video calling to the internet.”
It is among the long-lasting digital brands.
With the assistance of a group of former classmates who had no prior telecommunications experience, Janus Friis and Niklas Zennström, who had previously co-founded the peer-to-peer file-sharing application Kazaa, established Skype in Estonia in 2003. Skype started off as a way for users to make free online calls to each other. The oddball moniker was an allusion to the VoIP (voice over internet protocol) infrastructure that underpinned the service: “sky peer to peer.”
Skype quickly gained popularity. Eleven million users had registered by 2004. With 54 million users, Skype was expecting $60 million in revenue annually from fees from people who wanted to call landlines and mobile phones by the time eBay revealed plans to purchase Skype Technologies SA for $2.6 billion in 2005.
Meg Whitman, the CEO of eBay at the time, had the idea that by bringing buyers and sellers together, Skype would enable individuals to sell goods—especially expensive ones—more rapidly. Additionally, eBay might charge more for these calls. Skype users worldwide could also learn about PayPal and eBay. After 29 days, the transaction was finalized.
Skype’s user base increased under eBay, surpassing 405 million by 2008, and its revenue from communications increased as well. John Donahoe, a former Bain executive, took over as CEO after Whitman resigned because he didn’t believe the Skype deal was helping eBay’s core operations.
The economy was in a recession in 2009, eBay’s stock price was at its lowest level since 2001, and the company’s sales growth had slowed. eBay would start a Skype IPO as part of a separation, Donahoe said in a statement announcing the launch of a Skype client for Apple’s iPhone.
However, eBay never applied for an IPO for Skype. eBay announced that it has achieved an agreement to sell Skype to a group of investors led by Silver Lake for $2.75 billion, four and a half months after announcing the IPO plan. A 30% share in Skype’s buyer was given to the online auction operator. Skype applied for an IPO under the investor group, but that too failed. In 2011, Skype was ultimately purchased by Microsoft for $8.5 billion, while eBay received over $2 billion.
However, Skype was unable to reach one billion active users.
FaceTime and Apple’s in-built iMessage were gaining favor on iOS. Following the purchase of the mobile messaging program WhatsApp by Facebook in 2014, individuals could make worldwide calls a couple of months down the line. WhatsApp quickly gained immense popularity globally. Tencent’s WeChat followed the same.
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Meanwhile, Skype went through a number of redesigns and faced criticism from enthusiasts. Teams, a special “chat-based workspace” for companies with Office productivity software subscriptions, was introduced by Microsoft in 2016 to compete with Slack, which was a startup at the time.
When COVID arrived and forced individuals to work and learn at home, Zoom, initially designed for corporate use, turned into a consumer hit for conducting video calls. Individuals could also communicate on video using services from Cisco, Facebook, and Google. Skype did experience a usage spike, but Microsoft invested significant engineering resources in Teams for businesses, governments, and schools, and the investment paid dividends. Analysts started focusing on the number of Teams users that Microsoft would report, with the number passing 320 million in 2023.
Skype, meanwhile, has not been mentioned by Microsoft’s current CEO, Satya Nadella, on an earnings call since 2017.
In 2023, Microsoft reported Skype had 36 million daily active users. That was a decline from 40 million in March 2020. Teper refused to comment on how many people use the service now, but did report that the number of minutes consumers spent on Teams calls quadrupled over the last two years.
I believe a proper write-up on the history of the thing would demarcate the transition to mobile and cloud as a profound shift in the communications category,” Teper added.