1 00:00:04,440 --> 00:00:12,399 Speaker 1: Welcome to tech Stuff, a production from iHeartRadio. Hey there, 2 00:00:12,440 --> 00:00:16,160 Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland. 3 00:00:16,160 --> 00:00:19,840 Speaker 1: I'm an executive producer for iHeartRadio. And how the tech 4 00:00:20,040 --> 00:00:22,560 Speaker 1: are you? I've got a question for you. Do you 5 00:00:22,600 --> 00:00:27,120 Speaker 1: all remember Skype? Which, actually, if I'm being honest, that's 6 00:00:27,160 --> 00:00:30,480 Speaker 1: kind of a baited question because Skype is still a thing. 7 00:00:30,560 --> 00:00:33,760 Speaker 1: It's not like it doesn't exist anymore. According to a 8 00:00:33,800 --> 00:00:38,000 Speaker 1: Microsoft blog post from February twenty twenty three, quote, more 9 00:00:38,040 --> 00:00:42,159 Speaker 1: than thirty six million people use Skype daily to connect 10 00:00:42,200 --> 00:00:45,960 Speaker 1: through phone calls and chats across borders and around the 11 00:00:45,960 --> 00:00:51,200 Speaker 1: world end quote. Skype is a communications app. It incorporates 12 00:00:51,320 --> 00:00:55,800 Speaker 1: voice and video and text chat into the application, and 13 00:00:55,840 --> 00:00:59,160 Speaker 1: it's been around for a while, and Microsoft was not 14 00:00:59,240 --> 00:01:02,920 Speaker 1: always the own of that application. In fact, I've talked 15 00:01:02,920 --> 00:01:06,120 Speaker 1: about Skype a few times over the history of Tech Stuff. 16 00:01:06,560 --> 00:01:10,600 Speaker 1: I did an episode many years ago about some of 17 00:01:10,640 --> 00:01:13,800 Speaker 1: the worst acquisition deals in tech history, or what are 18 00:01:13,880 --> 00:01:17,880 Speaker 1: perceived to be the worst deals in tech history. These 19 00:01:17,920 --> 00:01:21,000 Speaker 1: are deals that cost a lot of money, but ultimately 20 00:01:21,640 --> 00:01:25,480 Speaker 1: they didn't perform the way the parties expected them to, 21 00:01:26,040 --> 00:01:29,120 Speaker 1: or worse in some cases, they led to the downfall 22 00:01:29,240 --> 00:01:34,240 Speaker 1: of one or all of the parties involved. Skype was 23 00:01:34,520 --> 00:01:39,480 Speaker 1: arguably part of one of these massively bad deals, and 24 00:01:39,520 --> 00:01:41,520 Speaker 1: I've talked about it several other times in this show, 25 00:01:41,560 --> 00:01:44,280 Speaker 1: but I've never dedicated a full episode to Skype itself. 26 00:01:44,760 --> 00:01:47,120 Speaker 1: So I thought it was high time to change that. 27 00:01:47,520 --> 00:01:49,640 Speaker 1: And there's a lot to talk about. In fact, there's 28 00:01:49,640 --> 00:01:52,480 Speaker 1: so much that it's going to be split up over 29 00:01:52,800 --> 00:01:56,680 Speaker 1: two episodes. Now. Tomorrow we're gonna have another episode of 30 00:01:56,680 --> 00:02:01,280 Speaker 1: Smart Talks with IBM, but on Wednesday, I plan on 31 00:02:01,440 --> 00:02:05,480 Speaker 1: bringing the second half of this story, so we'll be 32 00:02:05,600 --> 00:02:09,560 Speaker 1: back with more of this on Wednesday's episode. This whole 33 00:02:09,600 --> 00:02:12,000 Speaker 1: idea was prompted, by the way, because while I was 34 00:02:12,000 --> 00:02:15,720 Speaker 1: doing research for a totally different episode, I found an 35 00:02:15,800 --> 00:02:20,400 Speaker 1: article from July of twenty twenty three titled the Rise 36 00:02:20,520 --> 00:02:24,040 Speaker 1: and Fall of Skype. Now that stirred a memory in me, 37 00:02:24,720 --> 00:02:27,720 Speaker 1: so I plopped on over to YouTube, and sure enough, 38 00:02:28,040 --> 00:02:31,480 Speaker 1: I saw a video that I was on the channel 39 00:02:31,560 --> 00:02:35,600 Speaker 1: Company Man that also was titled the Rise and Fall 40 00:02:35,720 --> 00:02:39,720 Speaker 1: of Skype. Now. That video came out three years ago, 41 00:02:40,160 --> 00:02:42,639 Speaker 1: so in twenty twenty there was the Rise and Fall 42 00:02:42,680 --> 00:02:46,360 Speaker 1: of Skype. Then I found another video from May twenty 43 00:02:46,440 --> 00:02:49,200 Speaker 1: twenty three, so from this year, and it was on 44 00:02:49,320 --> 00:02:53,240 Speaker 1: Tech Inspection and it was called Skype the Rise and 45 00:02:53,320 --> 00:02:56,919 Speaker 1: Fall and Rise again. Then there was another video from 46 00:02:56,960 --> 00:03:01,160 Speaker 1: July twenty twenty three on CNBC titled what Happened to Skype? 47 00:03:01,440 --> 00:03:04,440 Speaker 1: So obviously Skype is something that's had a whole lot 48 00:03:04,440 --> 00:03:08,040 Speaker 1: of ups and downs, and enough for folks to imply 49 00:03:08,400 --> 00:03:11,280 Speaker 1: that the end days were near multiple times over the 50 00:03:11,360 --> 00:03:15,440 Speaker 1: last several years. I'm reminded of those doomsday cults that 51 00:03:15,480 --> 00:03:18,720 Speaker 1: would proclaim the earth would end on a certain day, 52 00:03:19,240 --> 00:03:22,000 Speaker 1: and when that day would come and go, the cult 53 00:03:22,000 --> 00:03:24,520 Speaker 1: would say, oh, you know what, we forgot to carry 54 00:03:24,560 --> 00:03:28,080 Speaker 1: the one, so now it's actually this other date, rents 55 00:03:28,120 --> 00:03:32,560 Speaker 1: and repeat. But why, what the heck has happened? What 56 00:03:32,680 --> 00:03:35,480 Speaker 1: has gone on with Skype to warrant these kinds of 57 00:03:35,640 --> 00:03:41,400 Speaker 1: articles and videos. Why during the lockdown of twenty twenty 58 00:03:41,920 --> 00:03:45,800 Speaker 1: did Zoom take center stage. Why wasn't Skype the big 59 00:03:45,880 --> 00:03:49,760 Speaker 1: name that we talked about. Why does Microsoft tend to 60 00:03:49,920 --> 00:03:53,440 Speaker 1: de emphasize Skype in favor of other tools, notably stuff 61 00:03:53,520 --> 00:03:57,360 Speaker 1: like Microsoft Teams. So we're going to look at the 62 00:03:57,440 --> 00:04:01,559 Speaker 1: history of Skype. The company the app and the phenomenon. 63 00:04:02,200 --> 00:04:15,920 Speaker 1: Let's begin. Our story begins not in video conferencing or 64 00:04:15,960 --> 00:04:21,800 Speaker 1: even voiceover Internet Protocol aka VoIP. No, it actually it 65 00:04:21,839 --> 00:04:26,120 Speaker 1: begins with an era of swashbucklers and buccaneers. Wait, no, 66 00:04:26,240 --> 00:04:29,360 Speaker 1: I'm sorry, I'm actually thinking of the wrong kind of pirates. 67 00:04:29,480 --> 00:04:34,200 Speaker 1: It begins in a tumultuous era in which massive media 68 00:04:34,320 --> 00:04:38,440 Speaker 1: companies were going nuclear in an effort to totally wipe 69 00:04:38,480 --> 00:04:42,640 Speaker 1: out piracy at IP theft, and they didn't care if 70 00:04:42,720 --> 00:04:46,080 Speaker 1: innocent technologies were caught up in the process. It certainly 71 00:04:46,120 --> 00:04:49,560 Speaker 1: didn't care if everyday normal people were caught up in 72 00:04:49,640 --> 00:04:52,880 Speaker 1: the process. That was actually part of the intimidation campaign. 73 00:04:53,320 --> 00:04:56,279 Speaker 1: But that's actually another story. But what we're talking about 74 00:04:56,320 --> 00:05:00,360 Speaker 1: here are the early days of peer to peer technolology. 75 00:05:00,920 --> 00:05:03,760 Speaker 1: So it actually benefits us to understand how this works 76 00:05:03,880 --> 00:05:07,279 Speaker 1: because ultimately it's going to play a big part in 77 00:05:07,360 --> 00:05:09,880 Speaker 1: the Skype story. And in my opinion, the best way 78 00:05:09,920 --> 00:05:12,320 Speaker 1: to do that is to compare and contrast peer to 79 00:05:12,360 --> 00:05:18,720 Speaker 1: peer networking with your typical server client situation. Okay, so 80 00:05:19,040 --> 00:05:23,760 Speaker 1: in a traditional network, you've got servers, like on the web, 81 00:05:23,800 --> 00:05:27,240 Speaker 1: you've got web servers for example. These are the computers 82 00:05:27,279 --> 00:05:31,000 Speaker 1: that are housing the stuff that you want to access. 83 00:05:31,040 --> 00:05:33,520 Speaker 1: This is where all the stuff you want to visit 84 00:05:33,680 --> 00:05:36,479 Speaker 1: or see or interact with. It's where it quote unquote 85 00:05:36,600 --> 00:05:39,240 Speaker 1: lives on the Internet. It's on one of these servers. 86 00:05:39,760 --> 00:05:42,720 Speaker 1: So let's think of a basic function like visiting a 87 00:05:42,760 --> 00:05:45,240 Speaker 1: web page. So what's really going on when you visit 88 00:05:45,240 --> 00:05:47,480 Speaker 1: a web page is that you're a computer through a 89 00:05:47,520 --> 00:05:52,240 Speaker 1: web browser. This is the client sends a request that 90 00:05:52,320 --> 00:05:56,040 Speaker 1: goes out to a specific web server. It's the web 91 00:05:56,080 --> 00:05:59,440 Speaker 1: server that is home to the document the web page 92 00:05:59,440 --> 00:06:02,920 Speaker 1: in this case that you actually want to access and see. 93 00:06:03,000 --> 00:06:06,840 Speaker 1: So your browser, the client asks the server, the computer 94 00:06:06,920 --> 00:06:10,280 Speaker 1: holding the document, may I please have a copy of 95 00:06:10,320 --> 00:06:14,039 Speaker 1: this specific web page? And assuming you have permission to 96 00:06:14,120 --> 00:06:17,240 Speaker 1: access that web page, the server then sends it along 97 00:06:17,520 --> 00:06:19,560 Speaker 1: and your browser will display the page for you to 98 00:06:19,560 --> 00:06:23,120 Speaker 1: see and interact with. So in this system, you've got 99 00:06:23,160 --> 00:06:26,760 Speaker 1: a centralized authority, the web server. So actually you've got 100 00:06:26,880 --> 00:06:30,719 Speaker 1: lots of centralized authorities. They are authorities over whichever documents 101 00:06:30,760 --> 00:06:35,800 Speaker 1: they host. So that means there's a single place for 102 00:06:35,839 --> 00:06:37,799 Speaker 1: you to go in order to get what you want. 103 00:06:38,480 --> 00:06:41,880 Speaker 1: If that source gets overwhelmed for some reason, let's say 104 00:06:41,880 --> 00:06:44,640 Speaker 1: there's a heavier than normal amount of traffic. Maybe there's 105 00:06:44,680 --> 00:06:49,279 Speaker 1: a distributed denial of service attack against the server. Well, 106 00:06:49,720 --> 00:06:53,560 Speaker 1: that affects your experience. The entire Internet is made up 107 00:06:53,600 --> 00:06:57,440 Speaker 1: of servers that act as the sort of centralized silos 108 00:06:57,560 --> 00:07:01,320 Speaker 1: of data. I should also mention that typically there are 109 00:07:01,320 --> 00:07:04,880 Speaker 1: also backup servers, so there's redundancy in the case that 110 00:07:04,920 --> 00:07:07,240 Speaker 1: primary servers go down. I say that just so that 111 00:07:07,279 --> 00:07:10,400 Speaker 1: you don't think that there's one and only one computer 112 00:07:10,480 --> 00:07:15,400 Speaker 1: out there that hosts your favorite website or whatever. Anyway, 113 00:07:15,520 --> 00:07:20,080 Speaker 1: let's compare this with peer to peer networks. Back in 114 00:07:20,160 --> 00:07:24,520 Speaker 1: nineteen ninety nine, a college student named Sean Fanning created 115 00:07:24,560 --> 00:07:29,280 Speaker 1: a service built on top of this different approach to networking. So, 116 00:07:29,360 --> 00:07:35,320 Speaker 1: instead of having centralized servers serving various clients, Fanning's approach 117 00:07:35,680 --> 00:07:40,760 Speaker 1: had peers. Every computer that joined the network was a peer. 118 00:07:40,920 --> 00:07:44,240 Speaker 1: It was equal to every other computer on the network. 119 00:07:44,680 --> 00:07:49,120 Speaker 1: Each computer could share resources and information with other computers 120 00:07:49,600 --> 00:07:54,080 Speaker 1: on that network. Fanning developed some software to facilitate this, 121 00:07:54,640 --> 00:07:58,280 Speaker 1: and in the software, you could create and designate a 122 00:07:58,400 --> 00:08:02,880 Speaker 1: folder as being shaable. Other computers that on that peer 123 00:08:02,920 --> 00:08:07,040 Speaker 1: to peer network could access anything that was stored inside 124 00:08:07,080 --> 00:08:12,160 Speaker 1: this shareable folder on the individual's computer, just as your 125 00:08:12,240 --> 00:08:15,920 Speaker 1: computer could access similar folders on other computers that were 126 00:08:16,120 --> 00:08:18,960 Speaker 1: joined to this network, which made it very easy to 127 00:08:19,040 --> 00:08:23,760 Speaker 1: distribute files across the network. It was a very efficient approach. 128 00:08:24,160 --> 00:08:26,200 Speaker 1: Let's say you joined the network after it's been around 129 00:08:26,240 --> 00:08:29,560 Speaker 1: for a while, and a lot of computers on this 130 00:08:29,680 --> 00:08:33,120 Speaker 1: particular network happened to have a file that you need, 131 00:08:33,640 --> 00:08:37,120 Speaker 1: and they have stored that file in these shared folders. 132 00:08:37,559 --> 00:08:40,520 Speaker 1: So your computer could start a download and even shift 133 00:08:40,640 --> 00:08:44,000 Speaker 1: to pull data from a different source if for some reason, 134 00:08:44,040 --> 00:08:47,600 Speaker 1: the connection between you and the first source you connected 135 00:08:47,600 --> 00:08:50,160 Speaker 1: to starts to go bad. Let's say that there's like 136 00:08:50,240 --> 00:08:55,480 Speaker 1: some Internet traffic spike or something. Your download could shift 137 00:08:55,679 --> 00:08:59,120 Speaker 1: back and forth to continue downloading that file from different sources, 138 00:08:59,480 --> 00:09:04,800 Speaker 1: assuming that all the same file. Fannings software was called Napster. 139 00:09:05,480 --> 00:09:07,600 Speaker 1: Now you may have heard of it, and while you 140 00:09:07,640 --> 00:09:10,600 Speaker 1: could use Napster to distribute pretty much any kind of file, 141 00:09:11,200 --> 00:09:14,680 Speaker 1: Fanning's emphasis was on digital audio, primarily in the form 142 00:09:14,720 --> 00:09:19,800 Speaker 1: of MP three files. The software took off at college campuses, 143 00:09:20,000 --> 00:09:23,720 Speaker 1: where students had access to decent Internet connections. They could 144 00:09:23,760 --> 00:09:28,200 Speaker 1: rip music off their CD collections. They could convert these 145 00:09:28,240 --> 00:09:31,120 Speaker 1: digital audio files to MP three's, they could store those 146 00:09:31,240 --> 00:09:34,960 Speaker 1: MP three's in a shared folder for Napster. Then they 147 00:09:34,960 --> 00:09:37,400 Speaker 1: could hop on Napster and look for other music to 148 00:09:37,440 --> 00:09:40,120 Speaker 1: fill out their collections while offering up their own collection 149 00:09:40,160 --> 00:09:43,400 Speaker 1: for other folks to download. So folks were sharing music 150 00:09:43,480 --> 00:09:48,080 Speaker 1: like crazy lots more. As these peer to peer networks grew, 151 00:09:48,480 --> 00:09:51,760 Speaker 1: they became more efficient. Right, if you have lots and 152 00:09:51,800 --> 00:09:54,160 Speaker 1: lots of people who all have the same files, it 153 00:09:54,200 --> 00:09:57,520 Speaker 1: suddenly becomes much more efficient to distribute those files. And 154 00:09:57,600 --> 00:10:02,920 Speaker 1: so music sharing or piracy, depending on your point of view, 155 00:10:03,760 --> 00:10:10,839 Speaker 1: was really becoming very popular enter the music studios, primarily 156 00:10:11,120 --> 00:10:17,839 Speaker 1: led by the band Metallica, which really went hard after Napster. Now, 157 00:10:17,840 --> 00:10:21,600 Speaker 1: it's a pretty well known fact that established media will 158 00:10:21,720 --> 00:10:27,120 Speaker 1: eye any innovation that involves home media with suspicion. The 159 00:10:27,240 --> 00:10:32,800 Speaker 1: recordable cassette tape, the VHS tape, the writeable CD, digital 160 00:10:32,840 --> 00:10:37,680 Speaker 1: audio files, all of these were viewed with consternation from 161 00:10:37,679 --> 00:10:41,200 Speaker 1: the music industry. They pushed back against all of these 162 00:10:41,240 --> 00:10:44,120 Speaker 1: innovations to some extent. In some cases, they tried to 163 00:10:44,200 --> 00:10:47,720 Speaker 1: prevent it from even becoming a thing because they argued 164 00:10:47,800 --> 00:10:53,559 Speaker 1: that it constituted an existential threat to the entire industry. 165 00:10:54,160 --> 00:10:57,120 Speaker 1: But this time it really felt like an existential threat, 166 00:10:57,200 --> 00:11:00,600 Speaker 1: right because recordable cassettes, Yeah, that could potent actually eat 167 00:11:00,640 --> 00:11:05,320 Speaker 1: into a little revenue. But you know, making a copy 168 00:11:05,400 --> 00:11:08,560 Speaker 1: of a cassette or copying music off of some other 169 00:11:08,960 --> 00:11:12,520 Speaker 1: medium to cassette, that takes a lot of time. The 170 00:11:12,800 --> 00:11:16,880 Speaker 1: quality isn't always there. It's not like the ideal way 171 00:11:17,040 --> 00:11:20,640 Speaker 1: of pirating music. But here we were talking about addigital 172 00:11:20,720 --> 00:11:25,560 Speaker 1: audio file that could end up spreading across hundreds of 173 00:11:25,600 --> 00:11:30,400 Speaker 1: thousands of computers. Now it was getting scary. Folks could 174 00:11:30,480 --> 00:11:33,400 Speaker 1: download the Napster software, they could hop onto a peer 175 00:11:33,440 --> 00:11:37,200 Speaker 1: to peer network, and they could pirate tons of content. 176 00:11:38,000 --> 00:11:40,920 Speaker 1: And like I said, the music industry would go nuclear 177 00:11:41,360 --> 00:11:45,720 Speaker 1: against Napster and its users, demanding huge amounts in damages 178 00:11:45,800 --> 00:11:49,640 Speaker 1: along the way, amounts that far outstripped anything that the 179 00:11:49,679 --> 00:11:53,320 Speaker 1: company's lost. And also, as I've said many times before, 180 00:11:53,640 --> 00:11:56,800 Speaker 1: you can't actually prove that there was a loss in 181 00:11:56,880 --> 00:12:00,520 Speaker 1: revenue at all when someone downloads something with out paying 182 00:12:00,520 --> 00:12:03,480 Speaker 1: for it. And the reason you can't prove a loss 183 00:12:03,520 --> 00:12:07,199 Speaker 1: in revenue is you can't prove the person who stole 184 00:12:07,320 --> 00:12:10,640 Speaker 1: the thing Otherwise would have paid for it, and no 185 00:12:10,840 --> 00:12:15,360 Speaker 1: physical copy of the thing had been lost, so it's 186 00:12:15,400 --> 00:12:17,720 Speaker 1: not like you can't sell the things. Still, the thing 187 00:12:17,800 --> 00:12:20,920 Speaker 1: still exists. Someone just made an illegal copy of it. 188 00:12:21,360 --> 00:12:23,360 Speaker 1: But you also can't say that the person who made 189 00:12:23,360 --> 00:12:26,960 Speaker 1: the illegal copy would have otherwise bought the thing, so 190 00:12:28,040 --> 00:12:30,440 Speaker 1: you can't prove there's a loss in revenue. This is 191 00:12:30,520 --> 00:12:33,240 Speaker 1: like a fundamental flaw in the way the music industry 192 00:12:33,320 --> 00:12:38,880 Speaker 1: went after pirates and services. It's entirely possible that the pirate, 193 00:12:39,360 --> 00:12:43,000 Speaker 1: were they honest, just would have gone without rather than 194 00:12:43,040 --> 00:12:46,360 Speaker 1: having bought the media or whatever, which means you haven't 195 00:12:46,360 --> 00:12:48,960 Speaker 1: lost any revenue. Right Like, if I don't buy your thing, 196 00:12:49,000 --> 00:12:50,640 Speaker 1: it doesn't mean I stole from you. It just means 197 00:12:50,679 --> 00:12:53,920 Speaker 1: I didn't buy it. But the copying part made it 198 00:12:54,000 --> 00:12:56,880 Speaker 1: much more complicated. Anyway, that's a rabbit hole we can't 199 00:12:56,880 --> 00:13:00,200 Speaker 1: really go down. I've talked about it in previous episodes. Anyway, So, oh, 200 00:13:00,600 --> 00:13:03,280 Speaker 1: what does all this have to do with Skype? Well, 201 00:13:03,360 --> 00:13:06,160 Speaker 1: a judgment on the Napster case brought against the app 202 00:13:06,200 --> 00:13:10,480 Speaker 1: by the aforementioned ban Metallica was going on. There was 203 00:13:10,559 --> 00:13:14,280 Speaker 1: also a pair of developers out in Amsterdam who launched 204 00:13:14,320 --> 00:13:18,840 Speaker 1: a similar peer to peer service. This one was called Kazah. 205 00:13:19,320 --> 00:13:22,319 Speaker 1: They had been working on it since two thousand and 206 00:13:22,400 --> 00:13:25,680 Speaker 1: While Napster took a rather lackadaisical stance on the whole 207 00:13:25,720 --> 00:13:31,400 Speaker 1: sharing of copyrighted material, Kazab at least outwardly urged users 208 00:13:31,440 --> 00:13:35,240 Speaker 1: to not engage in piracy. You could still share files 209 00:13:35,280 --> 00:13:37,280 Speaker 1: across the network, but they were supposed to be ones 210 00:13:37,280 --> 00:13:40,120 Speaker 1: that you had the authority to share. Of course, lots 211 00:13:40,120 --> 00:13:43,960 Speaker 1: of folks didn't really follow that philosophy, and piracy across 212 00:13:44,040 --> 00:13:48,400 Speaker 1: Kazab wasn't really that different than piracy across Napster, which 213 00:13:48,440 --> 00:13:52,840 Speaker 1: would ultimately lose its various court cases. Now. The developers 214 00:13:52,840 --> 00:13:57,880 Speaker 1: for kaza were Nicholas Zenstrom and Janis Freese, who had 215 00:13:57,880 --> 00:14:01,480 Speaker 1: been working together since the mid nineties. Zenstrom is a 216 00:14:01,480 --> 00:14:04,440 Speaker 1: decade older than Freeze, and both of them worked at 217 00:14:04,440 --> 00:14:08,480 Speaker 1: a telecommunications company in Denmark called Tella II. The two 218 00:14:08,520 --> 00:14:12,880 Speaker 1: men are really interesting contrast. Zenstrom is from Sweden. He 219 00:14:12,960 --> 00:14:17,480 Speaker 1: earned degrees in engineering, physics, and business administration. He started 220 00:14:17,520 --> 00:14:20,600 Speaker 1: at Tella IO back in nineteen ninety one and rose 221 00:14:20,720 --> 00:14:24,400 Speaker 1: through the ranks pretty quickly. He's an entrepreneur who has 222 00:14:24,480 --> 00:14:28,200 Speaker 1: led numerous companies over the course of his career. Janas 223 00:14:28,240 --> 00:14:33,720 Speaker 1: Freese is from Denmark, and unlike Zinstrom, Freeze doesn't hold degrees. 224 00:14:33,760 --> 00:14:36,400 Speaker 1: In fact, he's a high school dropout. He was one 225 00:14:36,440 --> 00:14:39,120 Speaker 1: of those kids who became fascinated with programming and networks 226 00:14:39,160 --> 00:14:42,600 Speaker 1: early on, and rather than pursue an education, he jumped 227 00:14:42,640 --> 00:14:46,200 Speaker 1: into working at companies that were introducing internet services. Now 228 00:14:46,240 --> 00:14:48,240 Speaker 1: keep in mind this was in the early days of 229 00:14:48,280 --> 00:14:51,000 Speaker 1: the general public even learning what the Internet was and 230 00:14:51,040 --> 00:14:54,480 Speaker 1: how to access it. Freeze joined Tella two in nineteen 231 00:14:54,560 --> 00:14:57,520 Speaker 1: ninety six. He would run the customer support department and 232 00:14:57,560 --> 00:15:01,080 Speaker 1: worked with Zenstrom on a few projects at company. The 233 00:15:01,080 --> 00:15:03,800 Speaker 1: two men worked well together and they decided to leave 234 00:15:03,880 --> 00:15:07,400 Speaker 1: Tellatu to create their own company and product, and Kaza 235 00:15:07,440 --> 00:15:10,480 Speaker 1: was born. I was born as the music industry was 236 00:15:10,520 --> 00:15:14,760 Speaker 1: pushing hard against peer to peer networks. Okay, we're gonna 237 00:15:14,800 --> 00:15:16,760 Speaker 1: take a quick break to thank our sponsors. When we 238 00:15:16,800 --> 00:15:31,120 Speaker 1: come back, we'll talk more about Kaza and then Skype. Okay, 239 00:15:31,160 --> 00:15:35,000 Speaker 1: before the break, I was talking about Zinstrom and Freeze, 240 00:15:35,040 --> 00:15:38,560 Speaker 1: the two guys from Tella to who left the company 241 00:15:38,600 --> 00:15:41,600 Speaker 1: to form their own company to create Kaza. They were 242 00:15:41,640 --> 00:15:45,720 Speaker 1: also joined by a trio of Estonian software developers, and 243 00:15:46,400 --> 00:15:49,120 Speaker 1: I'm going to butcher the pronunciation of these names, just 244 00:15:49,120 --> 00:15:52,960 Speaker 1: as I always do. But here we go John Tollin, 245 00:15:53,720 --> 00:16:00,320 Speaker 1: Atti Heinla and Pritt Casasalu. These developers would become the 246 00:16:00,320 --> 00:16:06,440 Speaker 1: core team behind Kazah and later on Skyte Mike Napster. 247 00:16:06,720 --> 00:16:10,040 Speaker 1: Kaza became the target of lawsuits. It was another peer 248 00:16:10,080 --> 00:16:12,520 Speaker 1: to peer sharing network and lots of people were using 249 00:16:12,560 --> 00:16:14,920 Speaker 1: it to share content that they didn't have their right 250 00:16:14,960 --> 00:16:18,240 Speaker 1: to do so. In early two thousand and two, the 251 00:16:18,280 --> 00:16:23,080 Speaker 1: company suspended downloads of the software because it was under 252 00:16:23,120 --> 00:16:26,400 Speaker 1: so much pressure, and then Zinstrument Freeze made the decision 253 00:16:26,560 --> 00:16:30,960 Speaker 1: to sell Kaza to another company called Sharman Networks, located 254 00:16:31,000 --> 00:16:34,520 Speaker 1: out of Australia. A fun sign note. The owner and 255 00:16:34,520 --> 00:16:37,760 Speaker 1: operator of Sharman Networks was a matter of secrecy, which 256 00:16:37,800 --> 00:16:40,320 Speaker 1: was probably necessary due to the scrutiny of the music 257 00:16:40,360 --> 00:16:45,000 Speaker 1: industry at the time. Nicki Hemming served as CEO, but 258 00:16:45,160 --> 00:16:47,840 Speaker 1: the music industry suspected that there might have been a 259 00:16:47,920 --> 00:16:51,880 Speaker 1: co owner lurking in the shadows and really went after them. 260 00:16:52,200 --> 00:16:55,360 Speaker 1: Others suspected that Hemming was the sole owner, that she 261 00:16:55,400 --> 00:16:58,200 Speaker 1: had done just a bang up job at creating a 262 00:16:58,240 --> 00:17:03,440 Speaker 1: complicated corporate structure that obfuscated that fact. Now, I suppose 263 00:17:03,480 --> 00:17:06,000 Speaker 1: that's a story for another time, but it does point 264 00:17:06,040 --> 00:17:10,199 Speaker 1: out that selling off Kaza was a really good and 265 00:17:10,240 --> 00:17:15,240 Speaker 1: timely decision, particularly since Australian authorities, under the direction of 266 00:17:15,280 --> 00:17:19,359 Speaker 1: the music industry, raided Sharman Network's offices in relation to 267 00:17:19,440 --> 00:17:22,720 Speaker 1: Kaza in two thousand and four. By that time, the 268 00:17:22,800 --> 00:17:25,680 Speaker 1: original team was well clear of it. But let's get 269 00:17:25,720 --> 00:17:29,720 Speaker 1: back to Zenstrom and Freeze and the Estonian developers. It's 270 00:17:29,760 --> 00:17:33,720 Speaker 1: two thousand and two. They've sold off Kaza, and they 271 00:17:33,800 --> 00:17:36,360 Speaker 1: started to ideate on how to leverage peer to peer 272 00:17:36,400 --> 00:17:39,800 Speaker 1: technology in a way that you know, wouldn't necessarily bring 273 00:17:39,880 --> 00:17:42,920 Speaker 1: down the music industry's wrath upon them or any other 274 00:17:43,280 --> 00:17:47,639 Speaker 1: media industry. So they started looking at stuff like voiceover 275 00:17:47,720 --> 00:17:52,119 Speaker 1: Internet Protocol or VoIP. To do that, they founded a 276 00:17:52,200 --> 00:17:57,200 Speaker 1: new company called Jolted Joltid, And while VoIP was an 277 00:17:57,200 --> 00:17:59,760 Speaker 1: early focus, the company really was about creating a way 278 00:17:59,800 --> 00:18:04,240 Speaker 1: for here to peer networks to scale quickly. We'll chat 279 00:18:04,240 --> 00:18:07,440 Speaker 1: about that in just a moment. To be clear, though 280 00:18:07,600 --> 00:18:10,400 Speaker 1: VoIP wasn't brand new in two thousand and two, they 281 00:18:10,400 --> 00:18:14,439 Speaker 1: didn't invent VoIP that actually had its history back in 282 00:18:14,480 --> 00:18:17,560 Speaker 1: the mid nineteen nineties when a company called vocal Tech 283 00:18:18,080 --> 00:18:21,399 Speaker 1: developed this protocol, and it does just what it says 284 00:18:21,400 --> 00:18:25,199 Speaker 1: on the ten. It utilizes the Internet to facilitate voice 285 00:18:25,200 --> 00:18:28,920 Speaker 1: calls between people. So instead of connecting via the plane 286 00:18:28,960 --> 00:18:34,119 Speaker 1: old telephone service aka POTTS and yes it's a real acronym, 287 00:18:34,440 --> 00:18:38,520 Speaker 1: users would instead make calls over the Internet, and thus 288 00:18:38,560 --> 00:18:42,560 Speaker 1: they would bypass things like those pesky long distance phone charges. 289 00:18:43,200 --> 00:18:44,800 Speaker 1: For those of y'all who have never had to deal 290 00:18:44,840 --> 00:18:47,480 Speaker 1: with that, it used to cost extra to make telephone 291 00:18:47,520 --> 00:18:51,120 Speaker 1: calls outside of your immediate service area. In a few 292 00:18:51,119 --> 00:18:53,800 Speaker 1: places like here in the United States, you used to 293 00:18:53,800 --> 00:18:55,720 Speaker 1: have to pay extra for a phone call if you 294 00:18:55,720 --> 00:18:58,000 Speaker 1: wanted to call someone who lived further than a couple 295 00:18:58,080 --> 00:19:02,080 Speaker 1: hundred miles from you. With VoIP, you could even make 296 00:19:02,119 --> 00:19:06,399 Speaker 1: an international call and still bypass those expensive fees. So 297 00:19:06,440 --> 00:19:09,360 Speaker 1: you could see why it would be really attractive. Now. 298 00:19:09,400 --> 00:19:13,679 Speaker 1: Some of the early VOPE applications were purely PC based, 299 00:19:14,040 --> 00:19:17,200 Speaker 1: so it wasn't super convenient. You had to be at 300 00:19:17,240 --> 00:19:20,720 Speaker 1: your computer to make a call, and the person on 301 00:19:20,760 --> 00:19:22,639 Speaker 1: the other end had to be at their computer to 302 00:19:22,680 --> 00:19:26,680 Speaker 1: receive a call. Early VOPE systems didn't allow for voipe 303 00:19:26,720 --> 00:19:30,760 Speaker 1: to landline or cell phone calls or vice versa. But 304 00:19:30,800 --> 00:19:33,080 Speaker 1: we're talking about the mid nineties when a good chunk 305 00:19:33,119 --> 00:19:36,240 Speaker 1: of folks didn't even have a cell phone, and smartphones 306 00:19:36,280 --> 00:19:38,520 Speaker 1: were essentially another decade out. I mean, there were some 307 00:19:38,640 --> 00:19:42,359 Speaker 1: early smartphones, but consumer smartphones wouldn't become a thing until 308 00:19:42,359 --> 00:19:45,480 Speaker 1: two thousand and seven. So most people who are making 309 00:19:45,520 --> 00:19:47,920 Speaker 1: a phone call were doing so when they were at 310 00:19:47,920 --> 00:19:50,160 Speaker 1: home or they were at work, and they were using 311 00:19:50,240 --> 00:19:54,440 Speaker 1: a landline anyway. Later on, companies would create telephone handsets 312 00:19:54,680 --> 00:19:58,520 Speaker 1: that could connect to a PC network and make voipe calls, 313 00:19:59,080 --> 00:20:01,320 Speaker 1: where you would have of what looked like a normal 314 00:20:01,359 --> 00:20:04,479 Speaker 1: cordless telephone, but it would connect to your computer as 315 00:20:04,520 --> 00:20:08,600 Speaker 1: opposed to your phone line. By combining VOPE services with 316 00:20:08,800 --> 00:20:12,600 Speaker 1: peer to peer infrastructure, the group hit upon a phenomenon. 317 00:20:13,200 --> 00:20:16,040 Speaker 1: You see. One of the challenges when you offer any 318 00:20:16,080 --> 00:20:18,600 Speaker 1: service does not have to be VOIPD. It could be anything. 319 00:20:19,040 --> 00:20:21,160 Speaker 1: One of the challenges that a lot of young companies 320 00:20:21,200 --> 00:20:24,919 Speaker 1: face is scalability. So you might easily be able to 321 00:20:24,920 --> 00:20:28,520 Speaker 1: handle demand in the early days of your product or 322 00:20:28,560 --> 00:20:31,960 Speaker 1: service when very few people have access to it. But 323 00:20:32,080 --> 00:20:36,840 Speaker 1: obviously you want your product to be a big success, right, Well, 324 00:20:36,880 --> 00:20:40,960 Speaker 1: the challenge comes when demand starts to outpace your ability 325 00:20:41,080 --> 00:20:45,080 Speaker 1: to meet that demand. If your servers can comfortably handle 326 00:20:45,119 --> 00:20:48,640 Speaker 1: a few thousand users at once, but tens of thousands 327 00:20:48,680 --> 00:20:52,320 Speaker 1: of people are trying to access it, you've got a problem. 328 00:20:52,680 --> 00:20:56,040 Speaker 1: Scaling can be expensive, and often it can become more 329 00:20:56,080 --> 00:20:59,560 Speaker 1: complicated than just throwing more resources at it. This is 330 00:20:59,560 --> 00:21:01,920 Speaker 1: one of those big challenges that startups face to this day. 331 00:21:01,960 --> 00:21:04,040 Speaker 1: It's also one of the big reasons for the dot 332 00:21:04,080 --> 00:21:06,360 Speaker 1: com crash. There are lots of reasons for the dot 333 00:21:06,480 --> 00:21:09,800 Speaker 1: com crash, but one of them was that there were 334 00:21:09,800 --> 00:21:13,199 Speaker 1: a lot of companies that had a good idea, but 335 00:21:13,400 --> 00:21:16,600 Speaker 1: it was way too expensive to scale it to a 336 00:21:16,680 --> 00:21:19,680 Speaker 1: point where they could actually do what they were hoping 337 00:21:19,760 --> 00:21:23,520 Speaker 1: to do beyond a small service group. Now, the beauty 338 00:21:23,560 --> 00:21:27,040 Speaker 1: of peer to peer networks is that computers that join 339 00:21:27,119 --> 00:21:30,520 Speaker 1: the network share their resources with one another, so you 340 00:21:30,560 --> 00:21:34,320 Speaker 1: aren't reliant on a centralized server or even a collection 341 00:21:34,400 --> 00:21:39,159 Speaker 1: of servers. The capacity to meet demand grows as the 342 00:21:39,240 --> 00:21:44,639 Speaker 1: actual network grows. It sidesteps the scalability issue, and arguably 343 00:21:44,720 --> 00:21:47,600 Speaker 1: this was the most genius aspect of Skype in those 344 00:21:47,640 --> 00:21:52,879 Speaker 1: early days, so the founders called their solution Global Index 345 00:21:53,200 --> 00:21:58,000 Speaker 1: or GI software. The core group built Skype on top 346 00:21:58,080 --> 00:22:01,920 Speaker 1: of GI software, and they launch on August twenty ninth, 347 00:22:02,160 --> 00:22:06,320 Speaker 1: two thousand and three. So we've just passed the twenty 348 00:22:06,440 --> 00:22:10,479 Speaker 1: year anniversary of Skype this year. The name Skype actually 349 00:22:10,480 --> 00:22:13,679 Speaker 1: came from a combination of the word sky and the 350 00:22:13,680 --> 00:22:17,760 Speaker 1: phrase peer to peer. At least one online source I 351 00:22:17,760 --> 00:22:20,560 Speaker 1: saw said that the name initially was going to be Skyper, 352 00:22:21,359 --> 00:22:23,800 Speaker 1: but they ended up shortening it to Skype because there 353 00:22:23,840 --> 00:22:28,800 Speaker 1: were some competing products some Internet domains that had Skyper 354 00:22:29,040 --> 00:22:31,640 Speaker 1: as the domain, and they just wanted to avoid any 355 00:22:32,080 --> 00:22:35,360 Speaker 1: issues with that, so they switched to Skype instead. As 356 00:22:35,400 --> 00:22:38,520 Speaker 1: Skype launched, it was free to use, or initially it 357 00:22:38,560 --> 00:22:41,879 Speaker 1: was Windows based. You would download a client and you 358 00:22:41,880 --> 00:22:44,600 Speaker 1: could use Skype for free. There were no fees for 359 00:22:44,680 --> 00:22:48,439 Speaker 1: long distance or international calls. For folks who lived in 360 00:22:48,440 --> 00:22:51,480 Speaker 1: remote places but who still had internet service, it could 361 00:22:51,480 --> 00:22:55,800 Speaker 1: be a big plus over traditional telephone service. The only 362 00:22:55,840 --> 00:22:59,320 Speaker 1: limiting factor, at least initially, was that the person with 363 00:22:59,359 --> 00:23:02,240 Speaker 1: whom you were trying to have a conversation also needed 364 00:23:02,280 --> 00:23:06,320 Speaker 1: to have Skype installed. On their computer. Both parties needed Skype. 365 00:23:06,840 --> 00:23:09,440 Speaker 1: If you had it and no one you knew had it, 366 00:23:09,760 --> 00:23:12,800 Speaker 1: well it doesn't do you much good. So it was 367 00:23:12,840 --> 00:23:16,359 Speaker 1: the kind of service that only has value as people 368 00:23:16,440 --> 00:23:20,840 Speaker 1: adopt it. But once they did, it was easyps limon 369 00:23:20,880 --> 00:23:24,400 Speaker 1: squeeze and the elegant solution of using peer to peer 370 00:23:24,440 --> 00:23:28,359 Speaker 1: technology really paid off. As long as folks in your 371 00:23:28,440 --> 00:23:32,800 Speaker 1: region had Skype installed, service was pretty darn good. The 372 00:23:32,800 --> 00:23:35,840 Speaker 1: more people who adopted it, the better the service got, 373 00:23:35,920 --> 00:23:39,880 Speaker 1: because again that meant that these computers were sharing resources. 374 00:23:40,920 --> 00:23:42,479 Speaker 1: Got to remember that a lot of people just let 375 00:23:42,520 --> 00:23:45,560 Speaker 1: their computers stay on all the time, and so it 376 00:23:45,600 --> 00:23:48,720 Speaker 1: could run the Skype peer to peer software in the 377 00:23:48,760 --> 00:23:52,359 Speaker 1: background even if someone wasn't actively using their computer, and 378 00:23:52,400 --> 00:23:56,159 Speaker 1: so it could contribute to the service this way. The 379 00:23:56,200 --> 00:23:59,840 Speaker 1: more folks who downloaded and installed it, the better it got. 380 00:24:00,520 --> 00:24:03,480 Speaker 1: This was key to Skype's success as it was not 381 00:24:03,680 --> 00:24:06,240 Speaker 1: the first VoIP product on the market right like it 382 00:24:06,320 --> 00:24:10,240 Speaker 1: was almost a decade out from when Voipe first appeared, 383 00:24:11,000 --> 00:24:16,200 Speaker 1: but other VoIP services followed the traditional client server infrastructure, 384 00:24:16,520 --> 00:24:19,400 Speaker 1: so they had challenges with scaling the service up as 385 00:24:19,440 --> 00:24:23,080 Speaker 1: adoption increased because the servers were running all the systems 386 00:24:23,080 --> 00:24:26,919 Speaker 1: in the background, so if more people were using your service, 387 00:24:26,960 --> 00:24:29,440 Speaker 1: you had to add more servers. The beauty of Skype 388 00:24:29,960 --> 00:24:33,000 Speaker 1: was that it just got better as more people joined it. 389 00:24:33,520 --> 00:24:37,000 Speaker 1: Now at this stage, the team referred to Skype as 390 00:24:37,000 --> 00:24:40,080 Speaker 1: being in beta. For those of y'all who are not 391 00:24:40,160 --> 00:24:43,720 Speaker 1: familiar with the term beta testing, it is a stage 392 00:24:43,760 --> 00:24:47,520 Speaker 1: in development where the programmer or programmers who are responsible 393 00:24:47,600 --> 00:24:50,359 Speaker 1: for this app or service or whatever, they roll it 394 00:24:50,400 --> 00:24:53,120 Speaker 1: out to a test group and that test group use 395 00:24:53,200 --> 00:24:55,560 Speaker 1: the app, and then they give feedback on it, and 396 00:24:55,600 --> 00:24:59,680 Speaker 1: they also alert if they run into any bugs or anything. 397 00:25:00,040 --> 00:25:03,080 Speaker 1: It's a way to make sure that the service is 398 00:25:03,119 --> 00:25:07,320 Speaker 1: actually stable and useful, that the features make sense and 399 00:25:07,359 --> 00:25:09,800 Speaker 1: everything before you roll it out to an even larger 400 00:25:10,160 --> 00:25:13,080 Speaker 1: group of people. Skype would stay in beta for quite 401 00:25:13,080 --> 00:25:16,000 Speaker 1: a bit, but it was an open beta, so really 402 00:25:16,040 --> 00:25:19,199 Speaker 1: anyone could participate. They just had to download and install it, 403 00:25:19,400 --> 00:25:22,600 Speaker 1: at least anyone on Windows machines. Initially, it would take 404 00:25:22,600 --> 00:25:25,600 Speaker 1: a bit before Apple would get its own client for Skype. 405 00:25:26,440 --> 00:25:29,199 Speaker 1: And that makes sense again that they had it as 406 00:25:29,240 --> 00:25:32,680 Speaker 1: an open beta approach, because if it's a peer to 407 00:25:32,720 --> 00:25:35,480 Speaker 1: peer network, it's only as good as the number of 408 00:25:35,480 --> 00:25:38,080 Speaker 1: people who have joined on right, you don't want to 409 00:25:38,440 --> 00:25:40,439 Speaker 1: limit that. If you had a closed beta for a 410 00:25:40,480 --> 00:25:44,400 Speaker 1: peer to peer network, then you might not have the 411 00:25:44,440 --> 00:25:48,199 Speaker 1: density of that network to make the service useful, and 412 00:25:48,240 --> 00:25:51,239 Speaker 1: you also would have people who actually were interested in 413 00:25:51,280 --> 00:25:53,800 Speaker 1: talking to each other. You'd have a bunch of individuals 414 00:25:54,240 --> 00:25:57,040 Speaker 1: who were all part of a beta, but they didn't 415 00:25:57,080 --> 00:25:58,960 Speaker 1: know each other, and they'd have no reason to talk 416 00:25:58,960 --> 00:26:03,560 Speaker 1: to one another. That would not be a really successful approach. Now. 417 00:26:03,600 --> 00:26:06,080 Speaker 1: One early beta build in two thousand and four added 418 00:26:06,119 --> 00:26:09,240 Speaker 1: in the feature that would let PC users make Skype 419 00:26:09,280 --> 00:26:14,240 Speaker 1: calls to landlines. The feature was called Skype out, and 420 00:26:14,520 --> 00:26:18,159 Speaker 1: unlike the PC to PC calls, this one would actually 421 00:26:18,160 --> 00:26:20,520 Speaker 1: cost money. So you can make a call from one 422 00:26:20,560 --> 00:26:23,280 Speaker 1: PC to another for free, but if you were using 423 00:26:23,320 --> 00:26:26,520 Speaker 1: your PC to call someone's landlined, you actually had to 424 00:26:26,720 --> 00:26:29,720 Speaker 1: pay money for that. The initial fee I believe was 425 00:26:29,800 --> 00:26:33,639 Speaker 1: two euro cents a minute for landlines that were within Europe, 426 00:26:34,119 --> 00:26:38,240 Speaker 1: the US, Australia, and New Zealand, but these fees were 427 00:26:38,240 --> 00:26:44,120 Speaker 1: typically lower, sometimes like significantly lower than the long distance 428 00:26:44,119 --> 00:26:47,879 Speaker 1: and international call fees that telecommunications companies would charge you, 429 00:26:48,400 --> 00:26:51,560 Speaker 1: so lots of people loved it. Lots of people started 430 00:26:51,560 --> 00:26:53,800 Speaker 1: to use it. It was a way of sidestepping those 431 00:26:53,800 --> 00:26:57,760 Speaker 1: incredibly expensive fees, and Skype's popularity grew as a result. 432 00:26:58,480 --> 00:27:01,440 Speaker 1: This was also around the time that develop finally created 433 00:27:01,440 --> 00:27:05,720 Speaker 1: an Apple computer compatible version of Skype. I say finally 434 00:27:05,840 --> 00:27:08,000 Speaker 1: it was, you know, within a year of them launching. 435 00:27:08,040 --> 00:27:11,680 Speaker 1: It wasn't that long. But still it shows a big 436 00:27:11,680 --> 00:27:15,840 Speaker 1: difference too, right, because Apple in the early two thousands 437 00:27:15,960 --> 00:27:20,119 Speaker 1: was starting to gain more momentum. But you have to 438 00:27:20,119 --> 00:27:23,320 Speaker 1: remember that in the mid to late nineties, Apple was 439 00:27:23,359 --> 00:27:25,480 Speaker 1: a very different company and it was on the verge 440 00:27:25,520 --> 00:27:29,200 Speaker 1: of falling apart. By the early two thousands, it had 441 00:27:29,240 --> 00:27:35,000 Speaker 1: started to mend that that reputation and was becoming well 442 00:27:35,040 --> 00:27:40,760 Speaker 1: known for things like the iMac computer. So it was 443 00:27:40,800 --> 00:27:43,320 Speaker 1: not a high priority because there was still a much 444 00:27:43,400 --> 00:27:46,199 Speaker 1: larger concentration of Windows machines out in the world than 445 00:27:46,240 --> 00:27:49,320 Speaker 1: Apple machines. But it's good to see that it took 446 00:27:49,400 --> 00:27:53,160 Speaker 1: only like a year before the Apple version came out. Now, 447 00:27:53,160 --> 00:27:56,040 Speaker 1: over the next two years, Skype would grow and with 448 00:27:56,119 --> 00:27:59,479 Speaker 1: beta versions point nine point ninety seven one point zero 449 00:27:59,480 --> 00:28:03,560 Speaker 1: to one point for rolling out to users. By January 450 00:28:03,560 --> 00:28:07,680 Speaker 1: two thousand and five, Skype had boasted twenty three million 451 00:28:07,760 --> 00:28:12,080 Speaker 1: registered users, and analysts began to i Skype as being 452 00:28:12,119 --> 00:28:16,679 Speaker 1: a potentially disruptive product. Like we talk about disruption and 453 00:28:16,760 --> 00:28:21,240 Speaker 1: tech a lot, typically we mean that some startup has 454 00:28:21,280 --> 00:28:24,080 Speaker 1: come up with an idea that can upset the apple 455 00:28:24,160 --> 00:28:28,480 Speaker 1: cart for an established industry. In this case, clearly Skype 456 00:28:28,560 --> 00:28:33,919 Speaker 1: was a potential disruptor for the telecommunications industry. Skype's popularity 457 00:28:33,960 --> 00:28:36,280 Speaker 1: grew in two thousand and five, helped in large part 458 00:28:36,400 --> 00:28:39,520 Speaker 1: by the spread of broadband service, which was really becoming 459 00:28:39,520 --> 00:28:42,280 Speaker 1: a thing by the mid two thousands. More folks were 460 00:28:42,320 --> 00:28:45,680 Speaker 1: getting better access to the Internet and they weren't necessarily 461 00:28:45,680 --> 00:28:48,240 Speaker 1: having to rely upon dial up modems to do it. 462 00:28:48,720 --> 00:28:52,040 Speaker 1: And with that access came the potential to leverage technologies 463 00:28:52,120 --> 00:28:56,280 Speaker 1: like VoIP, and by April Skype marked to milestone. It 464 00:28:56,360 --> 00:29:00,840 Speaker 1: had one hundred million downloads. Now, keep in mind this 465 00:29:00,920 --> 00:29:04,760 Speaker 1: is downloads, not registered users. Right at January they had 466 00:29:04,800 --> 00:29:07,480 Speaker 1: twenty three million registered users. In April they have one 467 00:29:07,560 --> 00:29:10,880 Speaker 1: hundred million downloads. But you know, you could have one 468 00:29:10,920 --> 00:29:13,640 Speaker 1: person install Skype on multiple machines, you still have just 469 00:29:13,720 --> 00:29:17,200 Speaker 1: one registered user doing that. So it's not in apples 470 00:29:17,200 --> 00:29:20,720 Speaker 1: to apples comparison, but it was showing that. In two 471 00:29:20,760 --> 00:29:25,760 Speaker 1: thousand and five, Skype was growing significantly. By August of 472 00:29:25,760 --> 00:29:29,680 Speaker 1: two thousand and five, competition was starting to pop up, 473 00:29:29,720 --> 00:29:33,320 Speaker 1: and again there had already been voipe services on the market, 474 00:29:33,320 --> 00:29:36,280 Speaker 1: many offered by the telco companies that were attempting to 475 00:29:36,400 --> 00:29:39,520 Speaker 1: guard their respective lunches out of fear of Skype gobbling 476 00:29:39,560 --> 00:29:43,440 Speaker 1: them up. So Google launched its own VoIP service called 477 00:29:43,480 --> 00:29:47,960 Speaker 1: Google Talk. Microsoft had acquired a company called Teleio that 478 00:29:48,080 --> 00:29:50,920 Speaker 1: was in the VoIP business and was eyeing an opportunity 479 00:29:50,960 --> 00:29:56,400 Speaker 1: to incorporate voipe features into Imson Messenger, and Skype, out 480 00:29:56,440 --> 00:30:00,960 Speaker 1: of a effort of self preservation, aligned itself with Intel. 481 00:30:01,040 --> 00:30:06,000 Speaker 1: They formed a partnership, and Intel made an investment into Skype. 482 00:30:06,720 --> 00:30:10,560 Speaker 1: And then we get to it, the acquisition that makes 483 00:30:10,600 --> 00:30:14,960 Speaker 1: the worst deals of all time lists. eBay made an 484 00:30:14,960 --> 00:30:18,200 Speaker 1: offer that the Skype folks couldn't refuse. It was a 485 00:30:18,240 --> 00:30:22,360 Speaker 1: two and a half billion dollar offer plus another half 486 00:30:22,440 --> 00:30:26,720 Speaker 1: billion incentives for Skype. Guardian actually has it listed all 487 00:30:26,720 --> 00:30:28,960 Speaker 1: the way up to three point one billion dollars when 488 00:30:28,960 --> 00:30:31,640 Speaker 1: it was all said and done. I don't know where 489 00:30:31,640 --> 00:30:33,800 Speaker 1: they got their math on that. Almost everyone else says 490 00:30:34,000 --> 00:30:36,600 Speaker 1: either two and a half or two point six billion dollars. 491 00:30:37,280 --> 00:30:40,040 Speaker 1: But the company known for online auctions and storefronts wanted 492 00:30:40,040 --> 00:30:43,280 Speaker 1: to buy Skype for a truly princely sum, and that 493 00:30:43,440 --> 00:30:47,320 Speaker 1: happened on September twelfth, two thousand and five. We're going 494 00:30:47,360 --> 00:30:49,560 Speaker 1: to take another quick break. When we come back, we'll 495 00:30:49,560 --> 00:30:52,520 Speaker 1: talk more about what happened in the wake of this 496 00:30:52,640 --> 00:31:06,320 Speaker 1: massive deal. Okay, we're in the fall of two thousand 497 00:31:06,360 --> 00:31:12,160 Speaker 1: and five. At that time, eBay's CEO was the serial 498 00:31:12,280 --> 00:31:16,840 Speaker 1: executive leader, Meg Whitman. That name might sound familiar to you. 499 00:31:16,920 --> 00:31:20,680 Speaker 1: Meg Whitman served as the head of several companies during 500 00:31:20,760 --> 00:31:27,320 Speaker 1: pivotal moments in their respective histories, often with things being chaotic. 501 00:31:27,920 --> 00:31:31,200 Speaker 1: Besides eBay, Meg Whitman was also the helm of Hewitt 502 00:31:31,240 --> 00:31:36,160 Speaker 1: Packard during a pretty rough patch for that company's history. 503 00:31:36,880 --> 00:31:40,080 Speaker 1: She also helmed Quibi. That was the short lived short 504 00:31:40,120 --> 00:31:43,120 Speaker 1: form media company that came out the same year as 505 00:31:43,160 --> 00:31:47,240 Speaker 1: we got a you know, global pandemic. Quibi launched and 506 00:31:47,320 --> 00:31:51,520 Speaker 1: crashed in less than a year. So not like big 507 00:31:52,920 --> 00:31:59,160 Speaker 1: bright things to cheer about in Meg Whitman's trophy case 508 00:31:59,280 --> 00:32:01,800 Speaker 1: right there. But that's not to say that Whitman is 509 00:32:01,960 --> 00:32:04,880 Speaker 1: or was a poor leader, but she is linked with 510 00:32:04,960 --> 00:32:09,160 Speaker 1: some pretty questionable deals and the purchase of Skype is 511 00:32:09,200 --> 00:32:13,000 Speaker 1: way up there. So at the time, Skype's revenue was 512 00:32:13,000 --> 00:32:16,920 Speaker 1: in the low millions of dollars, which isn't bad, mind you, 513 00:32:17,320 --> 00:32:23,520 Speaker 1: but it's hardly a powerhouse. However, the product's potential was enormous, 514 00:32:23,640 --> 00:32:27,200 Speaker 1: you know. The chance to push traditional telephone companies aside 515 00:32:27,240 --> 00:32:30,120 Speaker 1: and to become the dominant means with which people can 516 00:32:30,160 --> 00:32:35,320 Speaker 1: communicate long distance was undeniably powerful. But there were skeptics 517 00:32:35,360 --> 00:32:37,720 Speaker 1: who were questioning if eBay could even find a way 518 00:32:37,760 --> 00:32:42,160 Speaker 1: to monetize the service effectively, or to integrate it into 519 00:32:42,240 --> 00:32:47,240 Speaker 1: eBay itself, or preferably both. The one bit that seemed 520 00:32:47,280 --> 00:32:50,720 Speaker 1: to make the most sense was that eBay also owned PayPal, 521 00:32:51,280 --> 00:32:53,600 Speaker 1: and so the guess was that eBay would build in 522 00:32:53,680 --> 00:32:57,320 Speaker 1: the ability for Skype users to leverage PayPal to pay 523 00:32:57,360 --> 00:33:01,840 Speaker 1: for services like making calls to landline. And eBay also 524 00:33:01,920 --> 00:33:05,480 Speaker 1: had a huge user base, so potentially that could mean 525 00:33:05,520 --> 00:33:09,200 Speaker 1: a surge in Skype adoption. But beyond that, there was 526 00:33:09,240 --> 00:33:13,400 Speaker 1: a big old question mark hovering over this deal. One 527 00:33:13,440 --> 00:33:15,720 Speaker 1: thing that eBay was hoping for was to use the 528 00:33:15,800 --> 00:33:19,600 Speaker 1: service to connect buyers and sellers so that they could 529 00:33:19,640 --> 00:33:22,600 Speaker 1: talk with one another during things like an auction, but 530 00:33:22,640 --> 00:33:25,959 Speaker 1: it turned out eBay users didn't have any desire to 531 00:33:26,000 --> 00:33:30,720 Speaker 1: do that. With eBay's international scope, voice communication wasn't necessarily 532 00:33:30,840 --> 00:33:33,640 Speaker 1: viable in the first place, just due to language barriers, 533 00:33:33,960 --> 00:33:37,240 Speaker 1: and a lot of people preferred the anonymous approach of eBay, 534 00:33:37,720 --> 00:33:41,200 Speaker 1: so speaking to someone else over a voice call would 535 00:33:41,200 --> 00:33:44,200 Speaker 1: strip away at least some of that anonymity, so the 536 00:33:44,200 --> 00:33:47,200 Speaker 1: company didn't actually see many folks adopt the service for 537 00:33:47,280 --> 00:33:50,400 Speaker 1: the purpose that they were hoping for. Then there was 538 00:33:50,440 --> 00:33:54,000 Speaker 1: the clash in corporate cultures. So eBay got its start 539 00:33:54,120 --> 00:33:57,400 Speaker 1: as a plucky startup. When Meg Whitman joined the company, 540 00:33:57,880 --> 00:34:00,920 Speaker 1: there were only thirty employees at e but by two 541 00:34:00,960 --> 00:34:04,200 Speaker 1: thousand and five, eBay had grown into a much larger, 542 00:34:04,320 --> 00:34:10,560 Speaker 1: more corporate company. Meanwhile, Skype had a more rebellious startup culture, 543 00:34:11,000 --> 00:34:13,480 Speaker 1: so the two didn't really mix well, and there was 544 00:34:13,520 --> 00:34:16,239 Speaker 1: a lot of overturn in Skype, the Skype division of 545 00:34:16,239 --> 00:34:19,919 Speaker 1: eBay and the managerial side. Some of the founders would 546 00:34:20,000 --> 00:34:22,000 Speaker 1: leave the company. At that point, Wheen of the Estonian 547 00:34:22,080 --> 00:34:26,600 Speaker 1: developers decided to pack up and leave. Once the acquisition 548 00:34:26,719 --> 00:34:32,240 Speaker 1: was complete, jolted the company that Freese and Zenstrom had founded. 549 00:34:33,200 --> 00:34:37,520 Speaker 1: It continued to license the underlying peer to peer technology 550 00:34:37,520 --> 00:34:40,440 Speaker 1: to eBay, which is a matter that would become important 551 00:34:40,600 --> 00:34:44,120 Speaker 1: a few years further down the road. In December two 552 00:34:44,160 --> 00:34:50,120 Speaker 1: thousand and five, Skype introduced a new major feature, video calling. Again, 553 00:34:50,160 --> 00:34:53,760 Speaker 1: Skype wasn't the first company to or division in this case, 554 00:34:54,080 --> 00:34:57,520 Speaker 1: to provide internet video calling. It wasn't even the first 555 00:34:57,640 --> 00:35:00,279 Speaker 1: VoIP service to do that, but it would be a 556 00:35:00,400 --> 00:35:03,720 Speaker 1: major feature that would open up new possibilities for users. 557 00:35:04,600 --> 00:35:06,840 Speaker 1: Way back in the day, I actually used Skype to 558 00:35:06,880 --> 00:35:09,680 Speaker 1: connect with podcast co hosts to create some silly shows 559 00:35:09,680 --> 00:35:14,080 Speaker 1: that I haven't done in years. The Skype developers kept 560 00:35:14,080 --> 00:35:17,279 Speaker 1: working on new features, even as the culture clashes meant 561 00:35:17,280 --> 00:35:20,680 Speaker 1: that there were fairly frequent changes in you know, managers. 562 00:35:21,600 --> 00:35:24,840 Speaker 1: By May of two thousand and six, Skype launched Skype Casts. 563 00:35:25,080 --> 00:35:29,120 Speaker 1: This would allow a conference room of up to one 564 00:35:29,200 --> 00:35:32,279 Speaker 1: hundred people, so you could like broadcast one to one 565 00:35:32,360 --> 00:35:35,080 Speaker 1: hundred where it's kind of like a lecture, or you 566 00:35:35,080 --> 00:35:37,640 Speaker 1: could have a huge meeting. Sort of the features that 567 00:35:37,680 --> 00:35:41,080 Speaker 1: you would see later on in products like Zoom By 568 00:35:41,160 --> 00:35:43,759 Speaker 1: October of two thousand and seven, eBay had to make 569 00:35:43,840 --> 00:35:47,680 Speaker 1: a tough admission. The acquisition had not gone the way 570 00:35:47,760 --> 00:35:50,719 Speaker 1: meg Whitman and her team had hoped it would. The 571 00:35:50,760 --> 00:35:54,280 Speaker 1: goal was to integrate Skype into eBay and to build 572 00:35:54,320 --> 00:35:57,800 Speaker 1: a monster of a revenue generator, but that just didn't 573 00:35:57,800 --> 00:36:00,840 Speaker 1: pan out. So the company chose to take a nine 574 00:36:00,960 --> 00:36:05,600 Speaker 1: hundred million dollar write down on this deal, and that 575 00:36:05,920 --> 00:36:09,239 Speaker 1: essentially was eBay saying, yeah, we paid way too much 576 00:36:09,280 --> 00:36:11,600 Speaker 1: for this, kind of like you know in an eBay 577 00:36:11,640 --> 00:36:14,680 Speaker 1: auction where you get caught up in the excitement as 578 00:36:14,719 --> 00:36:18,319 Speaker 1: you're bidding for that vintage Bart Simpson action figure and 579 00:36:18,320 --> 00:36:20,560 Speaker 1: you end up spending like five times more than you 580 00:36:20,600 --> 00:36:25,480 Speaker 1: had planned on. Not to bring up personal examples or anything. 581 00:36:26,120 --> 00:36:29,319 Speaker 1: At this point, Zenstrom stepped down from Skype. He had 582 00:36:29,360 --> 00:36:32,440 Speaker 1: stuck it out for two years under eBay leadership, but 583 00:36:32,680 --> 00:36:35,200 Speaker 1: he felt it was ready to move on, and while 584 00:36:35,280 --> 00:36:38,760 Speaker 1: Skype boasted more than two hundred and twenty million registered users, 585 00:36:39,280 --> 00:36:41,680 Speaker 1: the usage rate just wasn't high enough to make it 586 00:36:41,800 --> 00:36:45,000 Speaker 1: a big success for eBay at the time. In two 587 00:36:45,040 --> 00:36:49,080 Speaker 1: thousand and eight, Meg Whitman left eBay. John Donahoe became 588 00:36:49,120 --> 00:36:52,160 Speaker 1: the new CEO of the company, and the following year, 589 00:36:52,160 --> 00:36:54,920 Speaker 1: in two thousand and nine, eBay announced a plan to 590 00:36:55,080 --> 00:36:58,760 Speaker 1: spin off Skype and to hold its own initial public 591 00:36:58,840 --> 00:37:02,680 Speaker 1: offering or IPOH. But now we get into that complication 592 00:37:02,760 --> 00:37:06,400 Speaker 1: that I had mentioned earlier, because Zinstrom had left eBay 593 00:37:06,520 --> 00:37:12,000 Speaker 1: right but Zinstrom still was in charge of the company Jolted, 594 00:37:12,320 --> 00:37:14,440 Speaker 1: the company that created the peer to peer network that 595 00:37:14,560 --> 00:37:19,680 Speaker 1: said it was licensing to Skype. So Zinstrum and Freeze 596 00:37:19,920 --> 00:37:23,239 Speaker 1: still were very much active with Jolted, and they were 597 00:37:23,360 --> 00:37:28,000 Speaker 1: arguing that Skype's technologies were completely dependent upon their products, 598 00:37:28,560 --> 00:37:32,480 Speaker 1: and the decision to spin Skype off would not entirely 599 00:37:32,520 --> 00:37:36,120 Speaker 1: be eBay's own because they didn't own the IP of 600 00:37:36,160 --> 00:37:41,120 Speaker 1: that technology, and they threatened to pull that IP from Skype. 601 00:37:41,440 --> 00:37:45,680 Speaker 1: So essentially they were saying, the foundational technology upon which 602 00:37:45,800 --> 00:37:48,959 Speaker 1: Skype is built that belongs to us, and we will 603 00:37:49,040 --> 00:37:53,000 Speaker 1: take it if we don't have a spot at this table. 604 00:37:53,560 --> 00:37:57,839 Speaker 1: And this set off a massive legal kerfuffel, so by 605 00:37:57,880 --> 00:38:01,440 Speaker 1: September two thousand and nine, eba Bay had to abandon 606 00:38:01,480 --> 00:38:05,600 Speaker 1: any plans of spinning off Skype as its own company. Instead, 607 00:38:06,320 --> 00:38:10,279 Speaker 1: the eBay chose to sell off a majority of its 608 00:38:10,280 --> 00:38:13,960 Speaker 1: steak sixty five percent of its steak and Skype, and 609 00:38:14,000 --> 00:38:16,880 Speaker 1: it would sell that to a group of investors including 610 00:38:17,239 --> 00:38:22,440 Speaker 1: Mark Andresen. Jolted filed a lawsuit against eBay and argued 611 00:38:22,480 --> 00:38:25,360 Speaker 1: that it should receive compensation for the continued use of 612 00:38:25,480 --> 00:38:30,800 Speaker 1: Jolted technology, and it got very very messy, with people 613 00:38:31,040 --> 00:38:33,600 Speaker 1: asking like, what is going to happen here? How is 614 00:38:33,640 --> 00:38:37,920 Speaker 1: this deal going to unfold? By November two thousand and nine, 615 00:38:37,960 --> 00:38:41,600 Speaker 1: the dust actually started to settle because eBay and Jolted 616 00:38:42,080 --> 00:38:45,800 Speaker 1: came to an agreement. Jolted would drop its lawsuit against 617 00:38:45,800 --> 00:38:50,080 Speaker 1: eBay and in return, Jolted would receive a fourteen percent 618 00:38:50,280 --> 00:38:54,719 Speaker 1: steak in Skype. So the full pie for Skype by 619 00:38:54,760 --> 00:38:57,719 Speaker 1: the end of all this mess looked something like this. 620 00:38:58,400 --> 00:39:02,040 Speaker 1: Fifty six percent on worship of Skype went to a 621 00:39:02,120 --> 00:39:05,839 Speaker 1: group of investors including Mark and Jason, who had been 622 00:39:05,880 --> 00:39:09,439 Speaker 1: part of some massive Internet deals throughout the entire era 623 00:39:09,560 --> 00:39:14,200 Speaker 1: of the Internet. Still as to this day, That's all 624 00:39:14,239 --> 00:39:15,840 Speaker 1: I'll say about that, because I would need to do 625 00:39:15,960 --> 00:39:19,560 Speaker 1: another episode to talk all about Mark and Json. Anyway, 626 00:39:19,800 --> 00:39:24,879 Speaker 1: fourteen percent of Skype would go to Jolted. eBay would 627 00:39:24,880 --> 00:39:29,000 Speaker 1: actually retain the final thirty percent, and this deal was 628 00:39:29,040 --> 00:39:32,279 Speaker 1: like a two billion dollar deal as well. So while 629 00:39:32,400 --> 00:39:36,839 Speaker 1: some people talk about the acquisition of Skype as one 630 00:39:36,880 --> 00:39:39,239 Speaker 1: of the worst Internet deals of all time or worst 631 00:39:39,320 --> 00:39:42,480 Speaker 1: deals of all time in the technology sector, I would 632 00:39:42,640 --> 00:39:46,560 Speaker 1: argue that in the long term it probably wasn't that bad. 633 00:39:46,640 --> 00:39:49,480 Speaker 1: It certainly wasn't as bad as like AOL Time Warner, 634 00:39:49,680 --> 00:39:54,200 Speaker 1: for example. It didn't have as big an effect as that. 635 00:39:54,719 --> 00:39:59,040 Speaker 1: And part of that is because while eBay paid way 636 00:39:59,040 --> 00:40:02,200 Speaker 1: too much for Skype, the fact that they were able 637 00:40:02,239 --> 00:40:05,120 Speaker 1: to recapture some of that by selling off some of 638 00:40:05,160 --> 00:40:08,560 Speaker 1: the ownership to this group of investors and then retain 639 00:40:08,640 --> 00:40:12,080 Speaker 1: thirty percent of it themselves meant that further down the line, 640 00:40:12,160 --> 00:40:14,920 Speaker 1: they were able to kind of recoup their costs. So 641 00:40:15,040 --> 00:40:17,000 Speaker 1: I don't think it was as bad a deal as 642 00:40:17,040 --> 00:40:20,279 Speaker 1: a lot of people say. Anyway, a few more years 643 00:40:20,280 --> 00:40:23,120 Speaker 1: went by, a couple more years, Skype continued to grow 644 00:40:23,160 --> 00:40:27,719 Speaker 1: in popularity, and now we're up to twenty eleven and 645 00:40:28,400 --> 00:40:32,400 Speaker 1: another huge deal is on the horizon. And I'm talking 646 00:40:33,520 --> 00:40:39,280 Speaker 1: really huge because Skype had a new suitor. So eBay, 647 00:40:39,320 --> 00:40:41,200 Speaker 1: like I said, had purchased the company for somewhere in 648 00:40:41,239 --> 00:40:43,960 Speaker 1: the neighborhood of two point six billion dollars in two 649 00:40:43,960 --> 00:40:46,800 Speaker 1: thousand and three, and it had sold off a portion 650 00:40:46,840 --> 00:40:51,320 Speaker 1: of at stake for around two billion, And now a big, 651 00:40:51,480 --> 00:40:55,680 Speaker 1: big company by the name of Microsoft had come calling, 652 00:40:56,400 --> 00:41:01,920 Speaker 1: and Microsoft would make an offer on Skypeype that would 653 00:41:02,360 --> 00:41:06,239 Speaker 1: put that two point six billion dollars well into the 654 00:41:06,280 --> 00:41:11,760 Speaker 1: rear view mirror. It was a deal that again shook 655 00:41:11,840 --> 00:41:16,000 Speaker 1: up the tech space, especially in tech journalism, because people 656 00:41:16,000 --> 00:41:18,239 Speaker 1: were just thinking, like, we went through this in two 657 00:41:18,239 --> 00:41:20,640 Speaker 1: thousand and three, now we're going through it again in 658 00:41:20,680 --> 00:41:25,120 Speaker 1: twenty eleven for an even larger amount of money. And 659 00:41:25,239 --> 00:41:30,279 Speaker 1: I'm dancing around it because in our next episode, we're 660 00:41:30,320 --> 00:41:34,840 Speaker 1: going to talk more about what happened when Microsoft made 661 00:41:35,280 --> 00:41:41,600 Speaker 1: the offer and ultimately acquired Skype, as well as some 662 00:41:41,760 --> 00:41:45,040 Speaker 1: massive changes that would happen to the service as a 663 00:41:45,080 --> 00:41:51,560 Speaker 1: result of this acquisition, including moving the service off of 664 00:41:51,600 --> 00:41:55,960 Speaker 1: that peer to peer infrastructure that had been powering it 665 00:41:56,040 --> 00:42:00,239 Speaker 1: since its founding. But that will wait until our next episod, 666 00:42:00,560 --> 00:42:03,000 Speaker 1: where we'll talk more about what has happened to Skype 667 00:42:03,000 --> 00:42:06,879 Speaker 1: in the year's following Microsoft's acquisition. In the meantime, I 668 00:42:06,960 --> 00:42:09,920 Speaker 1: hope you are all well, and I'll talk to you 669 00:42:10,000 --> 00:42:21,080 Speaker 1: again really soon. Tech Stuff is an iHeartRadio production. For 670 00:42:21,200 --> 00:42:26,040 Speaker 1: more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, 671 00:42:26,160 --> 00:42:32,000 Speaker 1: or wherever you listen to your favorite shows.