Skype hangs up after three decades, marking end to an iconic internet calling service

Once a dominant force, it probably fell victim to innumerable competition in a wild tech race

Microsoft says its decision to retire Skype and fold it into Teams will help 'streamline' its free consumer communications offerings. Photo: Microsoft

When Skype was released to the public on August 29, 2003, internet calling was costly and limited to those with the means to access it, and VoIP – voice over internet protocol – would not have rung a bell.

It did not take long before that distinctive ring from a Skype call slowly took over, changing the game for internet communications. Its popularity was such that “Skype” became a verb, much like how “google” was to searching the web.

About 22 years later, Skype makes its final call today, May 5, as its owner Microsoft folds it into its own Teams service.

Redmond, Washington-based Microsoft acknowledged Skype has been “an integral part of shaping modern communications”, and its retirement is meant to “streamline our free consumer communications offerings so we can more easily adapt to customer needs”, said Jeff Teper, president of Microsoft 365 Collaborative Apps and Platform.

It is yet another sad end to a once-dominant platform, probably falling victim to a cut-throat race in the technological age.

Ringing in

Before VoIP – also known as internet protocol telephony – mobile or cellular calls required a SIM card. VoIP and Skype eliminated the need for that, as the technology required only an internet connection.

The technology had its roots all the way back in 1925, when Bell Laboratories was formed to help AT&T's global communications. Three years later, Bell created Voder, the world's first electronic voice synthesiser.

The other key component of VoIP, the internet itself, had its foundations laid in 1969 with the development of Arpanet, the internet's first building block.

Several developments later – including fine tuning audio over the internet and improving connectivity – the first VoIP application, Rascal, was launched in 1989, as a means for gamers to talk to each other.

Between this time and Skype's launch, two notable VoIP services surfaced: Teleport, considered the first video conferencing service with basic functionality that attracted the attention of Hilton Hotels, and VocalTec, the first commercial VoIP platform.

Then, in 2003, Skype rang in a new era for VoIP communications.

The 'wake-up' call

Skype went by a few names before it became how we know it: it was derived from Skype Peer-to-Peer, then shortened to Skyper, before ultimately dropping the “r” to utilise available domains at the time.

Its parent, Skype Technologies, was founded by Swede Niklas Zennstrom and Dane Janus Friis, while its software was developed by Toivo Annus, Ahti Heinla, Priit Kasesalu and Jaan Tallinn, all from Estonia.

The platform quickly became famous for offering free voice calls between Skype users and paid ones to telephone numbers. It would eventually add video calls in 2006 on Windows, further cementing its place in internet communications.

Its popularity soared that users even put it in their contact details, such as those in business cards and email signatures.

Skype began as a start-up, raising $76.85 million through five funding rounds from 2003 to 2010 – beginning with a humble $250,000 and peaking at $50 million – according to data from industry tracker Crunchbase.

Ownership switches

In between, Skype's first ownership change happened, with e-commerce company eBay buying it for $2.5 billion in 2005. Skype founders Mr Zennstrom and Mr Friis would eventually leave and launch a new streaming video service, the short-lived Joost.

But eBay eventually soured on Skype, losing millions and dealing with unprofitability (perhaps annoying ads are not such a bad idea). California-based eBay sold 70 per cent of Skype to a group led by Silver Lake Partners, but not before a lawsuit was filed by Skype's founders over intellectual property copyrights.

In 2010, Skype announced plans to go public and raise as much as $1 billion – and this is where things took a strange turn: the company delayed its initial public offering, and it was believed that the IPO plans were just a smokescreen to put the business up for sale.

Facebook and Google, still in their infancies, reportedly made bids to value Skype at as much as $4 billion. But all went for naught as Microsoft swooped in and acquired Skype for $8.5 billion in 2011.

At its peak, Skype boasted about 300 million users. But, just like how the internet helped propel it into the mainstream, advancements and competition in the World Wide Web also caused its slow decline.

The Microsoft era

At this point, Microsoft – long the ruler of global technology – was now facing challenges from several fronts, including Apple's resurgence and Google's emergence, both of which were changing computing and consumer preferences.

While Microsoft did hold its ground – it was increasing its cloud and services game – acquiring Skype would enable it to tap into the growing communications scene.

In 2017, Microsoft unveiled Teams. While it was not clear yet at the time if Teams was meant to replace or knock off Skype, both platforms had their own unique propositions, at least according to Microsoft: Skype was meant for home and small business users for up to 20 people, with Skype for Business up to 250, while Teams offered as much as 10,000 and other advanced features such as enterprise-grade security.

There are still a number of countries where Skype is blocked – the UAE included – owing to concerns over security and privacy, as well as licensing issues. However, VPNs, or virtual private networks, can provide access to it.

In February, Microsoft finally announced that it was retiring Skype. At this point, Skype was not the force it was: at its peak, it boasted as much as 405 million users in 2008, but had since steadily declined, owing to the emergence of other platforms such as Google Meet, Apple's FaceTime, WhatsApp from Facebook that has since become Meta Platforms and other social media apps, and, most notably Zoom, which shot to popularity during the Covid-19 pandemic.

Teams itself had a hand in Skype's dwindling numbers. In 2020, Microsoft said Skype had about 40 million users, and the latest figures as of 2023 showed that that was down to 36 million. Teams, in contrast, shot up to about 300 million.

Microsoft says the folding of Skype was done to “streamline our free consumer communications offerings so we can more easily adapt to customer needs”. Teams users, anyway, will still have access to many of Skype's core features, in addition to the former's more advanced services.

Microsoft has pledged to make the Skype-to-Teams transition easy. But for the old heads who were able to witness what could be considered the dawn of mass video conferencing, that distinctive Skype tune will forever ring a (free call) bell.