Skype
- Key People:
- Steve Ballmer
- Related Topics:
- computer program
- VoIP
News •
Skype, software used to communicate over the Internet, which included voice, video, and instant message capabilities. Skype was one of the early successes in using the voice-over-Internet protocol (VoIP). Luxembourg-based Skype Technologies, founded by Niklas Zennström of Sweden and Janus Friis of Denmark, first introduced the software client in 2003. The number of registered users of Skype was about 50 million in 2005 and increased more than 10-fold to more than 600 million just five years later.
Technology
VoIP communication operates by converting the analog sound of a human voice into digital information and transmitting it over the Internet, to be translated back into analog audio at the receiver’s end. Unlike many VoIP services, Skype used a decentralized, peer-to-peer (P2P) network, in which all connected computers share processing tasks and bandwidth, which allowed its capacity to scale in tandem with its user base. This P2P technology was retained by Joltid, a company founded by Zennström and Friis, and licensed by eBay. Because it operated over existing Internet connections and did not require a dedicated network of cables, Skype offered most core services—including in-network long-distance calling—for free, which is why some considered Skype a form of freeware.
Skype was set up with a free software download. Customers could use a desktop client, or “softphone,” to make voice and video calls to other Skype users at no charge, using their computer’s speakers and a microphone. For a fee, customers could add the capability to call regular phone numbers or to receive incoming calls from regular phone networks. Features such as caller identification, voice mail, and conference calling were also available. Specialized Skype telephones were available from some manufacturers, and the company developed software clients to operate on many popular models of Internet-enabled smartphones, such as Apple Inc.’s iPhone. A Skype user had to be connected to the Internet, with the software running, to receive calls, and emergency calling was unavailable.
Tranfers in ownership
In 2005 Zennström and Friis sold Skype to the American company eBay for $2.5 billion plus an eventual $500 million in incentives. Communications services did not fit well within the online auction company’s business, and in 2009 eBay announced plans to sell Skype. Zennström and Friis expressed interest in reacquiring the company, but eBay rebuffed their efforts, instead making plans to sell a majority stake in the company to a group of other investors. Zennström and Friis quickly filed suit, declaring that the technology behind Skype was only leased to eBay through Joltid and that eBay had violated Joltid’s copyright by making alterations to the source code. This threat to the core asset of the service forced eBay to compromise. The company agreed to sell 56 percent of Skype to a consortium of buyers and 14 percent to Zennström and Friis for a total of some $2 billion. The two founders would receive seats on Skype’s new board of directors, and ownership of the core technology would be transferred from Joltid to Skype.
In 2011 the American company Microsoft Corporation bought Skype for $8.5 billion and planned to add Skype to its Xbox video game console, its Microsoft Outlook e-mail software, and Windows smartphones. That same year Skype also became the foundation of the social network Facebook’s video chat service. In November 2012 Skype was declared Microsoft’s primary messaging service.
Later years and retirement
Despite being declared Microsoft’s main communication platform, Skype began to lose popularity in the 2010s. Younger generations gravitated towards trendier applications such as Snapchat or Apple’s FaceTime to communicate with their friends. Meanwhile, business professionals favored Zoom, which skyrocketed in popularity during the 2020 COVID-19 pandemic. For many, Skype was viewed as a one-on-one calling service rather than a professional group calling service. Users were also disappointed by its increasingly outdated interface. Microsoft attempted to keep the app up-to-date, and introduced Bing in Skype, an “AI-powered copilot” to the application in February 2023. That same month, however, Microsoft announced that it would be retiring Skype in favor of its own Teams application. On May 5, 2025, the application officially shut down after more than two decades in service. However, users can transfer their Skype data to Teams until January 2026.
