The Rise and Fall of Microsoft's Skype

CNBC has created a 15-minute video titled "The Rise and Fall of Skype," telling the story of how Skype was developed in just nine months in 2003 by a six-person group of childhood friends in Estonia. "We were smart engineers," says Skype's former chief technical architect Ahti Heinla. "We learned on the go. None of us had any telecoms background." But at the end of the interview, he concedes "I myself use Skype right now fairly little. I still have it installed on my phone, but my primary communication methods now are elsewhere." GigaOm founder Om Malik tells CNBC it was Skype's missteps that enabled the massive growth of WhatsApp, and shared this succinct diagnosis of what's happening to Skype. "Microsoft is where consumer brands go to die."From an accompanying article on CNBC's web site:In 2005 eBay bought it. That deal didn't work out as planned, and an investor group led by Silver Lake purchased a majority stake. Microsoft then stepped in, shelling out $8.5 billion for the company in 2011. Even backed by the world's largest software company, Skype is falling by the wayside. During the pandemic, consumers and business workers turned to tools like Zoom and Meta's WhatsApp, and now there are any number of options to quickly connect with groups of friends and colleagues over smartphones... Microsoft has promoted Skype in Outlook and Windows and even enriched the app with its Bing generative artificial intelligence chatbot. But the numbers still don't look great. In March 2020, Microsoft said Skype had 40 million daily active users, a number that's since slipped to 36 million, according to a spokesperson. Microsoft's newer Teams communication app, by contrast, is growing in popularity, rising from nearly 250 million monthly users in July 2021 to a record of over 300 million in the first quarter. Microsoft Teams reached an all-time high of 300 million active users in the second quarter of 2023, according to CNBC's video report. But a research VP at International Data Corp says Microsoft Teams was successful - in taking users away from Skype. GigaOm's Malik says Microsoft "failed to capitalize on Skype, 100%. Steve Balmer was the king of buying things and not knowing what to do with them... What happened with Skype is the story of every large company with a lot of middle management: they didn't innovate on the product for a very long time." Jordan Novet from CNBC Business News calls Skype "a product with an uncertain future," arguing that Microsoft "is pouring a lot of engineering resources into making Teams a big destination for communication. It's not doing the same thing with Skype." Could Skype make a comeback? "Anything is possible," Novet concedes. "Microsoft is trying to make Skype happen in a bigger way now." He points out that Skype is now equipped with Bing's AI-powered chatbot, so "You can talk to Bing in Skype. Will that make Skype explode in popularity, or make a comeback? I don't think so." Microsoft's current head of Skype was not available for CNBC's video. But as a kind of epilogue, they report that Jaan Tallinn, one of Skype's original programmers, now "spends most of his time discussing the dangers of unchecked AI development." "I don't know what the future holds for Skype..." he tells CNBC. "I'm concerned about humans being wiped out, so it's unlikely that we'll need Skype if that happens."

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