The other day Microsoft Corporation reported, that on May 5 this year the Skype platform will finally disappear from the digital space. For many, this did not come as a surprise, as the service had lost its popularity for a long time, and there were repeated talks about its possible closure. Until May 5, Skype users will be able to transfer their contacts and message history to other services or migrate to Teams.
The history of the rise and fall of Skype eloquently testifies: in the world of technology, innovation alone is not enough – true leadership is achieved by the one who is able not only to be the first to occupy a niche, but also to keep it, constantly changing along with the market and sensitively responding to the new needs of users.
From failure to revolution: how a failed startup became the basis for the creation of Skype
At the beginning of the millennium, the world of online communication underwent a revolution, and it was Skype pond one of the revolutionary phenomena. But, as is often the case with great ideas, the success of the platform was rooted in the failed project that preceded it. In 2000, an international telecommunications holding Tele2 decided to create an infotainment platform known as Everyday. The Swede Niklas Zennström and the Dane Janus Friis led this ambitious plan.
The debut of the entrepreneurs was a fiasco. But instead of giving up, these visionaries began to look for more promising ideas. So they joined the half-forgotten phenomenon of those times – service Napster, which made a splash in the file sharing market. Zennstrom and Friis invited three Estonian programmers – Jaan Tallinn, Ahti Heinle and Prit Kasesala – to participate in the project.
The developers understood that Napster’s main weakness was its dependence on centralized servers that controlled everything that was downloaded. And what, under the conditions of implementation peer-to-peer technology (P2P), the situation will change dramatically. That’s how she was born Kazaa – a state-of-the-art product that allowed users to quickly exchange huge amounts of data. This ensured ease of use and made everyone an autonomous participant in direct communication.
Kazaa was supposed to distribute only licensed content. Major media companies bombarded the developers with lawsuits, accusing the platform of supporting illegal distribution of files. This situation forced Fries and Sennström to look for a new point of effort. Initially, they considered creating a platform for wireless Internet access, but later focused on the development of voice communication technologies over the network.
The experience gained from Kazaa became the basis for the development of Skype. After all, the same P2P technologies, adapted for voice communication, provided Skype with unprecedented communication quality, even with an unstable Internet connection. The concept of the new service was born in the summer of 2002, and the following spring, the first 20 users tested the beta version of the Skype application. Its work was based on the same peer-to-peer technology as Kazaa, but instead of broadcasting multimedia content, the program provided voice communication.
From a dream to millions: how Skype changed the world of communications and became a global phenomenon
Skype debuted in the summer of 2003. “We present Skype as a new generation telecommunications company”, “We dream that one day people will not say “I’ll call you”, but “I’ll Skype you”. These ambitious dreams of the founders were supported by the impressive pace of development of the new platform. In just the first day, the application was downloaded more than 10,000 times. The company passed the mark of one million downloads after a few months. Such rapid popularity was explained by a unique combination of accessibility and innovation.
Skype has radically changed the situation in the market of expensive international calls: thanks to VoIP technology (Voice over IP) users could communicate for free regardless of their location. In addition, unlike other VoIP solutions of that period, which required complex technical settings, Skype offered user-friendly functionality.
Thanks to exponential growth, the new project managed to attract approximately $20 million in funding. Despite the interest of investors, the team was in no hurry to monetize. Instead of making all calls chargeable, the company introduced charges only for connections between computers and phone numbers. This demonstrated loyalty to existing users and attracted new ones who were willing to pay for a convenient service. At the same time, the prices remained quite symbolic compared to traditional telecommunications providers. In the first three years, this approach brought the platform about 70 million users and quarterly revenue of $35 million.
The evolution of P2P technologies is significant influenced on the development of other digital platforms. It prompted the emergence of popular torrent trackers, in particular, BitTorrent, to share files without the need for centralized servers. This created the basis for the emergence of decentralized services that could work in conditions of limited resources.
The next stage in Skype’s history was its acquisition by eBay, despite the lack of a clear strategy for integrating the startup into their ecosystem. In the coming years, the platform flourished: by 2006, its annual revenue reached 195 million dollars, and in another year it exceeded 381 million. The user community has grown to 400 million people.
However, internal processes in the company started become unbalanced: the start-up atmosphere leveled off, the management became inconsistent, and the quality of services began to deteriorate. As a result, in 2009, eBay put Skype up for sale.
How Skype lost its leadership: the story of the decline of the iconic communication service
Later, Skype became the owner of Microsoft Corporation, which sought to dominate the market. Microsoft didn’t just buy the company; it has gained access to a new era of communications. At that time, Skype had already reached an annual revenue of 860 million dollars and provided one in seven international phone calls.
Before adding video calling in 2011, Skype pioneered voice communication on mobile devices. This made Skype available to users on Linux, game consoles and Smart TV – the service became an integral part of everyday life.
The rise in popularity of the service opened a new segment in the field of digital communication, which was not left out of the attention of technological giants. A danger signal for Skype was the rapid growth in popularity of mobile messengers. So, Apple integrated FaceTime and iMessage into its gadgets, WhatsApp, after integration with Facebook, added the ability to call, and the popularity of Viber and Telegram became an avalanche due to the convenient options they offered for communication.
However, Microsoft made several strategic mistakes that marked the beginning of the end of Skype. The main problem was the delay in the transition to the mobile segment. It was obvious that the style of communication had changed, with people increasingly using text messages, audio recordings and instant video calls. At the same time, Skype continued to be a service focused mainly on PCs. The delay in the development of integrated solutions for mobile platforms and the inability to adapt to new trends – short videos and voice chats, integration with AI – also played a negative role.
Another unsuccessful solution was an incorrect update strategy. Microsoft redesigned the interface, added many unnecessary functions, which made the application less convenient. Instead of productively competing with other platforms, the company focused on integrating Skype into its own ecosystem, which did not have the desired effect.
Skype was once synonymous with Internet communication, but over time its star began to fade. One of the main reasons for this is technical flaws that have spoiled the user experience. Users often encountered communication quality problems: delays, call interruptions, and poor sound quality. This was due to the fact that Skype used the aforementioned peer-to-peer technology, which depended on the quality of the users’ Internet connection. While competitors moved to cloud solutions that provided a more stable connection, Skype lagged behind in this direction.
The Achilles heel of the service was data security. Despite its widespread use, the service did not have end-to-end encryption for calls and messages for a long time. This meant that user data could be intercepted in transit, which worried security-conscious users. The first serious measures to improve data protection were introduced only in 2018, when Skype added the “Private conversation” function based on the Signal protocol, which provides end-to-end encryption. However, this option remained limited, available only for certain types of communications.
Today’s competitors – Signal, WhatsApp and Telegram – are known to offer full end-to-end encryption by default, which has become the new standard for messengers. In addition, they provide additional layers of protection, including two-factor authentication, the ability to self-destruct messages, and advanced control over access to personal data.
In the period of the COVID-19 pandemic, when the need for video communication has increased many times, Microsoft found itself at a bifurcation point: to develop the already well-known Skype or to invest resources in a new product – Teams. The company has focused its efforts on promoting Teams among businesses, government agencies, and educational institutions. This strategy proved successful, with Teams having more than 320 million users in 2023, while Skype’s popularity continued to decline.
It is worth noting that Microsoft’s decision to focus on the development of Teams instead of Skype support was due to strategic considerations. Teams is integrated with other Microsoft 365 products that provides comprehensive solution for corporate clients.
So, the reasons for the decline of the once popular service were technical problems and the lack of adaptation to changes in the market. Modern services such as Discord or Zoom better meet the needs of different audiences – from gamers to corporate clients. Changing user preferences and their transition to platforms with greater functionality and stability have become decisive factors in the loss of Skype’s position in the market.
Skype’s legacy: how one platform changed the world and powered an Estonian tech miracle
Skype has not only changed the way the world communicates, but has also become a catalyst for financial success for many of its employees. The so-called “Skype mafia” – former members of the team – after the sale of the eBay company received significant funds, which became the basis for the development of new innovative projects.
One of the most striking examples of such success was the creation of the international money transfer service TransferWise (now Wise) in 2011. This project was founded by former Skype employees who used the acquired knowledge and resources to launch a new business. In just three years, the company attracted $58 million in investment from the Andreessen Horowitz venture capital fund, and Sequoia Capital later valued it at $1 billion, making Wise the third Estonian technology “unicorn”. This laid the foundation for future achievements in the country’s startup industry.
Skype actually started a chain reaction that helped dozens of entrepreneurs start businesses and support young talent. Over the past four years, Estonia has given the world five more “unicorns”. Today, the country is the leading center of the start-up industry in Central and Eastern Europe, with more than 1,400 innovative companies registered and the total amount of investments exceeding 36.3 billion euros. For such a small country, this is a real breakthrough, and Skype was the beginning of this success.
The creators of the platform embodied the bold predictions of science fiction about a world where geographical borders no longer stand in the way of communication. People got the opportunity to communicate with family, friends and colleagues for free, regardless of their location. Thanks to this, Skype has become indispensable for a wide variety of users: from migrant workers to remote workers and employees of international corporations.
However, his influence went far beyond ordinary communication. Skype created video communication culture, becoming a key tool for business meetings and opened up new opportunities for education, making distance learning accessible to millions. In this sense, Skype not only changed the technological landscape, but also ushered in a new era of global interaction that continues to this day.
Tetyana Viktorova
