1 00:00:04,440 --> 00:00:12,399 Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey thereon 2 00:00:12,520 --> 00:00:15,800 Speaker 1: Welcome to Tech Stuff, I'm your host Jonathan Strickland. I'm 3 00:00:15,800 --> 00:00:19,000 Speaker 1: an executive producer with iHeartRadio and how the tech are 4 00:00:19,040 --> 00:00:25,160 Speaker 1: you So? On Monday's episode, I described how Skype came 5 00:00:25,200 --> 00:00:30,280 Speaker 1: into being, how it grew quickly after launch, which prompted eBay, 6 00:00:30,520 --> 00:00:34,760 Speaker 1: under the leadership of Meg Whitman, to acquire Skype for 7 00:00:34,840 --> 00:00:38,839 Speaker 1: the princely sum of around two point six billion dollars. 8 00:00:38,880 --> 00:00:41,920 Speaker 1: The actual amount varies depending upon what source you're looking at. 9 00:00:42,640 --> 00:00:45,000 Speaker 1: I also talked about how eBay never really found a 10 00:00:45,040 --> 00:00:48,680 Speaker 1: way to integrate Skype into its business, at least not 11 00:00:48,760 --> 00:00:51,960 Speaker 1: in a way that really worked, and when leadership of 12 00:00:52,000 --> 00:00:56,240 Speaker 1: eBay changed and John Donaho took over leadership of the company, 13 00:00:57,080 --> 00:00:59,200 Speaker 1: one of his priorities was to find something to do 14 00:00:59,240 --> 00:01:02,400 Speaker 1: with Skype. Now. Initially, the plan was to spin off 15 00:01:02,440 --> 00:01:05,400 Speaker 1: Skype as its own company in an initial public offering, 16 00:01:05,440 --> 00:01:08,960 Speaker 1: but that fell apart when Skype's original architects threatened to 17 00:01:09,000 --> 00:01:13,720 Speaker 1: pull the technology that powered the service if they went 18 00:01:13,760 --> 00:01:18,720 Speaker 1: that route without working with those founders. So instead, eBay 19 00:01:18,760 --> 00:01:21,399 Speaker 1: would actually sell off a majority stake in Skype to 20 00:01:21,480 --> 00:01:25,080 Speaker 1: an investor group silver Lake and the Skype founders would 21 00:01:25,080 --> 00:01:28,399 Speaker 1: also get a share of the ownership of Skype, and 22 00:01:28,400 --> 00:01:30,560 Speaker 1: eBay would hold on to about thirty percent of the 23 00:01:30,600 --> 00:01:33,959 Speaker 1: steak itself. Now, this is what set up all the 24 00:01:33,959 --> 00:01:39,039 Speaker 1: parties were a huge windfall when Microsoft expressed interest in 25 00:01:39,120 --> 00:01:43,759 Speaker 1: acquiring Skype in around twenty ten twenty eleven. And it's 26 00:01:43,800 --> 00:01:47,200 Speaker 1: also why I cannot call the eBay acquisition of Skype 27 00:01:47,240 --> 00:01:49,559 Speaker 1: one of the worst deals of all time, at least 28 00:01:49,560 --> 00:01:51,720 Speaker 1: not I may have done that once upon a time, 29 00:01:52,080 --> 00:01:55,200 Speaker 1: I don't think I can really say that. I think 30 00:01:55,200 --> 00:01:57,880 Speaker 1: it was a bad deal because the companies failed to 31 00:01:57,880 --> 00:02:00,400 Speaker 1: find a way to integrate with one another. They couldn't 32 00:02:00,400 --> 00:02:03,960 Speaker 1: find those synergies that they had been planning on. So 33 00:02:04,440 --> 00:02:08,040 Speaker 1: in that sense, it was a failure. But unlike some 34 00:02:08,120 --> 00:02:10,720 Speaker 1: of the other deals that tend to make a worst 35 00:02:10,840 --> 00:02:14,720 Speaker 1: Deals of all Time list, eBay did not lose a 36 00:02:15,000 --> 00:02:17,760 Speaker 1: ton of money on this if you're looking just at 37 00:02:17,800 --> 00:02:22,280 Speaker 1: the purchase price versus the sell price. In fact, they 38 00:02:22,320 --> 00:02:25,240 Speaker 1: actually made money compared to you know, how much they 39 00:02:25,280 --> 00:02:27,760 Speaker 1: bought versus how much they got when they sold it. 40 00:02:28,960 --> 00:02:31,639 Speaker 1: If you compare that to the time when News Corp. 41 00:02:32,040 --> 00:02:35,840 Speaker 1: Bought MySpace. They bought MySpace for five hundred and eighty 42 00:02:35,960 --> 00:02:39,240 Speaker 1: million dollars and then they later sold it for thirty 43 00:02:39,240 --> 00:02:42,239 Speaker 1: five million dollars. That was a stinker of a deal. 44 00:02:42,280 --> 00:02:45,200 Speaker 1: That was a huge loss. Now, obviously that doesn't actually 45 00:02:45,280 --> 00:02:50,680 Speaker 1: take into account how much money eBay spent while owning 46 00:02:50,919 --> 00:02:54,520 Speaker 1: Skype on the product, like how much money they poured 47 00:02:54,560 --> 00:02:57,040 Speaker 1: into development and that sort of stuff. If you take 48 00:02:57,120 --> 00:03:00,320 Speaker 1: all of those considerations into account, if very well may 49 00:03:00,320 --> 00:03:03,160 Speaker 1: be that ultimately, yes, eBay lost money on the deal, 50 00:03:03,760 --> 00:03:07,000 Speaker 1: but they still sold it for more than they bought it, 51 00:03:07,080 --> 00:03:12,680 Speaker 1: so on the worst deals list, it can't be number one. Anyway. 52 00:03:12,919 --> 00:03:17,120 Speaker 1: Let's set the stage for Microsoft's offer. While eBay and 53 00:03:17,160 --> 00:03:20,840 Speaker 1: Skype did not synergize the way Meg Whitman had hoped, 54 00:03:21,400 --> 00:03:25,480 Speaker 1: it didn't stop Skype from continuing to grow over the years. 55 00:03:25,960 --> 00:03:29,400 Speaker 1: In twenty ten, the service boasted five hundred and sixty 56 00:03:29,520 --> 00:03:34,480 Speaker 1: million registered users collectively. Those users had used Skype for 57 00:03:34,520 --> 00:03:38,880 Speaker 1: more than two hundred and seven billion minutes of voice 58 00:03:39,080 --> 00:03:43,800 Speaker 1: and video chats collectively across the entire history of Skype. Now, 59 00:03:44,520 --> 00:03:48,080 Speaker 1: if you actually convert that into years, that means that 60 00:03:48,560 --> 00:03:51,440 Speaker 1: there were more than three hundred ninety three, eight hundred 61 00:03:51,480 --> 00:03:54,040 Speaker 1: and thirty five years worth of digital chats that had 62 00:03:54,080 --> 00:03:58,040 Speaker 1: gone across Skype over its history. Yaosen no wonder Microsoft 63 00:03:58,080 --> 00:04:01,440 Speaker 1: was interested in it. And interested is putting it lightly, 64 00:04:01,480 --> 00:04:04,960 Speaker 1: because Microsoft was ready to offer the largest deal in 65 00:04:05,000 --> 00:04:08,920 Speaker 1: the company's history at that point. Anyway, it was for 66 00:04:09,080 --> 00:04:16,240 Speaker 1: eight point five six billion dollars in cash, a truly 67 00:04:16,880 --> 00:04:20,000 Speaker 1: princely sum, and this was at a time when other 68 00:04:20,080 --> 00:04:23,799 Speaker 1: parties were similarly starting to express interest in acquiring Skype. 69 00:04:24,440 --> 00:04:28,520 Speaker 1: Rumor had it that both Google and Facebook, which of 70 00:04:28,520 --> 00:04:33,800 Speaker 1: course now is Meta, were interested in potentially either partnering 71 00:04:33,839 --> 00:04:37,680 Speaker 1: with Skype or just outright acquiring it. But Microsoft was 72 00:04:37,720 --> 00:04:42,800 Speaker 1: the party that won the right to acquire Skype. And 73 00:04:42,839 --> 00:04:47,360 Speaker 1: to be clear, Skype was actually making money at this point. 74 00:04:47,400 --> 00:04:50,040 Speaker 1: It had debt as well, but it was making money. 75 00:04:50,720 --> 00:04:53,159 Speaker 1: In two thousand and eight, the division posted revenue of 76 00:04:53,240 --> 00:04:55,479 Speaker 1: more than eight hundred and sixty million dollars, but of 77 00:04:55,480 --> 00:04:59,200 Speaker 1: course revenue is not profit. But the profit was around 78 00:04:59,200 --> 00:05:03,200 Speaker 1: two hundred six sixty million dollars, so they weren't making money, 79 00:05:03,240 --> 00:05:06,560 Speaker 1: which put that into contrast with tons of startups that 80 00:05:06,600 --> 00:05:10,320 Speaker 1: come out of Silicon Valley, where you know, some of 81 00:05:10,360 --> 00:05:13,520 Speaker 1: them just don't even make revenue. But other ones that 82 00:05:13,560 --> 00:05:16,640 Speaker 1: do make revenue, most of them failed to turn a 83 00:05:16,720 --> 00:05:21,480 Speaker 1: profit for years, years and years. There are services that, 84 00:05:21,839 --> 00:05:24,799 Speaker 1: you know, for almost the entire history of the service 85 00:05:25,360 --> 00:05:29,080 Speaker 1: were not profitable. So Skype was kind of a standout 86 00:05:29,080 --> 00:05:32,599 Speaker 1: in the crowd on that regard. A quarter of a 87 00:05:32,680 --> 00:05:36,480 Speaker 1: billion dollars in profit is a mountainous amount of money, 88 00:05:36,520 --> 00:05:38,760 Speaker 1: but it is just a drop in the bucket compared 89 00:05:38,800 --> 00:05:43,560 Speaker 1: to eight point five billion dollars. And like I said, 90 00:05:43,640 --> 00:05:46,839 Speaker 1: Microsoft had never made an acquisition offer as large as 91 00:05:46,960 --> 00:05:50,839 Speaker 1: that before. Now since it has done that, right, Like 92 00:05:50,880 --> 00:05:56,680 Speaker 1: the Activision Blizzard deal which just completed was nearly seventy 93 00:05:56,960 --> 00:06:00,679 Speaker 1: billion dollars, almost ten times as much. So so yeah, 94 00:06:00,920 --> 00:06:04,320 Speaker 1: they have gone bigger since then. An article from Wired 95 00:06:04,320 --> 00:06:07,200 Speaker 1: back in twenty eleven put the deal in the context 96 00:06:07,200 --> 00:06:10,080 Speaker 1: of some other acquisitions Microsoft had made, ones with much 97 00:06:10,240 --> 00:06:14,839 Speaker 1: smaller price tags. But Wired was saying Microsoft had a 98 00:06:14,960 --> 00:06:19,960 Speaker 1: history of purchasing companies but having very little to show 99 00:06:20,000 --> 00:06:23,600 Speaker 1: for those purchases. That you know, there was clearly a 100 00:06:24,240 --> 00:06:28,280 Speaker 1: desire to acquire these these companies, but then kind of 101 00:06:28,480 --> 00:06:32,000 Speaker 1: momentum just died, so that it was sort of a warning, 102 00:06:32,640 --> 00:06:35,000 Speaker 1: and it raised the question what did Microsoft see in 103 00:06:35,080 --> 00:06:38,400 Speaker 1: Skype that would prompt the company to offer what was 104 00:06:38,480 --> 00:06:42,240 Speaker 1: at that point an unprecedented amount of cash. This was 105 00:06:42,279 --> 00:06:45,040 Speaker 1: a cash deal too. This wasn't one of those deals 106 00:06:45,040 --> 00:06:48,160 Speaker 1: where it was you know, trades and stock or whatever. 107 00:06:48,400 --> 00:06:50,480 Speaker 1: It was actually, no, we will pay you eight point 108 00:06:50,520 --> 00:06:54,039 Speaker 1: five billion dollars because Microsoft was flush with cash. Now, 109 00:06:54,080 --> 00:06:59,120 Speaker 1: confusing the matter was that Microsoft already had some products that, 110 00:06:59,200 --> 00:07:03,919 Speaker 1: at least in part art were overlaps or in competition 111 00:07:04,360 --> 00:07:09,240 Speaker 1: with Skype. Windows Live Messaging, for example, offered live chat, 112 00:07:09,240 --> 00:07:14,760 Speaker 1: including video chat, as well as text messaging. So you 113 00:07:14,840 --> 00:07:17,040 Speaker 1: might say, well, why would you want Skype? You already 114 00:07:17,040 --> 00:07:20,400 Speaker 1: have a tool that does kind of what Skype is doing. 115 00:07:20,920 --> 00:07:24,120 Speaker 1: It also had a bunch of corporate products that did 116 00:07:24,120 --> 00:07:28,120 Speaker 1: something similar for big companies. Right, a lot of Microsoft's 117 00:07:28,160 --> 00:07:34,280 Speaker 1: businesses were focused on enterprise clients, not individual customers. But 118 00:07:34,920 --> 00:07:39,560 Speaker 1: how can we get a customer like an entire company 119 00:07:40,160 --> 00:07:42,560 Speaker 1: to buy into our systems because that's where the big, 120 00:07:42,600 --> 00:07:46,600 Speaker 1: big money is. And in fact, Microsoft's owned and operated 121 00:07:46,640 --> 00:07:51,040 Speaker 1: products already boasted more users and more simultaneous connections than Skype. 122 00:07:51,600 --> 00:07:55,200 Speaker 1: In some cases, you see a company acquire another one. 123 00:07:55,560 --> 00:08:00,040 Speaker 1: Not because they want access to that company's technology, so 124 00:08:00,120 --> 00:08:02,800 Speaker 1: they want access to that company's user base. Right. That 125 00:08:02,920 --> 00:08:05,160 Speaker 1: was one of the arguments that was made when Facebook 126 00:08:05,280 --> 00:08:09,960 Speaker 1: acquired WhatsApp was that Facebook was more interested in getting 127 00:08:10,240 --> 00:08:14,920 Speaker 1: access to WhatsApp's users than WhatsApp itself. I don't think 128 00:08:14,960 --> 00:08:17,120 Speaker 1: that was fully true. I think it was like an 129 00:08:17,200 --> 00:08:20,400 Speaker 1: equal opportunity thing, like, yes, I want the users and 130 00:08:20,440 --> 00:08:24,800 Speaker 1: I want the technology. Now. Skype did have one thing 131 00:08:24,840 --> 00:08:28,560 Speaker 1: that Microsoft's products did not have. It had interoperability with 132 00:08:28,680 --> 00:08:32,960 Speaker 1: landline and cellular telephone services. Right. That was a paid 133 00:08:33,040 --> 00:08:36,120 Speaker 1: for option in Skype, in that you could use Skype 134 00:08:36,120 --> 00:08:41,440 Speaker 1: to make a computer to telephone phone call. Perhaps more importantly, 135 00:08:41,840 --> 00:08:46,640 Speaker 1: folks had to pay to use that specific service, and 136 00:08:47,040 --> 00:08:50,600 Speaker 1: around eight million of Skype's registered users were doing that 137 00:08:50,760 --> 00:08:53,560 Speaker 1: on the rag And that was something that Microsoft did 138 00:08:53,559 --> 00:08:56,440 Speaker 1: not have access to. And Microsoft was kind of struggling 139 00:08:56,520 --> 00:08:59,880 Speaker 1: in the communications space. It had been pushing variations of 140 00:09:00,160 --> 00:09:04,000 Speaker 1: Windows for mobile phones for years, but the rise of 141 00:09:04,000 --> 00:09:08,200 Speaker 1: the iPhone and Android platforms kept the Windows mobile platform 142 00:09:08,360 --> 00:09:11,600 Speaker 1: at a distant third not always at third place, either, 143 00:09:11,640 --> 00:09:14,080 Speaker 1: Sometimes there were other operating systems that took third place. 144 00:09:14,559 --> 00:09:18,600 Speaker 1: In fact, let's explore for a few minutes Microsoft's history 145 00:09:18,840 --> 00:09:22,840 Speaker 1: with mobile communications devices, because I think that's an important 146 00:09:22,880 --> 00:09:25,080 Speaker 1: piece to consider. I think it was one of the 147 00:09:25,120 --> 00:09:29,040 Speaker 1: motivating factors that led Microsoft to acquire Skype in the 148 00:09:29,040 --> 00:09:32,280 Speaker 1: first place. So Microsoft had been trying to establish a 149 00:09:32,320 --> 00:09:35,240 Speaker 1: strong presence in the space at least since the early 150 00:09:35,240 --> 00:09:39,880 Speaker 1: two thousands, with Pocket PC and Windows Mobile operating systems. Now, 151 00:09:39,920 --> 00:09:43,040 Speaker 1: you could argue that the history goes back even further 152 00:09:43,440 --> 00:09:46,280 Speaker 1: into the mid nineteen nineties with the introduction of Windows 153 00:09:46,440 --> 00:09:51,040 Speaker 1: CE in ninety six. Windows CE was intended for handheld PCs, 154 00:09:51,480 --> 00:09:54,719 Speaker 1: so think of things like, you know, very mobile computers, 155 00:09:54,800 --> 00:09:58,800 Speaker 1: almost like tablet style computer systems. Now, before the era 156 00:09:58,880 --> 00:10:02,640 Speaker 1: of the smartphone, there was the personal Digital assistant or PDA, 157 00:10:02,800 --> 00:10:04,680 Speaker 1: and you can kind of think of a PDA as 158 00:10:04,720 --> 00:10:08,520 Speaker 1: a smartphone without the phone part. The term was really 159 00:10:08,600 --> 00:10:11,840 Speaker 1: established with the introduction of the Apple Newton, although the 160 00:10:11,880 --> 00:10:14,559 Speaker 1: Newton itself wasn't the first device that fit the definition, 161 00:10:14,600 --> 00:10:18,600 Speaker 1: but it was the device that introduced the term. And 162 00:10:18,679 --> 00:10:22,040 Speaker 1: there was a rush to become the company to define 163 00:10:22,840 --> 00:10:26,440 Speaker 1: mobile computing, and Microsoft was very much interested in being 164 00:10:26,520 --> 00:10:30,880 Speaker 1: in that race. So Microsoft had a long history of 165 00:10:30,920 --> 00:10:34,800 Speaker 1: catering to enterprises, as I mentioned, you know, to go 166 00:10:35,120 --> 00:10:39,520 Speaker 1: and try and build products specifically for business and business leaders, 167 00:10:40,360 --> 00:10:44,240 Speaker 1: and a lot of their business came from licensing or 168 00:10:44,320 --> 00:10:47,280 Speaker 1: selling Microsoft products to these companies. So it made sense 169 00:10:47,320 --> 00:10:50,559 Speaker 1: to develop a mobile operating system that could be compatible 170 00:10:50,600 --> 00:10:54,839 Speaker 1: with the various software packages Microsoft published, right to build 171 00:10:54,880 --> 00:10:57,560 Speaker 1: an operating system that could run at least some version 172 00:10:58,160 --> 00:11:03,240 Speaker 1: of things like Outlook or a window, you know, Microsoft 173 00:11:03,280 --> 00:11:08,880 Speaker 1: Office products, and Microsoft's mobile operating system would also work 174 00:11:08,880 --> 00:11:11,400 Speaker 1: on smartphones, though at this point we're still in the 175 00:11:11,400 --> 00:11:15,400 Speaker 1: era of smartphones being the domain of fancy business people, right, 176 00:11:15,520 --> 00:11:19,440 Speaker 1: you wouldn't get consumer smartphones, at least not truly widely 177 00:11:19,480 --> 00:11:24,760 Speaker 1: adopted consumer smartphones until two thousand and seven. And Microsoft 178 00:11:24,760 --> 00:11:27,360 Speaker 1: also was not in the business of making the hardware, 179 00:11:27,800 --> 00:11:29,880 Speaker 1: so they were just focusing on the software that would 180 00:11:29,960 --> 00:11:32,120 Speaker 1: run on top of the devices. So then when we 181 00:11:32,200 --> 00:11:34,560 Speaker 1: do get to two thousand and seven, when Apple rolled 182 00:11:34,559 --> 00:11:37,840 Speaker 1: out its own smartphone, which was a really sexy device 183 00:11:37,880 --> 00:11:41,240 Speaker 1: that could serve as a computer and a communications device 184 00:11:41,320 --> 00:11:46,080 Speaker 1: and a digital media player and more, Apple made a 185 00:11:46,280 --> 00:11:50,600 Speaker 1: power move and something Microsoft was not ready to meet. Like, 186 00:11:50,679 --> 00:11:53,080 Speaker 1: they did not have an answer for the iPhone when 187 00:11:53,080 --> 00:11:56,120 Speaker 1: the iPhone came out in two thousand and seven. Then 188 00:11:56,880 --> 00:12:01,960 Speaker 1: Google released Android a short time later, and another competing 189 00:12:02,000 --> 00:12:04,960 Speaker 1: mobile operating system was there on the market, and unlike Apple, 190 00:12:05,040 --> 00:12:09,040 Speaker 1: Google partnered with handset manufacturers to put the Android operating 191 00:12:09,040 --> 00:12:13,439 Speaker 1: system on devices. Now Apple was doing everything itself, Google 192 00:12:13,520 --> 00:12:17,160 Speaker 1: was working with partners, which was more like Microsoft. Right. 193 00:12:17,240 --> 00:12:19,480 Speaker 1: Microsoft was doing the same sort of thing with their 194 00:12:19,520 --> 00:12:22,960 Speaker 1: own mobile operating system. But the important thing is the 195 00:12:23,000 --> 00:12:27,240 Speaker 1: era of the consumer smartphone was upon us, and the 196 00:12:27,360 --> 00:12:31,199 Speaker 1: utilitarian smartphones that were meant just for business leaders now 197 00:12:31,360 --> 00:12:36,400 Speaker 1: were taking second place to these sleek and sexy touch 198 00:12:36,600 --> 00:12:41,360 Speaker 1: screen interface smartphones that were meant for consumers. In two 199 00:12:41,400 --> 00:12:45,959 Speaker 1: thousand and seven, Microsoft introduced Windows Mobile six. While there 200 00:12:46,080 --> 00:12:48,720 Speaker 1: was a version of Windows Mobile six that would work 201 00:12:48,760 --> 00:12:53,680 Speaker 1: with touch screens, that version was called the Professional version 202 00:12:53,800 --> 00:12:57,360 Speaker 1: of Windows Mobile six, so that kind of indicated that 203 00:12:57,800 --> 00:13:00,920 Speaker 1: Microsoft was still looking at smartphones as kind of an 204 00:13:00,960 --> 00:13:05,719 Speaker 1: elite business device, not something for the general consumer. They 205 00:13:05,800 --> 00:13:10,400 Speaker 1: also offered classic and standard versions of the operating system, 206 00:13:11,679 --> 00:13:14,040 Speaker 1: so these were versions of the operating system that were 207 00:13:14,040 --> 00:13:17,080 Speaker 1: meant for other devices, such as smartphones that did not 208 00:13:17,200 --> 00:13:20,400 Speaker 1: have a touchscreen but had like physical keyboards and stuff 209 00:13:21,040 --> 00:13:23,920 Speaker 1: and even PDAs. Now, it wasn't until two thousand and 210 00:13:23,960 --> 00:13:27,040 Speaker 1: nine that Microsoft had a quote unquote finger friendly version 211 00:13:27,679 --> 00:13:30,760 Speaker 1: of its operating system, and by then the iPhone and 212 00:13:30,760 --> 00:13:33,559 Speaker 1: Android phones had been evolving for a couple of years 213 00:13:33,600 --> 00:13:36,720 Speaker 1: and had really established a firm presence in the market. 214 00:13:37,200 --> 00:13:39,360 Speaker 1: In twenty ten, Microsoft would change the name of its 215 00:13:39,360 --> 00:13:42,480 Speaker 1: mobile operating system, so instead of being called Windows Mobile, 216 00:13:43,120 --> 00:13:48,320 Speaker 1: it became Windows Phone, and it changed dramatically like Microsoft 217 00:13:48,360 --> 00:13:53,200 Speaker 1: was finally really ready to meet Android and iOS, and 218 00:13:53,280 --> 00:13:59,040 Speaker 1: the user interface for Windows Phone was obviously meant to 219 00:13:59,280 --> 00:14:04,319 Speaker 1: compete direct directly with Android and iOS devices. The company 220 00:14:04,360 --> 00:14:07,600 Speaker 1: was already well behind Google and Apple and the consumer market. However, 221 00:14:07,920 --> 00:14:10,280 Speaker 1: and this brings us up to the time of Microsoft's 222 00:14:10,280 --> 00:14:15,640 Speaker 1: decision to acquire Skype. We will continue our story, but 223 00:14:15,760 --> 00:14:23,800 Speaker 1: first let's take a quick break to thank our sponsors. 224 00:14:27,960 --> 00:14:32,800 Speaker 1: We're back. So perhaps Microsoft was viewing Skype as the 225 00:14:32,960 --> 00:14:37,320 Speaker 1: killer app that would propel Windows Phone into the spotlight. 226 00:14:37,520 --> 00:14:39,880 Speaker 1: That might have at least been part of their decision 227 00:14:40,000 --> 00:14:44,120 Speaker 1: to go after Skype. Maybe the plan was to leverage 228 00:14:44,120 --> 00:14:48,600 Speaker 1: Skype and make Skype the primary method of connecting with 229 00:14:48,760 --> 00:14:53,120 Speaker 1: other you know, other people instead of using traditional cellular service, 230 00:14:53,160 --> 00:14:56,400 Speaker 1: you would use Skype to connect to everybody. Now, if 231 00:14:56,400 --> 00:15:00,200 Speaker 1: that had been the plan, conventional wisdom said that Microsoft 232 00:15:00,240 --> 00:15:03,720 Speaker 1: embracing Skype would likely tick off the various carriers in 233 00:15:03,760 --> 00:15:07,360 Speaker 1: the phone space. That would be a huge issue now. 234 00:15:07,440 --> 00:15:11,320 Speaker 1: At the time when smartphones were coming out, there were 235 00:15:11,320 --> 00:15:15,200 Speaker 1: these big deals with carriers, sometimes meaning that a phone 236 00:15:15,280 --> 00:15:19,400 Speaker 1: might be exclusive to a specific carrier, at least in 237 00:15:19,400 --> 00:15:22,800 Speaker 1: the United States. So like when the iPhone first came out, 238 00:15:22,920 --> 00:15:25,760 Speaker 1: it was exclusive to AT and T users. If you 239 00:15:25,800 --> 00:15:28,400 Speaker 1: were on any other carrier, you could not have an 240 00:15:28,440 --> 00:15:32,760 Speaker 1: iPhone because it wouldn't work on that carrier's service. You 241 00:15:32,880 --> 00:15:36,880 Speaker 1: had to be an AT and T customer. And part 242 00:15:36,920 --> 00:15:41,080 Speaker 1: of those deals meant that the carriers would offer big 243 00:15:41,120 --> 00:15:44,840 Speaker 1: discounts on the smartphones in order to get you hooked 244 00:15:44,920 --> 00:15:48,440 Speaker 1: into the carrier's service. It's like the whole idea of like, 245 00:15:48,480 --> 00:15:50,720 Speaker 1: this is the lure, and once you've taken the lure, 246 00:15:50,800 --> 00:15:53,520 Speaker 1: you're caught, and now you're you're hers for as long 247 00:15:53,560 --> 00:15:57,440 Speaker 1: as we want you. And it meant that the initial 248 00:15:57,560 --> 00:16:00,760 Speaker 1: cost of these phones was much much much lower than 249 00:16:00,840 --> 00:16:04,760 Speaker 1: you would find today because those kind of agreements are 250 00:16:04,840 --> 00:16:07,520 Speaker 1: much more rare today. If you were to go and 251 00:16:07,520 --> 00:16:10,920 Speaker 1: buy a phone, in a lot of cases, you'd just 252 00:16:10,960 --> 00:16:13,840 Speaker 1: be paying full price to get the phone and then 253 00:16:13,920 --> 00:16:18,080 Speaker 1: add it to whatever service you already have. But at 254 00:16:18,120 --> 00:16:20,320 Speaker 1: this point that's not how things were going, and the 255 00:16:20,400 --> 00:16:25,400 Speaker 1: fear was that if Microsoft chose Skype as the central 256 00:16:25,960 --> 00:16:31,200 Speaker 1: way of communicating through this phone, it would alienate all 257 00:16:31,200 --> 00:16:33,040 Speaker 1: the carriers and there'd be no way to form that 258 00:16:33,160 --> 00:16:36,360 Speaker 1: kind of relationship and people would have to pay full 259 00:16:36,400 --> 00:16:39,480 Speaker 1: price to get a Windows phone, which seems like a 260 00:16:39,520 --> 00:16:43,520 Speaker 1: barrier to entry now. Before the acquisition deal could even 261 00:16:43,560 --> 00:16:47,280 Speaker 1: go through, there were a couple of instances where a 262 00:16:47,320 --> 00:16:50,240 Speaker 1: bug in Skype software caused a significant crash in the 263 00:16:50,280 --> 00:16:55,200 Speaker 1: service for millions of users. Not service wide, but enough 264 00:16:55,280 --> 00:16:58,200 Speaker 1: users for it to be a problem. Fortunately, a patched 265 00:16:58,240 --> 00:17:02,440 Speaker 1: client and Skype's own instructions or workarounds would limit the problem, 266 00:17:02,640 --> 00:17:04,920 Speaker 1: but it did demonstrate that there were some issues here, 267 00:17:05,720 --> 00:17:08,639 Speaker 1: and it prompted Skype to make a change to its 268 00:17:08,720 --> 00:17:12,000 Speaker 1: back end infrastructure that would continue over the course of 269 00:17:12,040 --> 00:17:17,080 Speaker 1: the following years. So way back when Skype was first introduced, 270 00:17:17,760 --> 00:17:21,280 Speaker 1: it was built purely upon peer to peer networks, and 271 00:17:21,320 --> 00:17:24,040 Speaker 1: in a peer to peer network every computer is equal 272 00:17:24,080 --> 00:17:28,000 Speaker 1: to every other computer on the system. But by this 273 00:17:28,320 --> 00:17:32,720 Speaker 1: point Skype had designated some of its own servers, servers 274 00:17:32,720 --> 00:17:38,000 Speaker 1: that Skype itself owned, as supernodes. These devices would feature 275 00:17:38,040 --> 00:17:41,480 Speaker 1: open connectivity and would remain online pretty much all the time. 276 00:17:41,560 --> 00:17:43,520 Speaker 1: This was meant to be kind of like the backbone 277 00:17:44,080 --> 00:17:47,159 Speaker 1: of Skype service that while other computers might go up 278 00:17:47,200 --> 00:17:51,879 Speaker 1: and down, these would be dependable and they would provide 279 00:17:51,880 --> 00:17:56,680 Speaker 1: additional stability to the overall network. But it would mean 280 00:17:56,680 --> 00:17:59,680 Speaker 1: that you're kind of moving away from this more democratic 281 00:17:59,720 --> 00:18:02,960 Speaker 1: peer to peer approach, and you could say things got 282 00:18:02,960 --> 00:18:06,640 Speaker 1: a little or Wellian, not nineteen eighty four, but more 283 00:18:06,720 --> 00:18:09,480 Speaker 1: like animal farm, where you have a peer to peer 284 00:18:09,480 --> 00:18:13,120 Speaker 1: network in which all computers are equal, but some computers 285 00:18:13,160 --> 00:18:16,880 Speaker 1: are more equal than others. That's probably being a bit 286 00:18:16,920 --> 00:18:20,879 Speaker 1: too unfair, because the move was becoming necessary. The way 287 00:18:20,960 --> 00:18:25,640 Speaker 1: we were using computers was changing. Before the smartphone era, 288 00:18:26,040 --> 00:18:28,919 Speaker 1: we were depending on desktops and laptop computers to access 289 00:18:28,960 --> 00:18:31,760 Speaker 1: the Internet, and a lot of times we would just 290 00:18:31,920 --> 00:18:36,000 Speaker 1: keep those devices running even if we weren't actively using them. 291 00:18:36,400 --> 00:18:39,760 Speaker 1: These were the computers that, when connected to a peer 292 00:18:39,800 --> 00:18:42,480 Speaker 1: to peer network, would continue to share their resources with 293 00:18:42,520 --> 00:18:46,680 Speaker 1: the overall system. It's what made peer to peer networks work. 294 00:18:47,560 --> 00:18:51,760 Speaker 1: But with the proliferation of smartphones, more of our computer 295 00:18:51,840 --> 00:18:55,520 Speaker 1: activity began to shift to mobile devices. We started to 296 00:18:55,640 --> 00:19:00,320 Speaker 1: use desktops and laptops less frequently, and we weren't always 297 00:19:00,400 --> 00:19:05,760 Speaker 1: keeping them online, and that meant that the peer to 298 00:19:05,760 --> 00:19:09,680 Speaker 1: peer network saw a decline in active nodes across the system. 299 00:19:09,960 --> 00:19:13,560 Speaker 1: So if Skype had remained strictly a peer to peer service, 300 00:19:14,160 --> 00:19:18,480 Speaker 1: the actual performance of Skype would have steadily declined because 301 00:19:18,520 --> 00:19:21,480 Speaker 1: fewer computers remained active in the network. There would be 302 00:19:21,560 --> 00:19:25,440 Speaker 1: fewer resources for Skype to use, and the service would 303 00:19:25,480 --> 00:19:29,800 Speaker 1: go downhill. So you could argue that this was absolutely 304 00:19:30,000 --> 00:19:33,960 Speaker 1: a necessary move for Skype in order for the service 305 00:19:34,000 --> 00:19:37,120 Speaker 1: to continue to work. Now, this didn't actually slow down 306 00:19:37,200 --> 00:19:39,679 Speaker 1: Microsoft's deal. They made the eight and a half billion 307 00:19:39,720 --> 00:19:43,520 Speaker 1: dollar offer. The collection of Skype stakeholders agreed to that, 308 00:19:44,240 --> 00:19:46,760 Speaker 1: and that actually would mean that eBay would get another 309 00:19:46,840 --> 00:19:50,320 Speaker 1: one point four billion because of its stake in Skype, 310 00:19:50,800 --> 00:19:53,960 Speaker 1: and by my reckoning, that ultimately means eBay sold Skype 311 00:19:53,960 --> 00:19:56,680 Speaker 1: for somewhere in the neighborhood of seven hundred million dollars 312 00:19:56,760 --> 00:20:01,199 Speaker 1: more than what it paid for it, so again, not 313 00:20:01,320 --> 00:20:04,960 Speaker 1: exactly the worst deal in tech history. Though also again 314 00:20:05,200 --> 00:20:08,720 Speaker 1: I'm not factoring in how much money eBay poured into 315 00:20:08,720 --> 00:20:12,119 Speaker 1: Skype while it owned it, so it's not an apples 316 00:20:12,119 --> 00:20:15,800 Speaker 1: to apples thing. But anyway, in this era, Steve Balmer 317 00:20:16,160 --> 00:20:18,199 Speaker 1: was in charge of Microsoft. Now, if you do not 318 00:20:18,359 --> 00:20:21,399 Speaker 1: know who Steve Balmer is, there's no shade on that. 319 00:20:22,720 --> 00:20:24,840 Speaker 1: But boy, how do you need to go to YouTube 320 00:20:25,359 --> 00:20:29,520 Speaker 1: and search Microsoft Steve Balmer and look for the greatest 321 00:20:29,560 --> 00:20:33,720 Speaker 1: hits of that man's performances on various stages at different conferences, 322 00:20:34,320 --> 00:20:41,320 Speaker 1: because the word intense doesn't begin to capture that guy. Anyway, 323 00:20:42,320 --> 00:20:46,520 Speaker 1: Bamber planned to integrate Skype into lots of Microsoft products. 324 00:20:46,560 --> 00:20:49,280 Speaker 1: Just like when Meg Whitman was in charge of eBay, 325 00:20:49,440 --> 00:20:53,720 Speaker 1: she had intended to get Skype integrated deeply into eBay's 326 00:20:53,800 --> 00:20:57,440 Speaker 1: products and services. Balmer planned to do the same thing 327 00:20:57,760 --> 00:21:00,440 Speaker 1: over at Microsoft. So the plan was to to great 328 00:21:00,440 --> 00:21:05,160 Speaker 1: Skype with things like the Xbox game console, with products 329 00:21:05,160 --> 00:21:12,639 Speaker 1: like Outlook mail, and potentially with Microsoft's Windows for Phones platform. 330 00:21:12,760 --> 00:21:16,359 Speaker 1: Most of that would not pan out, and some critics 331 00:21:16,400 --> 00:21:19,040 Speaker 1: would end up saying that this was classic Steve Balmer, 332 00:21:19,160 --> 00:21:22,639 Speaker 1: that he was guilty of buying assets and then not 333 00:21:22,880 --> 00:21:26,960 Speaker 1: really knowing how to leverage them, like how to integrate 334 00:21:27,000 --> 00:21:29,280 Speaker 1: them or how to otherwise use them in a meaningful way. 335 00:21:29,960 --> 00:21:33,040 Speaker 1: Microsoft did continue the trend of porting more of Skype's 336 00:21:33,040 --> 00:21:37,760 Speaker 1: back end operations onto Microsoft's owned and operated supernotes, So 337 00:21:38,480 --> 00:21:43,400 Speaker 1: this was again kind of changing the nature of how 338 00:21:43,520 --> 00:21:47,200 Speaker 1: Skype worked, like removing that whole peer to peer aspect. 339 00:21:47,720 --> 00:21:49,919 Speaker 1: It was a very slow transition, however, this was not 340 00:21:50,040 --> 00:21:52,479 Speaker 1: something that was like one day they flipped a switch 341 00:21:52,840 --> 00:21:55,000 Speaker 1: and everything went from peer to peer to kind of 342 00:21:55,080 --> 00:21:59,040 Speaker 1: a cloud based system. It would actually take several years 343 00:21:59,080 --> 00:22:02,760 Speaker 1: to complete, but it did mean that Skype would change 344 00:22:02,760 --> 00:22:07,200 Speaker 1: from peer to peer to cloud based ultimately. Now, one 345 00:22:07,320 --> 00:22:10,200 Speaker 1: semi scandal that kind of broke out around this time 346 00:22:10,840 --> 00:22:13,760 Speaker 1: was that Microsoft was potentially making this change in order 347 00:22:13,800 --> 00:22:17,679 Speaker 1: to garner approval from US authorities. So you got to remember, 348 00:22:18,440 --> 00:22:20,679 Speaker 1: this is around the time that there were all these 349 00:22:20,720 --> 00:22:26,920 Speaker 1: whistleblowers coming forward showing that various authorities, primarily the NSA, 350 00:22:27,720 --> 00:22:32,800 Speaker 1: were using technologies to tap into different communications channels throughout 351 00:22:32,840 --> 00:22:36,919 Speaker 1: the United States and were actively spying on US citizens. 352 00:22:37,600 --> 00:22:40,400 Speaker 1: And this is a huge, huge story and it involved 353 00:22:41,480 --> 00:22:45,879 Speaker 1: dozens of companies in the telecommunications and information services spaces. 354 00:22:46,760 --> 00:22:51,240 Speaker 1: So the fringe theory was that Microsoft wanted to migrate 355 00:22:51,280 --> 00:22:55,800 Speaker 1: away from peer to peer networks because those systems would 356 00:22:55,800 --> 00:22:59,840 Speaker 1: make it impossible for folks to trace phone calls or 357 00:22:59,840 --> 00:23:03,840 Speaker 1: to intercept calls, and that Microsoft was instead moving to 358 00:23:04,320 --> 00:23:08,000 Speaker 1: their own cloud based system because then they could comply 359 00:23:08,160 --> 00:23:10,800 Speaker 1: with law enforcement if there were in order to share 360 00:23:10,840 --> 00:23:13,800 Speaker 1: information about users. Now, the truth of the matter is 361 00:23:14,520 --> 00:23:17,959 Speaker 1: Skype was never immune to tracking, at least not on 362 00:23:18,000 --> 00:23:22,479 Speaker 1: a technical level, like it was possible. That doesn't mean 363 00:23:22,520 --> 00:23:26,440 Speaker 1: it happened, but it was technically possible. So the move 364 00:23:26,520 --> 00:23:30,479 Speaker 1: toward a more cloud based infrastructure didn't mean that it 365 00:23:30,520 --> 00:23:32,840 Speaker 1: was suddenly more susceptible to that. It was just a 366 00:23:32,840 --> 00:23:36,200 Speaker 1: different approach. It also was a move that happened before 367 00:23:36,240 --> 00:23:39,199 Speaker 1: Microsoft had even acquired Skype, right, because when Skype was 368 00:23:39,280 --> 00:23:43,240 Speaker 1: still with the investor Group, they were already transitioning toward 369 00:23:43,359 --> 00:23:47,199 Speaker 1: a semi cloud based kind of infrastructure. So it's not 370 00:23:47,280 --> 00:23:51,120 Speaker 1: like Microsoft made that decision. They just continued that decision. 371 00:23:51,760 --> 00:23:55,439 Speaker 1: But folks love a good conspiracy theory, and trust me, 372 00:23:56,040 --> 00:23:59,879 Speaker 1: I'm not like a flag waiver for Microsoft, but I 373 00:24:00,080 --> 00:24:01,879 Speaker 1: don't want to throw the company under the bus for 374 00:24:01,960 --> 00:24:05,520 Speaker 1: something that it really didn't do. The transition to cloud, 375 00:24:06,280 --> 00:24:08,439 Speaker 1: like I said, took years, It kind of wrapped up 376 00:24:08,480 --> 00:24:12,080 Speaker 1: around twenty sixteen. The change actually meant that Skype users 377 00:24:12,119 --> 00:24:14,399 Speaker 1: had to update the client that they were using to 378 00:24:14,440 --> 00:24:18,160 Speaker 1: access the service because the peer to peer based Skype 379 00:24:18,160 --> 00:24:21,640 Speaker 1: clients would not work with the new cloud based infrastructure. 380 00:24:21,680 --> 00:24:25,159 Speaker 1: So Microsoft rolled out some new clients for folks to 381 00:24:25,280 --> 00:24:29,320 Speaker 1: download and use so they could continue to utilize the 382 00:24:29,359 --> 00:24:34,920 Speaker 1: Skype service. Under Microsoft's ownership, Skype did get more complicated, 383 00:24:35,600 --> 00:24:40,480 Speaker 1: and a lot of analysts, at least in hindsight, say 384 00:24:41,119 --> 00:24:45,560 Speaker 1: that Skype was bloated with features that did not really 385 00:24:45,640 --> 00:24:49,399 Speaker 1: contribute to the prime purpose for Skype. We see this 386 00:24:49,480 --> 00:24:52,040 Speaker 1: a lot with different products, especially products that have a 387 00:24:52,160 --> 00:24:56,840 Speaker 1: very long lifespan, where over the course of a product's 388 00:24:56,880 --> 00:25:00,359 Speaker 1: life cycle, the developers will start to add in that 389 00:25:00,400 --> 00:25:02,600 Speaker 1: don't really make a whole lot of sense. And part 390 00:25:02,640 --> 00:25:04,400 Speaker 1: of it is just because you might reach a level 391 00:25:04,400 --> 00:25:07,960 Speaker 1: of maturity with an app or service where there's not 392 00:25:08,280 --> 00:25:12,840 Speaker 1: really any further you can go with like the primary functions, 393 00:25:12,960 --> 00:25:15,800 Speaker 1: like a word processor, you can always improve it, but 394 00:25:15,960 --> 00:25:19,879 Speaker 1: tends to be very incremental improvement, Right, So, how do 395 00:25:20,000 --> 00:25:24,840 Speaker 1: you create a product that's different enough from the predecessor 396 00:25:24,880 --> 00:25:27,040 Speaker 1: to convince people to buy it? You know, how do 397 00:25:27,080 --> 00:25:29,040 Speaker 1: you get people to come out and buy a new 398 00:25:29,080 --> 00:25:32,639 Speaker 1: word processing program if they already have one. Well, you've 399 00:25:32,640 --> 00:25:35,879 Speaker 1: got to add in some features, and often that can 400 00:25:35,960 --> 00:25:40,600 Speaker 1: mean that features that don't actually really incorporate into the 401 00:25:40,640 --> 00:25:44,119 Speaker 1: main purpose of the software get thrown in there, and 402 00:25:44,119 --> 00:25:46,600 Speaker 1: that could just make things more messy. It could mean 403 00:25:46,600 --> 00:25:48,959 Speaker 1: that your performance will take a hit as well, and 404 00:25:49,080 --> 00:25:51,400 Speaker 1: that apparently happened with Skype. At this point. I wasn't 405 00:25:51,400 --> 00:25:54,520 Speaker 1: even using Skype, so it's hard for me to say 406 00:25:54,560 --> 00:25:57,280 Speaker 1: from a personal level, but from what I've read, Skype 407 00:25:57,280 --> 00:25:59,240 Speaker 1: performance was taking a hit, and it was getting so 408 00:25:59,359 --> 00:26:02,640 Speaker 1: feature heavy. You know, the audio quality, the video quality 409 00:26:03,080 --> 00:26:08,320 Speaker 1: weren't really measuring up toward to what competitors were able 410 00:26:08,320 --> 00:26:11,520 Speaker 1: to offer. So the one thing that Skype was really 411 00:26:11,560 --> 00:26:14,919 Speaker 1: important for, which was for voice and video calls, it 412 00:26:15,040 --> 00:26:18,040 Speaker 1: wasn't doing as well as competitors. I Meanwhile, you had 413 00:26:18,080 --> 00:26:22,439 Speaker 1: all these other superfluous features being thrown in there, and 414 00:26:22,480 --> 00:26:27,800 Speaker 1: there were still concerns about privacy and security with Skype. 415 00:26:28,040 --> 00:26:32,600 Speaker 1: Part of the issue was that Skype's operations were proprietary. 416 00:26:33,000 --> 00:26:36,680 Speaker 1: You know, they were under wraps. Microsoft was not talking 417 00:26:36,720 --> 00:26:40,119 Speaker 1: too much about what actually was going on under the 418 00:26:40,160 --> 00:26:46,000 Speaker 1: hood with Skype, and that included what part did encryption 419 00:26:46,160 --> 00:26:50,520 Speaker 1: play in Skype communications? Was it fully encrypted? But you 420 00:26:50,640 --> 00:26:55,600 Speaker 1: had other communications services that boasted end to end encryption, 421 00:26:55,840 --> 00:27:00,000 Speaker 1: meaning that if someone were to intercept communications between point 422 00:27:00,440 --> 00:27:03,800 Speaker 1: point B, they probably wouldn't be able to tell what 423 00:27:04,000 --> 00:27:07,600 Speaker 1: was being said because the encryption would prevent them from 424 00:27:07,600 --> 00:27:13,080 Speaker 1: doing so. But Microsoft wasn't even saying to what extent, 425 00:27:13,119 --> 00:27:18,800 Speaker 1: if any, did encryption play with Skype Communications. And you 426 00:27:20,040 --> 00:27:23,399 Speaker 1: then had the opportunity for competing services to kind of 427 00:27:23,880 --> 00:27:27,760 Speaker 1: step and serve a community that was perhaps a bit 428 00:27:27,800 --> 00:27:32,720 Speaker 1: more concerned about privacy and security. WhatsApp is a great 429 00:27:32,760 --> 00:27:36,760 Speaker 1: example of that. So WhatsApp was proving to be a 430 00:27:37,000 --> 00:27:42,000 Speaker 1: massive competitor to Skype, and it's funny because it didn't 431 00:27:42,040 --> 00:27:47,440 Speaker 1: have the video and audio capabilities of Skype. Facebook actually 432 00:27:47,440 --> 00:27:52,480 Speaker 1: purchased WhatsApp in twenty fourteen for the princely sum of 433 00:27:52,520 --> 00:27:58,320 Speaker 1: around nineteen billion dollars. Again, the estimations of how much 434 00:27:58,600 --> 00:28:02,720 Speaker 1: this deal went for it they changed from source to source, 435 00:28:03,040 --> 00:28:05,679 Speaker 1: so somewhere in the neighborhood of nineteen billion dollars. Some 436 00:28:05,720 --> 00:28:08,200 Speaker 1: of it have it actually significantly more than that when 437 00:28:08,200 --> 00:28:11,720 Speaker 1: you add in all the different considerations, but let's just 438 00:28:11,760 --> 00:28:15,000 Speaker 1: say it was a boatload of money, and even more 439 00:28:15,040 --> 00:28:18,440 Speaker 1: money than what Microsoft paid for Skype right while by 440 00:28:18,440 --> 00:28:22,840 Speaker 1: the following year, by twenty fifteen, wsapp was cited as 441 00:28:22,840 --> 00:28:27,919 Speaker 1: the world's most popular messaging application. And while WhatsApp was 442 00:28:27,960 --> 00:28:31,240 Speaker 1: only text based, it did allow users to send messages 443 00:28:31,280 --> 00:28:34,720 Speaker 1: to anyone all over the world without having to deal 444 00:28:34,760 --> 00:28:38,080 Speaker 1: with text messaging fees or international fees, so it was 445 00:28:38,120 --> 00:28:42,120 Speaker 1: a very affordable way to have communications. It wasn't even 446 00:28:42,160 --> 00:28:47,520 Speaker 1: ads supported. The acquisition gave an enormous boost to Facebook's 447 00:28:47,560 --> 00:28:50,760 Speaker 1: daily active user numbers, and you know those were spread 448 00:28:50,800 --> 00:28:55,440 Speaker 1: out across all the Facebook platforms, which included Facebook itself, Wasapp, 449 00:28:55,560 --> 00:28:59,440 Speaker 1: and Instagram. But Facebook had plans to integrate these like 450 00:28:59,480 --> 00:29:01,959 Speaker 1: there were. The big plan was, let's make an integrated 451 00:29:02,000 --> 00:29:07,560 Speaker 1: messaging service where it works on Instagram and Facebook and WhatsApp. 452 00:29:08,080 --> 00:29:09,600 Speaker 1: It would turn out that would be a lot more 453 00:29:09,600 --> 00:29:13,720 Speaker 1: complicated than what Zuckerberg initially thought back in twenty fourteen, 454 00:29:14,160 --> 00:29:16,640 Speaker 1: but that was the plan. Kind of similar to how 455 00:29:16,760 --> 00:29:21,200 Speaker 1: Microsoft and even eBay had planned to incorporate Skype into 456 00:29:21,320 --> 00:29:25,360 Speaker 1: their own operations. Now, one big advantage WhatsApp had was 457 00:29:25,400 --> 00:29:30,240 Speaker 1: that it sported a simple user interface, It worked, it 458 00:29:30,320 --> 00:29:35,880 Speaker 1: was easy to understand, and it made everything work fairly smoothly. Meanwhile, 459 00:29:35,960 --> 00:29:40,960 Speaker 1: Skype was continuing to get cluttered under Microsoft's ownership. While 460 00:29:40,960 --> 00:29:44,240 Speaker 1: WhatsApp was seeing adoption and use grow year over year, 461 00:29:45,120 --> 00:29:49,000 Speaker 1: Skype couldn't quite boast the same. Now, overall number of 462 00:29:49,080 --> 00:29:51,880 Speaker 1: registered users on Skype kept going up, like it was 463 00:29:51,920 --> 00:29:53,680 Speaker 1: getting up to like two billion. By the time you're 464 00:29:53,680 --> 00:29:56,600 Speaker 1: getting to twenty twenty, However, the number of folks who 465 00:29:56,600 --> 00:29:59,560 Speaker 1: were actively using the service on any given day was 466 00:29:59,600 --> 00:30:03,080 Speaker 1: in decl line. Okay, we're gonna take another quick break. 467 00:30:03,080 --> 00:30:06,400 Speaker 1: When we come back, I'll talk about another complicating factor 468 00:30:07,080 --> 00:30:11,080 Speaker 1: in Microsoft's ownership of Skype. But first let's take another 469 00:30:11,160 --> 00:30:26,800 Speaker 1: quick break. Okay. In twenty sixteen, Microsoft announced a new product, 470 00:30:26,880 --> 00:30:31,360 Speaker 1: one that would end up ultimately having overlap with Skype, 471 00:30:31,800 --> 00:30:36,880 Speaker 1: and this product was Microsoft Teams. So initially, the Team 472 00:30:37,000 --> 00:30:41,600 Speaker 1: service wasn't intended to compete against Skype, because that wouldn't 473 00:30:41,600 --> 00:30:44,880 Speaker 1: make sense. Microsoft already owns Skype, there's no reason to 474 00:30:44,880 --> 00:30:49,960 Speaker 1: make a product that cannibalizes another of your products. Instead, 475 00:30:50,120 --> 00:30:54,560 Speaker 1: Teams was intended to be a competitor against another service, 476 00:30:54,720 --> 00:30:58,640 Speaker 1: that of Slack. See there was a time where Microsoft 477 00:30:58,720 --> 00:31:03,360 Speaker 1: was considered making an acquisition move on Slack and offering 478 00:31:03,400 --> 00:31:06,040 Speaker 1: a similar amount of money to buy Slack as it 479 00:31:06,080 --> 00:31:09,080 Speaker 1: did Skype, but Bill Gates was not in favor of that. 480 00:31:09,920 --> 00:31:12,440 Speaker 1: He was chairman of the board at this point. He 481 00:31:12,560 --> 00:31:15,560 Speaker 1: was not CEO or anything, but he did not like 482 00:31:15,600 --> 00:31:20,160 Speaker 1: the idea of Microsoft making yet another acquisition and potentially 483 00:31:20,280 --> 00:31:23,400 Speaker 1: finding itself in the same situation as it had been 484 00:31:23,400 --> 00:31:26,400 Speaker 1: in the past, which is that it now owns another 485 00:31:26,480 --> 00:31:32,400 Speaker 1: company but is incapable of integrating that company's technologies into 486 00:31:32,520 --> 00:31:36,400 Speaker 1: Microsoft services. Instead, he said, no, what the company should 487 00:31:36,440 --> 00:31:39,800 Speaker 1: do is develop its alternative to Slack and go into 488 00:31:39,840 --> 00:31:43,760 Speaker 1: direct competition. So the plan for Teams was to create 489 00:31:43,800 --> 00:31:48,840 Speaker 1: a tool that facilitated internal communications within an organization. So 490 00:31:48,880 --> 00:31:54,040 Speaker 1: it be Microsoft's approach to project management, communication and collaboration. 491 00:31:55,720 --> 00:32:00,520 Speaker 1: In twenty seventeen, Microsoft pulled the plug on Windows Phone. 492 00:32:01,000 --> 00:32:04,360 Speaker 1: The company just could not make a dent in the 493 00:32:04,400 --> 00:32:08,520 Speaker 1: dominant market presence of Android and iOS. They could not 494 00:32:08,760 --> 00:32:11,560 Speaker 1: gain market share. They were always in like the single 495 00:32:11,640 --> 00:32:15,320 Speaker 1: digit percentages when it came to the overall market share 496 00:32:15,640 --> 00:32:19,840 Speaker 1: for smartphone operating systems on that were active on the market, 497 00:32:21,000 --> 00:32:24,280 Speaker 1: and because they were having trouble getting adoption, it also 498 00:32:24,320 --> 00:32:28,040 Speaker 1: meant they were having real trouble convincing third party developers 499 00:32:28,520 --> 00:32:32,400 Speaker 1: to make apps for the Windows Phone platform. And that 500 00:32:32,560 --> 00:32:37,080 Speaker 1: becomes a cyclical issue. Right, you don't have people buying 501 00:32:37,120 --> 00:32:40,120 Speaker 1: Windows Phone devices, which means you don't have developers making 502 00:32:40,160 --> 00:32:43,880 Speaker 1: apps for Windows Phone devices, which means you can't attract 503 00:32:44,040 --> 00:32:47,720 Speaker 1: people to buy Windows Phone devices because their favorite apps 504 00:32:47,760 --> 00:32:51,840 Speaker 1: aren't available on it. So it just wasn't going anywhere, 505 00:32:51,920 --> 00:32:56,760 Speaker 1: and Microsoft made the painful decision to kill the platform 506 00:32:57,040 --> 00:32:59,720 Speaker 1: and they bowed out of the space. There was tons 507 00:32:59,760 --> 00:33:04,560 Speaker 1: of news about it in the tech circles when Microsoft 508 00:33:04,600 --> 00:33:07,640 Speaker 1: finally said, Okay, you know, we did our best, it's 509 00:33:07,680 --> 00:33:11,680 Speaker 1: not working. We have to walk away. But this also 510 00:33:11,720 --> 00:33:15,320 Speaker 1: meant that one of the potential applications for Skype kind 511 00:33:15,360 --> 00:33:18,600 Speaker 1: of faded away as well. One of the reasons why 512 00:33:18,680 --> 00:33:22,520 Speaker 1: Microsoft bought Skype in the first place just never panned out. 513 00:33:23,560 --> 00:33:27,160 Speaker 1: Then you've got Zoom. While Watsapp was becoming the most 514 00:33:27,160 --> 00:33:31,520 Speaker 1: popular text based communications service Zoom was becoming a much 515 00:33:31,520 --> 00:33:35,960 Speaker 1: more useful tool for group calls, conference calls, that sort 516 00:33:36,000 --> 00:33:40,360 Speaker 1: of stuff. Microsoft had been building out Skype to serve 517 00:33:40,440 --> 00:33:43,120 Speaker 1: as an enterprise tool for remote meetings. They actually had 518 00:33:43,120 --> 00:33:46,600 Speaker 1: a Skype for Business tool, but Zoom was doing the 519 00:33:46,640 --> 00:33:51,000 Speaker 1: same thing. And the difference was Zoom was staying relatively 520 00:33:51,160 --> 00:33:56,280 Speaker 1: slim compared to the bloat of Skype. Zoom had launched 521 00:33:56,760 --> 00:33:59,640 Speaker 1: back in twenty eleven, and while it had a late 522 00:33:59,680 --> 00:34:03,880 Speaker 1: star compared to Skype, the service boasted better audio and 523 00:34:03,960 --> 00:34:08,920 Speaker 1: better video quality, and that the things that Zoom was 524 00:34:09,560 --> 00:34:13,800 Speaker 1: investing in were in support of that of audio and 525 00:34:13,920 --> 00:34:16,680 Speaker 1: video quality and connectivity. Those were like the things that 526 00:34:16,800 --> 00:34:21,080 Speaker 1: Zoom was focusing on. Meanwhile, again Microsoft was Skype was 527 00:34:21,200 --> 00:34:26,080 Speaker 1: kind of adding bloatwear to the service. This kind of 528 00:34:26,120 --> 00:34:28,439 Speaker 1: starts to bring us up to twenty twenty. Now, going 529 00:34:28,480 --> 00:34:32,240 Speaker 1: into twenty twenty, Skype had around forty million active users, 530 00:34:32,520 --> 00:34:34,319 Speaker 1: but by the end of it it was down to 531 00:34:34,400 --> 00:34:38,280 Speaker 1: thirty six million. Number. Go down is not what companies 532 00:34:38,320 --> 00:34:42,040 Speaker 1: want to see, so this was bad news for Microsoft. Now, Zoom, 533 00:34:42,080 --> 00:34:45,560 Speaker 1: on the other hand, was pushed into the spotlight. The 534 00:34:45,640 --> 00:34:50,480 Speaker 1: service saw an unprecedented surge in adoption as various companies 535 00:34:50,520 --> 00:34:53,000 Speaker 1: had to jump on the platform in order to make 536 00:34:53,080 --> 00:34:58,080 Speaker 1: remote work a possibility. Remember, with the pandemic, companies all 537 00:34:58,120 --> 00:35:02,680 Speaker 1: around the world were to go remote, not everyone, but 538 00:35:02,800 --> 00:35:06,399 Speaker 1: a lot of them, and to do that they had 539 00:35:06,440 --> 00:35:09,320 Speaker 1: to rely on tools that would allow for communication between 540 00:35:09,360 --> 00:35:15,960 Speaker 1: teams and to let managers have those overbearing conversations with 541 00:35:16,560 --> 00:35:19,319 Speaker 1: folks that you feel could have been better expressed in 542 00:35:19,360 --> 00:35:22,680 Speaker 1: an email. Not that I'm speaking from personal experience, but 543 00:35:23,360 --> 00:35:28,040 Speaker 1: analysts would say that because Zoom was prioritizing features that 544 00:35:28,160 --> 00:35:32,480 Speaker 1: supported the very primary purpose of the tool, to facilitate 545 00:35:32,640 --> 00:35:37,480 Speaker 1: audio and video conferencing, it was winning out because Skype 546 00:35:37,960 --> 00:35:40,239 Speaker 1: seemed to have a bunch of cruff built around it 547 00:35:40,800 --> 00:35:44,040 Speaker 1: that not only didn't contribute to the main purpose of 548 00:35:44,080 --> 00:35:47,920 Speaker 1: the tool, but actually seemed to detract from it. Then 549 00:35:47,960 --> 00:35:51,920 Speaker 1: you had Microsoft Teams, their division were actually taking lessons 550 00:35:51,960 --> 00:35:54,719 Speaker 1: from Zoom and putting them to heart. They built in 551 00:35:55,360 --> 00:35:58,920 Speaker 1: video and chat features into teams, but they were doing 552 00:35:59,000 --> 00:36:01,880 Speaker 1: it in a way where they were emphasizing video and 553 00:36:01,920 --> 00:36:05,520 Speaker 1: audio quality, and that was something that Skype just wasn't 554 00:36:05,560 --> 00:36:10,319 Speaker 1: really doing at the time. So Microsoft then pulled the 555 00:36:10,320 --> 00:36:13,000 Speaker 1: plug on Skype for business actually they did that in 556 00:36:13,200 --> 00:36:18,160 Speaker 1: twenty nineteen, and the decision was, let's focus on Microsoft 557 00:36:18,239 --> 00:36:22,839 Speaker 1: Teams to fill that role for our enterprise customers, and 558 00:36:23,000 --> 00:36:27,479 Speaker 1: Skype would be positioned to be more for one on 559 00:36:27,480 --> 00:36:31,799 Speaker 1: one personal communication between users. So it almost was like 560 00:36:32,400 --> 00:36:37,120 Speaker 1: Microsoft Teams is the corporate version of this tool and 561 00:36:37,200 --> 00:36:42,000 Speaker 1: Skype is for the personal communications version. And the decline 562 00:36:42,040 --> 00:36:44,480 Speaker 1: in that user base has led lots of people to 563 00:36:44,520 --> 00:36:48,120 Speaker 1: say Skype is essentially on the road to being obsolete, 564 00:36:48,760 --> 00:36:52,120 Speaker 1: that it'll just be a matter of time before Microsoft 565 00:36:52,239 --> 00:36:55,799 Speaker 1: ends support for Skype, but that for the moment, enough 566 00:36:55,800 --> 00:36:58,960 Speaker 1: people are using it to justify keeping it around for 567 00:36:59,040 --> 00:37:03,160 Speaker 1: a while. But who knows. It is possible that Microsoft 568 00:37:03,160 --> 00:37:05,720 Speaker 1: will find a new way to inject life into Skype. 569 00:37:06,000 --> 00:37:11,360 Speaker 1: That could happen, or maybe Microsoft could spin off Skype 570 00:37:11,440 --> 00:37:14,239 Speaker 1: the way that the plan had been back in two 571 00:37:14,239 --> 00:37:19,279 Speaker 1: thousand and eight, but we'll have to see right now. 572 00:37:19,480 --> 00:37:21,759 Speaker 1: Or maybe they'll even look to sell it to a 573 00:37:21,760 --> 00:37:25,480 Speaker 1: different owner. That's another possibility. But that's pretty much where 574 00:37:25,640 --> 00:37:28,719 Speaker 1: Skype is today. Just kind of a crazy journey from 575 00:37:28,760 --> 00:37:32,600 Speaker 1: a peer to peer network to a cloud based communications service, 576 00:37:33,320 --> 00:37:40,279 Speaker 1: one that could have been the pivotal communications service during 577 00:37:40,280 --> 00:37:45,719 Speaker 1: the pandemic, but because of various poor decisions, which is 578 00:37:45,760 --> 00:37:47,799 Speaker 1: easy to say in hindsight. I mean, at the time, 579 00:37:47,880 --> 00:37:49,960 Speaker 1: I'm sure they didn't feel like they were poor decisions, 580 00:37:50,000 --> 00:37:53,160 Speaker 1: but in hindsight they are. It just means that Skype 581 00:37:53,719 --> 00:37:57,399 Speaker 1: was a communication service that some people used and most 582 00:37:57,440 --> 00:38:01,320 Speaker 1: people didn't. But I think it's still very important company. 583 00:38:01,760 --> 00:38:04,600 Speaker 1: I don't know if it's actually on the road to 584 00:38:06,080 --> 00:38:10,080 Speaker 1: slow obsolescence and death. I hope it's not. I hope 585 00:38:10,080 --> 00:38:13,080 Speaker 1: that they're able to find ways to make better use 586 00:38:13,120 --> 00:38:15,920 Speaker 1: of it, because I think that there's a there's a 587 00:38:15,960 --> 00:38:19,360 Speaker 1: good story there, and it does play a very important 588 00:38:19,480 --> 00:38:22,000 Speaker 1: part for people who need to be able to communicate 589 00:38:22,040 --> 00:38:25,600 Speaker 1: with each other across the world and can't afford to 590 00:38:25,640 --> 00:38:33,239 Speaker 1: do that through more traditional telecommunications routes. So yeah, that's it. 591 00:38:33,560 --> 00:38:37,839 Speaker 1: That's the full full story on Skype so far. I 592 00:38:37,880 --> 00:38:41,680 Speaker 1: hope you enjoyed this pair of episodes, and I've got 593 00:38:41,760 --> 00:38:44,560 Speaker 1: a lot more stuff coming in the very near future. 594 00:38:44,840 --> 00:38:48,160 Speaker 1: On next week, we've got an interview with a neuroscientist 595 00:38:48,239 --> 00:38:51,200 Speaker 1: that's going to go up, and we've got another entry 596 00:38:51,320 --> 00:38:56,320 Speaker 1: in the Ignobel Prize series, and of course tech News. 597 00:38:56,520 --> 00:38:59,480 Speaker 1: So I hope you are all well, and I'll talk 598 00:38:59,520 --> 00:39:09,760 Speaker 1: to you again really soon. Tech Stuff is an iHeartRadio production. 599 00:39:10,080 --> 00:39:15,120 Speaker 1: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, 600 00:39:15,239 --> 00:39:17,240 Speaker 1: or wherever you listen to your favorite shows.