Today, WhatsApp, Telegram, and Facebook Messenger rule the world of convenient messengers. Signal is also gaining popularity. And we have gradually begun to forget how in the early 2000s, everyone who had a computer used «ICQ». Gradually, ICQ turned into something from the long-forgotten past, and in 2024, the messenger ceased to exist. Now Skype is also on the shelf of memories, dusted with years. Let’s recall how this product once revolutionized the market and why it lost its position and eventually became a digital relic.
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Let’s go back to 2003. The world of technology has never been so diverse. Slow internet and a constantly busy phone line. The sound of a dial-up modem, and you sit for several minutes waiting for a web page to load completely on a thick monitor.
Computers — bulky boxes with thick monitors, laptops — rare and costing a fortune. It was at that time that the world of digital technology began to gain momentum. And at that time, two tech enthusiasts — Niklas Zennström from Sweden and Janus Fries from Denmark — decided to make communication on the Internet something new, convenient, revolutionary.
Both of them had already shown what they could do before Skype was developed. They created a successful file-sharing platform called Kazaa, which was loved by millions of users but also became a headache.
Kazaa allowed users to share any file directly with each other (P2P or peer-to-peer), without central servers. Because of this, lawyers for record labels repeatedly accused Zennström and Fries of facilitating piracy. But the talented techies didn’t think to stop, and decided to use the P2P capabilities in a new project, creating a tool for free, accessible communication around the world. This was at a time when every minute of a phone call with, for example, your family in the United States could cost up to $1 (about 5.33 UAH). For comparison, the average the salary in Ukraine at that time was 462 hryvnias. That is, a few minutes of conversation was very expensive. And video communication seemed like something fantastic.
That’s what Zennström and Fries wanted to change. They wanted to create an app that would allow people to call each other over the Internet for free using decentralized P2P technology. No intermediaries or expensive servers.
To work on their new idea, they invited three Estonian programmers — Ahti Heinla, Priit Kasesala, and Jaan Tallinn, who had already worked on Kazaa and had an excellent reputation. The latter, by the way, later co-founded the money transfer service Wise.
They decided to call the project Sky peer-to-peer (short for Skyper): it combined the romance of «sky» possibilities and a hint of the technical part, namely P2P. However, it turned out that the Skyper domain was already taken. So the team just decided to cut off «r», and that’s how Skype came about. The name turned out to be apt and memorable.
On August 29, 2003, the first public beta version of Skype became available for download. The program allowed only voice calls.
The team opened a modest office in Tallinn, Estonia’s capital, a small and quiet city. This location allowed them to save on costs and have a good selection of talented engineers at hand. After work, employees often went to a cheap local bar called Valli, where they were rumored to perform a ritual for witches newcomers. Newcomers had to pass a test herbs the infernal Millimallikas cocktail, which consisted of anise vodka, tequila and Tabasco.
Even with its limited functionality, Skype immediately attracted attention. It offered an unprecedented alternative to conventional telephony: free calls abroad. All you needed was a computer with the program installed and the Internet. Yes, the quality of the calls was not the best. But people got a chance to communicate without borders, as long as they wanted, and it was a game changer.
The startup was gradually expanding, and the team already consisted of several dozen people working in a cramped office.
The first Skype users were, of course, mostly tech enthusiasts and students. Rumors about the miracle program spread like wildfire. And Skype quickly became a legend.
Without any advertising campaigns on TV or in newspapers, just through talk radio, the app for communicating without borders gained immense popularity. It was also very easy to use: download the app, install it, enter a username, add a friend to your contacts — and you’re ready to call them. On the first day of Skype uploaded 10 thousand people. And in 2004, the number of simultaneous users reached 1 million. It was a phenomenal result for a startup that hadn’t spent a penny on advertising.
The program went beyond the circle of techno-geeks and became a mass product. It is thanks to P2P technology that Skype was able to overcome the disadvantages of traditional phone calls that go through central servers. This equipment needs to be purchased, maintained, and paid for in many other ways. But with Skype, every computer became part of the network, a PC with this program eventually allowed not only to make calls but also to transfer data to others. And the more people were added, the stronger the system became.
Skype was also simple and easy to understand, even for those with a «you» tech background. In 2003, most Internet calling programs — such as Microsoft NetMeeting or early VoIP services — were difficult to set up. You had to fiddle with ports, firewalls, and codecs. It was an asterisked task for the older generation. Skype, on the other hand, was intuitive: you just downloaded it, installed it, and you were ready to call.
Even people far from technology could figure it out in five minutes. This accessibility was the second key to success.
The development team did not stop there. In 2004, they added a paid feature called SkypeOut, which allowed people to call landlines or cell phones at very low rates. For example, a call from the US to Ukraine cost only 2-3 cents per minute. For students, expats, and small businesses, this was a lifeline.
The startup turned into a serious business. Legally, Skype was registered in Luxembourg to optimize taxes (the lowest VAT rate in the EU is 15%). The headquarters was tiny and inconspicuous, without a sign. Employees recalled that sometimes they even had to make calls from the bathroom because the noise of the fan drowned out everything.
Later, another office was opened in London. Skype employees shared the space with a modeling agency. The wall separating them was glass and partially transparent. On one side were gloomy programmers, and on the other side, stylists and models were running back and forth. But only their feet and heads were visible.
By 2005, Skype had become a real sensation. The number of registered users reached 50 million. Gradually, the application became a typical attribute of everyday life: it penetrated homes, offices, and student dormitories.
The success of Skype was a source of concern for eBay. In September 2005, the e-commerce giant acquired the company for $2.6 billion. At the time, it was one of the largest deals in the tech world. Another significant improvement was expected from eBay. Skype was going to be integrated into the trading platform so that buyers and sellers could communicate in real time. This was going to change online shopping forever. But…
eBay users were satisfied with text messaging on the platform itself or via email, and voice and video calls were unnecessary. Meg Whitman, eBay’s CEO, later admitted that the company failed to find a way to monetize Skype. The idea was good only on paper. In 2007, eBay wrote off 1.4 billion of Skype’s value — effectively admitting that it had overpaid for an asset it could not find a use for.
The situation was complicated by the fact that Skype founders Zennström and Fries did not sell everything to eBay. They retained the rights to the P2P technology through their company Joltid. When eBay started experimenting with Skype’s code, trying to adapt it to its needs, the founders accused it of copyright infringement. This situation scared potential buyers of Skype, which were rumored to include Google and Facebook (now Meta). Considered buying Skype, but backed off for fear of legal risks.
Eventually, in 2009, eBay sold 70% of Skype to a group of investors led by Silver Lake for $1.9 billion.
The deal with eBay was the first epic fail. But it won’t be the last.
It’s 2011, and Skype is a giant with 600 million registered users, accounting for 25% of all international voice calls. Microsoft does the largest purchase at the time: it pays $8.5 billion. The tech giant has ambitious plans to make Skype the basis of its communication strategy. The program was integrated into Windows 8, added to Xbox, connected to Outlook, and promoted as a business solution. In 2012, Skype replaced the popular Windows Live Messenger chat. Video calls became the main feature of Skype. By 2015, the program created by a once small team of enthusiasts had reached its highest popularity with —40 million daily active users.
Businesses started using Skype for business calls, freelancers started using it to communicate with clients, and teachers started using it for group classes. Everything seemed to be going well. But then comes the second epic fail.
The new owner, Microsoft, decides to abandon Skype’s unique P2P architecture. And moved it to its own centralized Azure servers, as they were easier to control, update, and scale for the thousands of new users that were added every day. From that moment on, Skype lost some of its «soul». Thanks to P2P, every user was part of the network, and now everything depended on Microsoft servers. This made the system more vulnerable to failure and tracking.
From a simple «caller» Skype turned into a cumbersome monster that was constantly adding new features. In the 2010s, Microsoft added emojis, group chats for many people, Stories (hello, Snapchat), Outlook integration, and the ability to send GIFs. The once easy interface turned into chaos. Users began to complain. They began to appeared publications with criticisms like «Skype used to be easy and convenient, but now it’s a mess». Call quality was falling, many people were unhappy with the Android version, and the number of competitors was growing. Microsoft was under considerable pressure.
One of the first major failures occurred in 2007, when the company was run by Zennström’s team. In August, millions of users around the world lost access to the program for several days. Skype explained this as a glitch caused by a Windows update that triggered a series of failures in the P2P network. The company apologized and gave away free SkypeOut minutes as compensation. However, users were furious, although some were humorous and called the incident Skype’s Y2K. It was a play on the panic before the start of 2000, when rumors circulated online about a potential global computer crash starting January 1.
There were other incidents as well. For example, in 2007, a German court found that Skype had violated the GNU General Public License (GPL) in its paid product, the SMC WSKP100 — a phone that worked with Skype. The company used open-source code, but did not comply with the terms of the license. The company’s reputation was damaged.
Another dark spot on Skype’s reputation appeared in 2008. It became known that TOM Online, Skype’s partner in China, transmitted chat logs and encryption keys to government servers for monitoring. This came as an unpleasant surprise to Western users.
Zennström, who had already retired from the business by that time, made the excuse that they were simply following local laws. In China, there is no other way. But this did not reassure those who considered Skype a safe haven for private conversations. It significantly undermined trust.
But the biggest blow to the reputation of Skype in 2013, which was then under the wing of Microsoft, was dealt by Edward Snowden. The former CIA officer published documents about a large-scale system of surveillance of people: PRISM from the US National Security Agency (NSA). It turned out that Skype was part of it. Microsoft, which acquired Skype in 2011, allegedly passed on user data to the US authorities: call records, text messages, and even videos. Since the old P2P system made surveillance difficult, the switch to centralized servers in 2011 made it easier for the NSA to do its job.
Snowden’s materials showed that Microsoft actively cooperated with the authorities. For example, in 2012, the corporation allegedly provided the NSA with access to encrypted messages and helped to bypass encryption of video calls. Microsoft assuredacting in accordance with court orders and did not violate privacy without legal grounds.
Skype, once associated with free, easy, and secure communication, has become a tool of the government. Privacy advocates began to leave the platform in droves and move to competitors such as Signal or Telegram.
Skype’s heyday was in 2015. Every day, 40 million people used the program. But competitors were not sleeping. Launched in 2009, WhatsApp began to take away some of the audience as it offered free text messages and calls over the mobile Internet, all with the promise of data encryption. In 2011, Zoom appeared, focusing on simple and reliable video conferencing. Apple’s FaceTime began to grow in popularity among iPhone users, and Discord among gamers and online communities. Meanwhile, Skype became too inconvenient for everyday communication and too unstable for professional use.
Microsoft tried to turn Skype into a corporate tool. In 2015, the company launched Skype for Business to compete with Slack and Cisco Webex — team collaboration platforms with chats, calls, and video.
But Skype for Business was a standalone product that received a lot of attention, and meanwhile, the regular version of Skype began to decline. In 2019, Microsoft announced that Skype for Business would be gradually integrated into Microsoft Teams. There were more and more updates that non-users didn’t appreciate.
In 2017, Microsoft failed in its attempt to add Highlights to Skype, a feature that duplicated Snapchat Stories. Then they added emoji reactions to messages, integration with the Bing search engine, and the ability to record calls. We use many things in different messengers today. But in the case of Skype, it made the interface more and more overloaded each time.
It became difficult for users to find basic functions among several unnecessary features. Problems with call quality continued. Against this background, Zoom, which offered stable video calls even on weak internet, stood out favorably. WhatsApp was light and fast and worked well on smartphones. Skype began to look like a relic of an old era against the new players. All the accumulated problems became apparent when the world plunged into the good old days of the COVID-19 pandemic.
In 2020, video communication will become the main source of communication. Companies switched to remote work en masse. Most people preferred the space and stability of Zoom, which was used by 300 million people daily during peak periods.
And what about Skype? Microsoft tried to promote the app, but interest in the product was lost. And although Skype is still alive as of March 2025, its audience has shrunk dramatically. Most users are those who got used to it back in the 2000s, or companies that still have to work with it because of integration with Outlook or Teams (the latter has become Microsoft’s main product). Although in 2024, Skype was still being resuscitated by removing ads and adding artificial intelligence. It didn’t work.
And now this moment has come. The epic Skype story has come to a logical conclusion. The corporationMicrosoft to shut down Skype in May and will focus entirely on Teams.
But we will always remember Skype. It was the first to prove and make internet calls free and video calls — affordable. Without Skype, there would be no WhatsApp, Zoom, and Google Meet as we know them. It was the first to pave the way for the VoIP (Voice over Internet Protocol) industry, changing the way people communicate everywhere.