RIP Skype. How the dominant video call pioneer lost to newer rivals

[Simone Del Rosario]

The app that brought video calls to the masses is signing off.

Microsoft will officially pull the plug on Skype on May 5. In lieu of the legacy calling software, the tech giant is calling on users to move over to Teams.

Within the next week, Skype diehards will be able to log into Teams with their Skype credentials and it will transfer over contacts and chat history. For those who are just not interested in joining the Teams ecosystem… they will be able to export all their data for integration elsewhere.

So… How did Skype usher in a generation of video calling that people walking down the street on Facetime just take for granted.

Skype was initially launched in 2003 by entrepreneurs Janus Friis and Niklas Zennström. The pair previously made a name for themselves by creating a peer-to-peer file-sharing program called Kazaa.

Fun fact, in 2003 the company declared Kazaa was the most downloaded piece of software ever. But … it was used to download audio and music files from users across the world. Like companies before it, Kazaa faced lawsuits from the music and motion picture industry they eventually settled in 2006.

I just really like reminding you about the earlier days of the World Wide Web.

Oh right… back to Skype.

The prospect of calling friends and family throughout the world caught on pretty quick.

By 2005, it had 54 million registered users. That same year, online auction powerhouse eBay announced it would buy the app for $2.6 billion. eBay’s leadership planned to allow buyers and sellers to connect on Skype to make transactions quicker for a little extra charge. Nothing like a little face-time with a stranger on the internet. They also thought it would expose Skype users to eBay and PayPal.

By 2008, Skype’s user base ballooned to more than 400 million. But new leadership at eBay couldn’t see how Skype helped its core business.

In 2009, eBay announced it was selling the app to a group of investors led by Silver Lake for $2.75 billion. So hey, at least they didn’t take a hit.

{Skype ring sound}

In 2011, Microsoft called Silver Lake to buy Skype for $8.5 billion.

Steve Ballmer:

Skype is very consistent with what Microsoft has made one of its core businesses, and that for us, is helping people communicate and collaborate.

Simone Del Rosario:

Microsoft was looking to integrate Skype with a bunch of its other products like Windows Live Messenger, Windows Phones and XBox.

So… What the heck happened?

Well… Competition. Right around the time Microsoft bought Skype, Apple announced FaceTime. As more and more users entered the iPhone – and eventually the broader Mac – ecosystem, it ate away at market share.

In 2014, Facebook acquired WhatsApp, and shortly thereafter made it possible to place calls to other countries. This, again, ate away at Skype’s bread and butter.

In 2016, Skype took another blow when Microsoft introduced Teams. Sure, it’s odd to launch a competitor to your own product, but at the time, Teams was more focused on business enterprises. Skype is how you called your family.

But it definitely put a damper on Skype. In fact, the company’s CEO hasn’t mentioned Skype on an earnings call since 2017, according to CNBC.

You’ll notice that in all of this, I still haven’t mentioned Zoom. Let’s call that the final nail in the coffin.

When the world shut down from COVID-19 in 2020, Zoom took off with consumers. Meanwhile, everyone from Cisco to Facebook to Google offered ways to hold video calls with business acquaintances and loved ones alike.

In 2023, Microsoft said Teams users exceeded 320 million, while Skype had just 36 million daily active users.

And now, whoever’s left will soon be looking for a new home to video chat.

For Straight Arrow News, I’m Simone Del Rosario.