The Rise and Fall of Skype: How Microsoft’s Acquisition Led to its Demise
In 2011, Microsoft acquired Skype for a whopping $8.5 billion, hoping to take on the rise of the iPhone and become a major player in the VoIP (Voice over Internet Protocol) space. Fast forward 10 years, and Skype has become a relic of the past, relegated to the dustbin of history alongside other failed mobile efforts like Windows Phone. But what went wrong? In this post, we’ll explore the key points and trends that led to Skype’s downfall, and what Microsoft can learn from its mistakes.
The Early Days of Skype
In 2012, I visited the Skype offices in Stockholm, where engineers were excited and nervous about Microsoft’s acquisition. At the time, Skype had just passed 41 million concurrent users, a staggering number that rivaled even Steam’s recent record. The office felt like a breath of fresh air, with no formal dress code, special acoustics panels, and meetings held over Skype’s network. It was clear that Skype’s culture was vastly different from Microsoft’s, and integrating the two would be a challenge.
The Challenges of Integration
As Skype’s focus shifted to building a new version for Windows 8, the team struggled to adapt to Microsoft’s way of working. The heavy use of email by Microsoft’s teams was a major culture shock for Skype employees, who were used to a more collaborative and agile approach. This early sign of trouble would ultimately lead to the closure of the Stockholm office five years later.
The Rise of Mobile and the Fall of Skype
As Skype turned its focus to mobile, the problems with overhauling its aging peer-to-peer infrastructure began to emerge. Microsoft’s attempts to migrate users to its Messenger platform in 2012 resulted in countless bugs and issues, including repeated calls, messages, and notifications on multiple devices. The app redesigns that followed only added to the chaos, and basic problems with calling and messaging became apparent.
The Snapchat-Like Redesign and the Loss of Consumer Trust
In 2017, Microsoft introduced a radical redesign of Skype that resembled something more like Snapchat. The layout was a major departure from the traditional Skype interface, and users were not pleased. The redesign was eventually walked back in 2018, but the damage was done. By then, WhatsApp, Messenger, FaceTime, WeChat, Line, and Telegram had already become entrenched, offering easy video calls and reliable messaging. Microsoft’s struggles with Skype had created a perfect storm, and it was difficult for the company to win back consumer trust.
The Rise of Zoom and the Demise of Skype
When the COVID-19 pandemic forced everyone to use video and voice calls to connect with friends and family, consumers turned to Zoom for its ease of use and reliability. Instead of heading to Skype, people picked Zoom, and Microsoft was left scrambling to respond. In response, Microsoft quickly pivoted its consumer focus to Teams, launching a personal version in the middle of 2020. That’s what is slated to replace Skype in May.
Lessons Learned
Microsoft’s acquisition of Skype was a costly mistake, but it also provided valuable lessons. The company learned that integrating a new culture and way of working is crucial, and that neglecting the basics of a service can lead to its downfall. Microsoft also learned that it’s essential to prioritize reliability and ease of use, and that a radical redesign can be a major turnoff for users.
Actionable Insights
For businesses and individuals looking to adopt a new video conferencing solution, here are some actionable insights:
- Prioritize reliability and ease of use when selecting a video conferencing solution.
- Consider the cultural fit of the solution with your organization’s way of working.
- Don’t be afraid to pivot and adapt to changing user needs.
Conclusion
Skype’s rise and fall is a cautionary tale of what happens when a company neglects the basics of a service and fails to adapt to changing user needs. Microsoft’s acquisition of Skype was a costly mistake, but it also provided valuable lessons that can be applied to other areas of the company. As we look to the future, it’s clear that Microsoft has learned from its mistakes and is moving forward with a new focus on Teams.