Skype has faded from the global internet landscape!

Source: New Product Strategy Finance

Author: Wu Wenwu

The global technology industry was recently rocked by a bombshell: a once-ubiquitous communication software has officially announced its closure, marking another era's end.

According to multiple domestic and international media reports, on February 28, local time, Microsoft announced that the communication call and messaging service software Skype will be shut down on May 5, encouraging users to migrate to its free Teams application.

In today's China, dominated by WeChat and Douyin, some young people may not have heard of Skype. But for those who used it, it evokes nostalgic memories.

Skype, a 21-year-old communication software, is a true veteran in the field of internet communication. Its impending closure has naturally sparked global attention and heated discussions.

So, how did Skype become a global sensation, and what is its development story? Why has it gone from being a global hit to being abandoned by the times?

01

Born in Europe, once a global sensation, changed hands three times

The tide of human technological and internet history rolls forward, with each era birthing software that revolutionizes communication. Skype is one such software.

Interestingly, Skype was not born in the technologically advanced United States but in a small European country.

In 2003, Janus Friis and Niklas Zennström launched Skype in Estonia, collaborating with a group of classmates with no telecommunications experience to create this internet-based voice protocol (VoIP) software. The name Skype is derived from "sky peer to peer".

Skype is a VoIP software that gained popularity due to its free features, especially during a time when phone calls, especially international long-distance calls, were very expensive.

Skype quickly swept the globe, amassing over 11 million users in just one year. One contributing factor was the SARS epidemic that year, which drew many people to its functionality, catapulting it to fame.

By 2005, the user base had grown to 54 million, making it profitable with an estimated annual revenue of $60 million.

Skype's rapid growth and profitability attracted the attention of the cross-border e-commerce platform eBay. In 2005, eBay acquired Skype for a staggering $2.6 billion, marking its first change of ownership.

eBay's rationale for acquiring Skype now seems puzzling. eBay planned to use Skype to facilitate direct communication between buyers and sellers, thereby increasing transaction volumes and profiting from telephony features.

Under eBay's management, Skype's user base continued to grow, surpassing 405 million users by 2008, with a corresponding increase in communication revenue.

The 2008 global financial crisis hit eBay hard, with negative growth and plummeting stock prices, leaving it unable to focus on Skype. In 2009, eBay's new CEO deemed Skype not to have significantly benefited eBay's core business and decided to spin it off through an IPO, but this plan failed.

Soon after, eBay welcomed its second change of ownership. That year, eBay sold a 70% stake in Skype to a Silver Lake-led investment group for $2.75 billion. The latter also attempted to take Skype public but ultimately failed.

By 2011, Skype had reached 170 million monthly active users, making it a popular software. At that time, Microsoft, which wanted to expand its instant messaging business, acquired Skype for $8.5 billion, marking its third change of ownership.

Microsoft originally planned to grow Skype into a software with 1 billion active users and integrate it with multiple Microsoft products, but this goal was never achieved.

02

Why was Skype left behind by the times?

Skype, a software that can be inscribed in the annals of global internet development, is now about to be shut down. People naturally wonder why Skype declined.

In the view of New Product Strategy Finance, Skype rose during the traditional PC internet era and declined during the mobile internet era. It is a product of internet technology development that has been abandoned by the times. Its decline from global fame to abandonment is due to both market competition and internal reasons.

Undoubtedly, in the early days of the internet, Skype, with its free features enabling online voice communication without cost, was a groundbreaking classic product. It was destined for success in that era and became a hot commodity sought after by global tech giants.

However, as the internet era evolved, Skype faced increasing competition from alternative software in the international market and gradually fell out of favor.

Especially in the mobile internet era, the advent of smartphones like the iPhone further changed the way people communicate, with Apple's iMessage and FaceTime directly replacing Skype.

The rise of the mobile internet brought new communication tools, such as WhatsApp, which became one of the main instant messaging apps for foreigners. Later, Facebook acquired WhatsApp in 2014 and introduced international calling features, further diminishing Skype's relevance.

Intense market competition saw many communication software directly replace Skype, dooming it to be abandoned by more and more people.

Skype's impending closure is also due to internal reasons.

One reason is its own lack of innovation. Faced with technological advancements and fierce market competition, Skype underwent multiple interface redesigns but failed to attract new users and instead received criticism from loyal users.

Another key reason is that Skype was neglected and gradually abandoned by its parent company.

Although Skype was acquired by Microsoft, it did not receive much attention. Microsoft later launched the enterprise collaboration tool Teams in 2016, which is deeply integrated with Office productivity software, effectively abandoning Skype.

During the COVID-19 pandemic, the demand for remote work and online learning surged, with many users globally needing video and voice calls and online video conferencing. Although Skype's usage increased, users preferred Zoom.

Microsoft focused on Teams, which grew its user base to over 320 million by 2023. In contrast, Skype's daily active users numbered only 36 million, no longer a mainstream communication software and completely irrelevant.

Microsoft had long considered Skype insignificant and placed its hopes on the rapidly growing Teams. Now, Microsoft has officially announced the shutdown of Skype.

03

Conclusion

Skype, born in Europe and rising to fame with its free features, became a global sensation during the SARS epidemic and later reached its peak, becoming a hot commodity sought after by internet tech giants. It once enjoyed immense popularity.

Although Skype is a global communication software, it has never had much presence in China, a core market for the internet.

Like MSN, another communication software launched by Microsoft, although Skype had a small number of Chinese users and enjoyed some popularity, it was not only ill-suited to the local market but also unable to compete with local social software such as QQ and WeChat.

Skype's story is a microcosm of the progress of the internet technology era, which has also played out in China's internet landscape. For example, Fetion, launched by China Mobile, Renren.com, a generational memory for many, and abandoned BBS Chinese forums have all been abandoned by the times despite their past popularity.

With technological advancements and the iteration of the internet, especially the mobile internet further changing the way people communicate, Skype failed to actively embrace these changes and only fell further behind.

Skype's journey from global fame to its upcoming official shutdown, abandoned by the times, is like a tear of the times, ultimately leaving behind memories. Skype's story also leaves us with a familiar business lesson: failure to keep pace with the times will ultimately lead to abandonment by the times.