Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey thereon
Speaker 1: Welcome to Tech Stuff, I'm your host Jonathan Strickland. I'm
Speaker 1: an executive producer with iHeartRadio and how the tech are
Speaker 1: you So? On Monday's episode, I described how Skype came
Speaker 1: into being, how it grew quickly after launch, which prompted eBay,
Speaker 1: under the leadership of Meg Whitman, to acquire Skype for
Speaker 1: the princely sum of around two point six billion dollars.
Speaker 1: The actual amount varies depending upon what source you're looking at.
Speaker 1: I also talked about how eBay never really found a
Speaker 1: way to integrate Skype into its business, at least not
Speaker 1: in a way that really worked, and when leadership of
Speaker 1: eBay changed and John Donaho took over leadership of the company,
Speaker 1: one of his priorities was to find something to do
Speaker 1: with Skype. Now. Initially, the plan was to spin off
Speaker 1: Skype as its own company in an initial public offering,
Speaker 1: but that fell apart when Skype's original architects threatened to
Speaker 1: pull the technology that powered the service if they went
Speaker 1: that route without working with those founders. So instead, eBay
Speaker 1: would actually sell off a majority stake in Skype to
Speaker 1: an investor group silver Lake and the Skype founders would
Speaker 1: also get a share of the ownership of Skype, and
Speaker 1: eBay would hold on to about thirty percent of the
Speaker 1: steak itself. Now, this is what set up all the
Speaker 1: parties were a huge windfall when Microsoft expressed interest in
Speaker 1: acquiring Skype in around twenty ten twenty eleven. And it's
Speaker 1: also why I cannot call the eBay acquisition of Skype
Speaker 1: one of the worst deals of all time, at least
Speaker 1: not I may have done that once upon a time,
Speaker 1: I don't think I can really say that. I think
Speaker 1: it was a bad deal because the companies failed to
Speaker 1: find a way to integrate with one another. They couldn't
Speaker 1: find those synergies that they had been planning on. So
Speaker 1: in that sense, it was a failure. But unlike some
Speaker 1: of the other deals that tend to make a worst
Speaker 1: Deals of all Time list, eBay did not lose a
Speaker 1: ton of money on this if you're looking just at
Speaker 1: the purchase price versus the sell price. In fact, they
Speaker 1: actually made money compared to you know, how much they
Speaker 1: bought versus how much they got when they sold it.
Speaker 1: If you compare that to the time when News Corp.
Speaker 1: Bought MySpace. They bought MySpace for five hundred and eighty
Speaker 1: million dollars and then they later sold it for thirty
Speaker 1: five million dollars. That was a stinker of a deal.
Speaker 1: That was a huge loss. Now, obviously that doesn't actually
Speaker 1: take into account how much money eBay spent while owning
Speaker 1: Skype on the product, like how much money they poured
Speaker 1: into development and that sort of stuff. If you take
Speaker 1: all of those considerations into account, if very well may
Speaker 1: be that ultimately, yes, eBay lost money on the deal,
Speaker 1: but they still sold it for more than they bought it,
Speaker 1: so on the worst deals list, it can't be number one. Anyway.
Speaker 1: Let's set the stage for Microsoft's offer. While eBay and
Speaker 1: Skype did not synergize the way Meg Whitman had hoped,
Speaker 1: it didn't stop Skype from continuing to grow over the years.
Speaker 1: In twenty ten, the service boasted five hundred and sixty
Speaker 1: million registered users collectively. Those users had used Skype for
Speaker 1: more than two hundred and seven billion minutes of voice
Speaker 1: and video chats collectively across the entire history of Skype. Now,
Speaker 1: if you actually convert that into years, that means that
Speaker 1: there were more than three hundred ninety three, eight hundred
Speaker 1: and thirty five years worth of digital chats that had
Speaker 1: gone across Skype over its history. Yaosen no wonder Microsoft
Speaker 1: was interested in it. And interested is putting it lightly,
Speaker 1: because Microsoft was ready to offer the largest deal in
Speaker 1: the company's history at that point. Anyway, it was for
Speaker 1: eight point five six billion dollars in cash, a truly
Speaker 1: princely sum, and this was at a time when other
Speaker 1: parties were similarly starting to express interest in acquiring Skype.
Speaker 1: Rumor had it that both Google and Facebook, which of
Speaker 1: course now is Meta, were interested in potentially either partnering
Speaker 1: with Skype or just outright acquiring it. But Microsoft was
Speaker 1: the party that won the right to acquire Skype. And
Speaker 1: to be clear, Skype was actually making money at this point.
Speaker 1: It had debt as well, but it was making money.
Speaker 1: In two thousand and eight, the division posted revenue of
Speaker 1: more than eight hundred and sixty million dollars, but of
Speaker 1: course revenue is not profit. But the profit was around
Speaker 1: two hundred six sixty million dollars, so they weren't making money,
Speaker 1: which put that into contrast with tons of startups that
Speaker 1: come out of Silicon Valley, where you know, some of
Speaker 1: them just don't even make revenue. But other ones that
Speaker 1: do make revenue, most of them failed to turn a
Speaker 1: profit for years, years and years. There are services that,
Speaker 1: you know, for almost the entire history of the service
Speaker 1: were not profitable. So Skype was kind of a standout
Speaker 1: in the crowd on that regard. A quarter of a
Speaker 1: billion dollars in profit is a mountainous amount of money,
Speaker 1: but it is just a drop in the bucket compared
Speaker 1: to eight point five billion dollars. And like I said,
Speaker 1: Microsoft had never made an acquisition offer as large as
Speaker 1: that before. Now since it has done that, right, Like
Speaker 1: the Activision Blizzard deal which just completed was nearly seventy
Speaker 1: billion dollars, almost ten times as much. So so yeah,
Speaker 1: they have gone bigger since then. An article from Wired
Speaker 1: back in twenty eleven put the deal in the context
Speaker 1: of some other acquisitions Microsoft had made, ones with much
Speaker 1: smaller price tags. But Wired was saying Microsoft had a
Speaker 1: history of purchasing companies but having very little to show
Speaker 1: for those purchases. That you know, there was clearly a
Speaker 1: desire to acquire these these companies, but then kind of
Speaker 1: momentum just died, so that it was sort of a warning,
Speaker 1: and it raised the question what did Microsoft see in
Speaker 1: Skype that would prompt the company to offer what was
Speaker 1: at that point an unprecedented amount of cash. This was
Speaker 1: a cash deal too. This wasn't one of those deals
Speaker 1: where it was you know, trades and stock or whatever.
Speaker 1: It was actually, no, we will pay you eight point
Speaker 1: five billion dollars because Microsoft was flush with cash. Now,
Speaker 1: confusing the matter was that Microsoft already had some products that,
Speaker 1: at least in part art were overlaps or in competition
Speaker 1: with Skype. Windows Live Messaging, for example, offered live chat,
Speaker 1: including video chat, as well as text messaging. So you
Speaker 1: might say, well, why would you want Skype? You already
Speaker 1: have a tool that does kind of what Skype is doing.
Speaker 1: It also had a bunch of corporate products that did
Speaker 1: something similar for big companies. Right, a lot of Microsoft's
Speaker 1: businesses were focused on enterprise clients, not individual customers. But
Speaker 1: how can we get a customer like an entire company
Speaker 1: to buy into our systems because that's where the big,
Speaker 1: big money is. And in fact, Microsoft's owned and operated
Speaker 1: products already boasted more users and more simultaneous connections than Skype.
Speaker 1: In some cases, you see a company acquire another one.
Speaker 1: Not because they want access to that company's technology, so
Speaker 1: they want access to that company's user base. Right. That
Speaker 1: was one of the arguments that was made when Facebook
Speaker 1: acquired WhatsApp was that Facebook was more interested in getting
Speaker 1: access to WhatsApp's users than WhatsApp itself. I don't think
Speaker 1: that was fully true. I think it was like an
Speaker 1: equal opportunity thing, like, yes, I want the users and
Speaker 1: I want the technology. Now. Skype did have one thing
Speaker 1: that Microsoft's products did not have. It had interoperability with
Speaker 1: landline and cellular telephone services. Right. That was a paid
Speaker 1: for option in Skype, in that you could use Skype
Speaker 1: to make a computer to telephone phone call. Perhaps more importantly,
Speaker 1: folks had to pay to use that specific service, and
Speaker 1: around eight million of Skype's registered users were doing that
Speaker 1: on the rag And that was something that Microsoft did
Speaker 1: not have access to. And Microsoft was kind of struggling
Speaker 1: in the communications space. It had been pushing variations of
Speaker 1: Windows for mobile phones for years, but the rise of
Speaker 1: the iPhone and Android platforms kept the Windows mobile platform
Speaker 1: at a distant third not always at third place, either,
Speaker 1: Sometimes there were other operating systems that took third place.
Speaker 1: In fact, let's explore for a few minutes Microsoft's history
Speaker 1: with mobile communications devices, because I think that's an important
Speaker 1: piece to consider. I think it was one of the
Speaker 1: motivating factors that led Microsoft to acquire Skype in the
Speaker 1: first place. So Microsoft had been trying to establish a
Speaker 1: strong presence in the space at least since the early
Speaker 1: two thousands, with Pocket PC and Windows Mobile operating systems. Now,
Speaker 1: you could argue that the history goes back even further
Speaker 1: into the mid nineteen nineties with the introduction of Windows
Speaker 1: CE in ninety six. Windows CE was intended for handheld PCs,
Speaker 1: so think of things like, you know, very mobile computers,
Speaker 1: almost like tablet style computer systems. Now, before the era
Speaker 1: of the smartphone, there was the personal Digital assistant or PDA,
Speaker 1: and you can kind of think of a PDA as
Speaker 1: a smartphone without the phone part. The term was really
Speaker 1: established with the introduction of the Apple Newton, although the
Speaker 1: Newton itself wasn't the first device that fit the definition,
Speaker 1: but it was the device that introduced the term. And
Speaker 1: there was a rush to become the company to define
Speaker 1: mobile computing, and Microsoft was very much interested in being
Speaker 1: in that race. So Microsoft had a long history of
Speaker 1: catering to enterprises, as I mentioned, you know, to go
Speaker 1: and try and build products specifically for business and business leaders,
Speaker 1: and a lot of their business came from licensing or
Speaker 1: selling Microsoft products to these companies. So it made sense
Speaker 1: to develop a mobile operating system that could be compatible
Speaker 1: with the various software packages Microsoft published, right to build
Speaker 1: an operating system that could run at least some version
Speaker 1: of things like Outlook or a window, you know, Microsoft
Speaker 1: Office products, and Microsoft's mobile operating system would also work
Speaker 1: on smartphones, though at this point we're still in the
Speaker 1: era of smartphones being the domain of fancy business people, right,
Speaker 1: you wouldn't get consumer smartphones, at least not truly widely
Speaker 1: adopted consumer smartphones until two thousand and seven. And Microsoft
Speaker 1: also was not in the business of making the hardware,
Speaker 1: so they were just focusing on the software that would
Speaker 1: run on top of the devices. So then when we
Speaker 1: do get to two thousand and seven, when Apple rolled
Speaker 1: out its own smartphone, which was a really sexy device
Speaker 1: that could serve as a computer and a communications device
Speaker 1: and a digital media player and more, Apple made a
Speaker 1: power move and something Microsoft was not ready to meet. Like,
Speaker 1: they did not have an answer for the iPhone when
Speaker 1: the iPhone came out in two thousand and seven. Then
Speaker 1: Google released Android a short time later, and another competing
Speaker 1: mobile operating system was there on the market, and unlike Apple,
Speaker 1: Google partnered with handset manufacturers to put the Android operating
Speaker 1: system on devices. Now Apple was doing everything itself, Google
Speaker 1: was working with partners, which was more like Microsoft. Right.
Speaker 1: Microsoft was doing the same sort of thing with their
Speaker 1: own mobile operating system. But the important thing is the
Speaker 1: era of the consumer smartphone was upon us, and the
Speaker 1: utilitarian smartphones that were meant just for business leaders now
Speaker 1: were taking second place to these sleek and sexy touch
Speaker 1: screen interface smartphones that were meant for consumers. In two
Speaker 1: thousand and seven, Microsoft introduced Windows Mobile six. While there
Speaker 1: was a version of Windows Mobile six that would work
Speaker 1: with touch screens, that version was called the Professional version
Speaker 1: of Windows Mobile six, so that kind of indicated that
Speaker 1: Microsoft was still looking at smartphones as kind of an
Speaker 1: elite business device, not something for the general consumer. They
Speaker 1: also offered classic and standard versions of the operating system,
Speaker 1: so these were versions of the operating system that were
Speaker 1: meant for other devices, such as smartphones that did not
Speaker 1: have a touchscreen but had like physical keyboards and stuff
Speaker 1: and even PDAs. Now, it wasn't until two thousand and
Speaker 1: nine that Microsoft had a quote unquote finger friendly version
Speaker 1: of its operating system, and by then the iPhone and
Speaker 1: Android phones had been evolving for a couple of years
Speaker 1: and had really established a firm presence in the market.
Speaker 1: In twenty ten, Microsoft would change the name of its
Speaker 1: mobile operating system, so instead of being called Windows Mobile,
Speaker 1: it became Windows Phone, and it changed dramatically like Microsoft
Speaker 1: was finally really ready to meet Android and iOS, and
Speaker 1: the user interface for Windows Phone was obviously meant to
Speaker 1: compete direct directly with Android and iOS devices. The company
Speaker 1: was already well behind Google and Apple and the consumer market. However,
Speaker 1: and this brings us up to the time of Microsoft's
Speaker 1: decision to acquire Skype. We will continue our story, but
Speaker 1: first let's take a quick break to thank our sponsors.
Speaker 1: We're back. So perhaps Microsoft was viewing Skype as the
Speaker 1: killer app that would propel Windows Phone into the spotlight.
Speaker 1: That might have at least been part of their decision
Speaker 1: to go after Skype. Maybe the plan was to leverage
Speaker 1: Skype and make Skype the primary method of connecting with
Speaker 1: other you know, other people instead of using traditional cellular service,
Speaker 1: you would use Skype to connect to everybody. Now, if
Speaker 1: that had been the plan, conventional wisdom said that Microsoft
Speaker 1: embracing Skype would likely tick off the various carriers in
Speaker 1: the phone space. That would be a huge issue now.
Speaker 1: At the time when smartphones were coming out, there were
Speaker 1: these big deals with carriers, sometimes meaning that a phone
Speaker 1: might be exclusive to a specific carrier, at least in
Speaker 1: the United States. So like when the iPhone first came out,
Speaker 1: it was exclusive to AT and T users. If you
Speaker 1: were on any other carrier, you could not have an
Speaker 1: iPhone because it wouldn't work on that carrier's service. You
Speaker 1: had to be an AT and T customer. And part
Speaker 1: of those deals meant that the carriers would offer big
Speaker 1: discounts on the smartphones in order to get you hooked
Speaker 1: into the carrier's service. It's like the whole idea of like,
Speaker 1: this is the lure, and once you've taken the lure,
Speaker 1: you're caught, and now you're you're hers for as long
Speaker 1: as we want you. And it meant that the initial
Speaker 1: cost of these phones was much much much lower than
Speaker 1: you would find today because those kind of agreements are
Speaker 1: much more rare today. If you were to go and
Speaker 1: buy a phone, in a lot of cases, you'd just
Speaker 1: be paying full price to get the phone and then
Speaker 1: add it to whatever service you already have. But at
Speaker 1: this point that's not how things were going, and the
Speaker 1: fear was that if Microsoft chose Skype as the central
Speaker 1: way of communicating through this phone, it would alienate all
Speaker 1: the carriers and there'd be no way to form that
Speaker 1: kind of relationship and people would have to pay full
Speaker 1: price to get a Windows phone, which seems like a
Speaker 1: barrier to entry now. Before the acquisition deal could even
Speaker 1: go through, there were a couple of instances where a
Speaker 1: bug in Skype software caused a significant crash in the
Speaker 1: service for millions of users. Not service wide, but enough
Speaker 1: users for it to be a problem. Fortunately, a patched
Speaker 1: client and Skype's own instructions or workarounds would limit the problem,
Speaker 1: but it did demonstrate that there were some issues here,
Speaker 1: and it prompted Skype to make a change to its
Speaker 1: back end infrastructure that would continue over the course of
Speaker 1: the following years. So way back when Skype was first introduced,
Speaker 1: it was built purely upon peer to peer networks, and
Speaker 1: in a peer to peer network every computer is equal
Speaker 1: to every other computer on the system. But by this
Speaker 1: point Skype had designated some of its own servers, servers
Speaker 1: that Skype itself owned, as supernodes. These devices would feature
Speaker 1: open connectivity and would remain online pretty much all the time.
Speaker 1: This was meant to be kind of like the backbone
Speaker 1: of Skype service that while other computers might go up
Speaker 1: and down, these would be dependable and they would provide
Speaker 1: additional stability to the overall network. But it would mean
Speaker 1: that you're kind of moving away from this more democratic
Speaker 1: peer to peer approach, and you could say things got
Speaker 1: a little or Wellian, not nineteen eighty four, but more
Speaker 1: like animal farm, where you have a peer to peer
Speaker 1: network in which all computers are equal, but some computers
Speaker 1: are more equal than others. That's probably being a bit
Speaker 1: too unfair, because the move was becoming necessary. The way
Speaker 1: we were using computers was changing. Before the smartphone era,
Speaker 1: we were depending on desktops and laptop computers to access
Speaker 1: the Internet, and a lot of times we would just
Speaker 1: keep those devices running even if we weren't actively using them.
Speaker 1: These were the computers that, when connected to a peer
Speaker 1: to peer network, would continue to share their resources with
Speaker 1: the overall system. It's what made peer to peer networks work.
Speaker 1: But with the proliferation of smartphones, more of our computer
Speaker 1: activity began to shift to mobile devices. We started to
Speaker 1: use desktops and laptops less frequently, and we weren't always
Speaker 1: keeping them online, and that meant that the peer to
Speaker 1: peer network saw a decline in active nodes across the system.
Speaker 1: So if Skype had remained strictly a peer to peer service,
Speaker 1: the actual performance of Skype would have steadily declined because
Speaker 1: fewer computers remained active in the network. There would be
Speaker 1: fewer resources for Skype to use, and the service would
Speaker 1: go downhill. So you could argue that this was absolutely
Speaker 1: a necessary move for Skype in order for the service
Speaker 1: to continue to work. Now, this didn't actually slow down
Speaker 1: Microsoft's deal. They made the eight and a half billion
Speaker 1: dollar offer. The collection of Skype stakeholders agreed to that,
Speaker 1: and that actually would mean that eBay would get another
Speaker 1: one point four billion because of its stake in Skype,
Speaker 1: and by my reckoning, that ultimately means eBay sold Skype
Speaker 1: for somewhere in the neighborhood of seven hundred million dollars
Speaker 1: more than what it paid for it, so again, not
Speaker 1: exactly the worst deal in tech history. Though also again
Speaker 1: I'm not factoring in how much money eBay poured into
Speaker 1: Skype while it owned it, so it's not an apples
Speaker 1: to apples thing. But anyway, in this era, Steve Balmer
Speaker 1: was in charge of Microsoft. Now, if you do not
Speaker 1: know who Steve Balmer is, there's no shade on that.
Speaker 1: But boy, how do you need to go to YouTube
Speaker 1: and search Microsoft Steve Balmer and look for the greatest
Speaker 1: hits of that man's performances on various stages at different conferences,
Speaker 1: because the word intense doesn't begin to capture that guy. Anyway,
Speaker 1: Bamber planned to integrate Skype into lots of Microsoft products.
Speaker 1: Just like when Meg Whitman was in charge of eBay,
Speaker 1: she had intended to get Skype integrated deeply into eBay's
Speaker 1: products and services. Balmer planned to do the same thing
Speaker 1: over at Microsoft. So the plan was to to great
Speaker 1: Skype with things like the Xbox game console, with products
Speaker 1: like Outlook mail, and potentially with Microsoft's Windows for Phones platform.
Speaker 1: Most of that would not pan out, and some critics
Speaker 1: would end up saying that this was classic Steve Balmer,
Speaker 1: that he was guilty of buying assets and then not
Speaker 1: really knowing how to leverage them, like how to integrate
Speaker 1: them or how to otherwise use them in a meaningful way.
Speaker 1: Microsoft did continue the trend of porting more of Skype's
Speaker 1: back end operations onto Microsoft's owned and operated supernotes, So
Speaker 1: this was again kind of changing the nature of how
Speaker 1: Skype worked, like removing that whole peer to peer aspect.
Speaker 1: It was a very slow transition, however, this was not
Speaker 1: something that was like one day they flipped a switch
Speaker 1: and everything went from peer to peer to kind of
Speaker 1: a cloud based system. It would actually take several years
Speaker 1: to complete, but it did mean that Skype would change
Speaker 1: from peer to peer to cloud based ultimately. Now, one
Speaker 1: semi scandal that kind of broke out around this time
Speaker 1: was that Microsoft was potentially making this change in order
Speaker 1: to garner approval from US authorities. So you got to remember,
Speaker 1: this is around the time that there were all these
Speaker 1: whistleblowers coming forward showing that various authorities, primarily the NSA,
Speaker 1: were using technologies to tap into different communications channels throughout
Speaker 1: the United States and were actively spying on US citizens.
Speaker 1: And this is a huge, huge story and it involved
Speaker 1: dozens of companies in the telecommunications and information services spaces.
Speaker 1: So the fringe theory was that Microsoft wanted to migrate
Speaker 1: away from peer to peer networks because those systems would
Speaker 1: make it impossible for folks to trace phone calls or
Speaker 1: to intercept calls, and that Microsoft was instead moving to
Speaker 1: their own cloud based system because then they could comply
Speaker 1: with law enforcement if there were in order to share
Speaker 1: information about users. Now, the truth of the matter is
Speaker 1: Skype was never immune to tracking, at least not on
Speaker 1: a technical level, like it was possible. That doesn't mean
Speaker 1: it happened, but it was technically possible. So the move
Speaker 1: toward a more cloud based infrastructure didn't mean that it
Speaker 1: was suddenly more susceptible to that. It was just a
Speaker 1: different approach. It also was a move that happened before
Speaker 1: Microsoft had even acquired Skype, right, because when Skype was
Speaker 1: still with the investor Group, they were already transitioning toward
Speaker 1: a semi cloud based kind of infrastructure. So it's not
Speaker 1: like Microsoft made that decision. They just continued that decision.
Speaker 1: But folks love a good conspiracy theory, and trust me,
Speaker 1: I'm not like a flag waiver for Microsoft, but I
Speaker 1: don't want to throw the company under the bus for
Speaker 1: something that it really didn't do. The transition to cloud,
Speaker 1: like I said, took years, It kind of wrapped up
Speaker 1: around twenty sixteen. The change actually meant that Skype users
Speaker 1: had to update the client that they were using to
Speaker 1: access the service because the peer to peer based Skype
Speaker 1: clients would not work with the new cloud based infrastructure.
Speaker 1: So Microsoft rolled out some new clients for folks to
Speaker 1: download and use so they could continue to utilize the
Speaker 1: Skype service. Under Microsoft's ownership, Skype did get more complicated,
Speaker 1: and a lot of analysts, at least in hindsight, say
Speaker 1: that Skype was bloated with features that did not really
Speaker 1: contribute to the prime purpose for Skype. We see this
Speaker 1: a lot with different products, especially products that have a
Speaker 1: very long lifespan, where over the course of a product's
Speaker 1: life cycle, the developers will start to add in that
Speaker 1: don't really make a whole lot of sense. And part
Speaker 1: of it is just because you might reach a level
Speaker 1: of maturity with an app or service where there's not
Speaker 1: really any further you can go with like the primary functions,
Speaker 1: like a word processor, you can always improve it, but
Speaker 1: tends to be very incremental improvement, Right, So, how do
Speaker 1: you create a product that's different enough from the predecessor
Speaker 1: to convince people to buy it? You know, how do
Speaker 1: you get people to come out and buy a new
Speaker 1: word processing program if they already have one. Well, you've
Speaker 1: got to add in some features, and often that can
Speaker 1: mean that features that don't actually really incorporate into the
Speaker 1: main purpose of the software get thrown in there, and
Speaker 1: that could just make things more messy. It could mean
Speaker 1: that your performance will take a hit as well, and
Speaker 1: that apparently happened with Skype. At this point. I wasn't
Speaker 1: even using Skype, so it's hard for me to say
Speaker 1: from a personal level, but from what I've read, Skype
Speaker 1: performance was taking a hit, and it was getting so
Speaker 1: feature heavy. You know, the audio quality, the video quality
Speaker 1: weren't really measuring up toward to what competitors were able
Speaker 1: to offer. So the one thing that Skype was really
Speaker 1: important for, which was for voice and video calls, it
Speaker 1: wasn't doing as well as competitors. I Meanwhile, you had
Speaker 1: all these other superfluous features being thrown in there, and
Speaker 1: there were still concerns about privacy and security with Skype.
Speaker 1: Part of the issue was that Skype's operations were proprietary.
Speaker 1: You know, they were under wraps. Microsoft was not talking
Speaker 1: too much about what actually was going on under the
Speaker 1: hood with Skype, and that included what part did encryption
Speaker 1: play in Skype communications? Was it fully encrypted? But you
Speaker 1: had other communications services that boasted end to end encryption,
Speaker 1: meaning that if someone were to intercept communications between point
Speaker 1: point B, they probably wouldn't be able to tell what
Speaker 1: was being said because the encryption would prevent them from
Speaker 1: doing so. But Microsoft wasn't even saying to what extent,
Speaker 1: if any, did encryption play with Skype Communications. And you
Speaker 1: then had the opportunity for competing services to kind of
Speaker 1: step and serve a community that was perhaps a bit
Speaker 1: more concerned about privacy and security. WhatsApp is a great
Speaker 1: example of that. So WhatsApp was proving to be a
Speaker 1: massive competitor to Skype, and it's funny because it didn't
Speaker 1: have the video and audio capabilities of Skype. Facebook actually
Speaker 1: purchased WhatsApp in twenty fourteen for the princely sum of
Speaker 1: around nineteen billion dollars. Again, the estimations of how much
Speaker 1: this deal went for it they changed from source to source,
Speaker 1: so somewhere in the neighborhood of nineteen billion dollars. Some
Speaker 1: of it have it actually significantly more than that when
Speaker 1: you add in all the different considerations, but let's just
Speaker 1: say it was a boatload of money, and even more
Speaker 1: money than what Microsoft paid for Skype right while by
Speaker 1: the following year, by twenty fifteen, wsapp was cited as
Speaker 1: the world's most popular messaging application. And while WhatsApp was
Speaker 1: only text based, it did allow users to send messages
Speaker 1: to anyone all over the world without having to deal
Speaker 1: with text messaging fees or international fees, so it was
Speaker 1: a very affordable way to have communications. It wasn't even
Speaker 1: ads supported. The acquisition gave an enormous boost to Facebook's
Speaker 1: daily active user numbers, and you know those were spread
Speaker 1: out across all the Facebook platforms, which included Facebook itself, Wasapp,
Speaker 1: and Instagram. But Facebook had plans to integrate these like
Speaker 1: there were. The big plan was, let's make an integrated
Speaker 1: messaging service where it works on Instagram and Facebook and WhatsApp.
Speaker 1: It would turn out that would be a lot more
Speaker 1: complicated than what Zuckerberg initially thought back in twenty fourteen,
Speaker 1: but that was the plan. Kind of similar to how
Speaker 1: Microsoft and even eBay had planned to incorporate Skype into
Speaker 1: their own operations. Now, one big advantage WhatsApp had was
Speaker 1: that it sported a simple user interface, It worked, it
Speaker 1: was easy to understand, and it made everything work fairly smoothly. Meanwhile,
Speaker 1: Skype was continuing to get cluttered under Microsoft's ownership. While
Speaker 1: WhatsApp was seeing adoption and use grow year over year,
Speaker 1: Skype couldn't quite boast the same. Now, overall number of
Speaker 1: registered users on Skype kept going up, like it was
Speaker 1: getting up to like two billion. By the time you're
Speaker 1: getting to twenty twenty, However, the number of folks who
Speaker 1: were actively using the service on any given day was
Speaker 1: in decl line. Okay, we're gonna take another quick break.
Speaker 1: When we come back, I'll talk about another complicating factor
Speaker 1: in Microsoft's ownership of Skype. But first let's take another
Speaker 1: quick break. Okay. In twenty sixteen, Microsoft announced a new product,
Speaker 1: one that would end up ultimately having overlap with Skype,
Speaker 1: and this product was Microsoft Teams. So initially, the Team
Speaker 1: service wasn't intended to compete against Skype, because that wouldn't
Speaker 1: make sense. Microsoft already owns Skype, there's no reason to
Speaker 1: make a product that cannibalizes another of your products. Instead,
Speaker 1: Teams was intended to be a competitor against another service,
Speaker 1: that of Slack. See there was a time where Microsoft
Speaker 1: was considered making an acquisition move on Slack and offering
Speaker 1: a similar amount of money to buy Slack as it
Speaker 1: did Skype, but Bill Gates was not in favor of that.
Speaker 1: He was chairman of the board at this point. He
Speaker 1: was not CEO or anything, but he did not like
Speaker 1: the idea of Microsoft making yet another acquisition and potentially
Speaker 1: finding itself in the same situation as it had been
Speaker 1: in the past, which is that it now owns another
Speaker 1: company but is incapable of integrating that company's technologies into
Speaker 1: Microsoft services. Instead, he said, no, what the company should
Speaker 1: do is develop its alternative to Slack and go into
Speaker 1: direct competition. So the plan for Teams was to create
Speaker 1: a tool that facilitated internal communications within an organization. So
Speaker 1: it be Microsoft's approach to project management, communication and collaboration.
Speaker 1: In twenty seventeen, Microsoft pulled the plug on Windows Phone.
Speaker 1: The company just could not make a dent in the
Speaker 1: dominant market presence of Android and iOS. They could not
Speaker 1: gain market share. They were always in like the single
Speaker 1: digit percentages when it came to the overall market share
Speaker 1: for smartphone operating systems on that were active on the market,
Speaker 1: and because they were having trouble getting adoption, it also
Speaker 1: meant they were having real trouble convincing third party developers
Speaker 1: to make apps for the Windows Phone platform. And that
Speaker 1: becomes a cyclical issue. Right, you don't have people buying
Speaker 1: Windows Phone devices, which means you don't have developers making
Speaker 1: apps for Windows Phone devices, which means you can't attract
Speaker 1: people to buy Windows Phone devices because their favorite apps
Speaker 1: aren't available on it. So it just wasn't going anywhere,
Speaker 1: and Microsoft made the painful decision to kill the platform
Speaker 1: and they bowed out of the space. There was tons
Speaker 1: of news about it in the tech circles when Microsoft
Speaker 1: finally said, Okay, you know, we did our best, it's
Speaker 1: not working. We have to walk away. But this also
Speaker 1: meant that one of the potential applications for Skype kind
Speaker 1: of faded away as well. One of the reasons why
Speaker 1: Microsoft bought Skype in the first place just never panned out.
Speaker 1: Then you've got Zoom. While Watsapp was becoming the most
Speaker 1: popular text based communications service Zoom was becoming a much
Speaker 1: more useful tool for group calls, conference calls, that sort
Speaker 1: of stuff. Microsoft had been building out Skype to serve
Speaker 1: as an enterprise tool for remote meetings. They actually had
Speaker 1: a Skype for Business tool, but Zoom was doing the
Speaker 1: same thing. And the difference was Zoom was staying relatively
Speaker 1: slim compared to the bloat of Skype. Zoom had launched
Speaker 1: back in twenty eleven, and while it had a late
Speaker 1: star compared to Skype, the service boasted better audio and
Speaker 1: better video quality, and that the things that Zoom was
Speaker 1: investing in were in support of that of audio and
Speaker 1: video quality and connectivity. Those were like the things that
Speaker 1: Zoom was focusing on. Meanwhile, again Microsoft was Skype was
Speaker 1: kind of adding bloatwear to the service. This kind of
Speaker 1: starts to bring us up to twenty twenty. Now, going
Speaker 1: into twenty twenty, Skype had around forty million active users,
Speaker 1: but by the end of it it was down to
Speaker 1: thirty six million. Number. Go down is not what companies
Speaker 1: want to see, so this was bad news for Microsoft. Now, Zoom,
Speaker 1: on the other hand, was pushed into the spotlight. The
Speaker 1: service saw an unprecedented surge in adoption as various companies
Speaker 1: had to jump on the platform in order to make
Speaker 1: remote work a possibility. Remember, with the pandemic, companies all
Speaker 1: around the world were to go remote, not everyone, but
Speaker 1: a lot of them, and to do that they had
Speaker 1: to rely on tools that would allow for communication between
Speaker 1: teams and to let managers have those overbearing conversations with
Speaker 1: folks that you feel could have been better expressed in
Speaker 1: an email. Not that I'm speaking from personal experience, but
Speaker 1: analysts would say that because Zoom was prioritizing features that
Speaker 1: supported the very primary purpose of the tool, to facilitate
Speaker 1: audio and video conferencing, it was winning out because Skype
Speaker 1: seemed to have a bunch of cruff built around it
Speaker 1: that not only didn't contribute to the main purpose of
Speaker 1: the tool, but actually seemed to detract from it. Then
Speaker 1: you had Microsoft Teams, their division were actually taking lessons
Speaker 1: from Zoom and putting them to heart. They built in
Speaker 1: video and chat features into teams, but they were doing
Speaker 1: it in a way where they were emphasizing video and
Speaker 1: audio quality, and that was something that Skype just wasn't
Speaker 1: really doing at the time. So Microsoft then pulled the
Speaker 1: plug on Skype for business actually they did that in
Speaker 1: twenty nineteen, and the decision was, let's focus on Microsoft
Speaker 1: Teams to fill that role for our enterprise customers, and
Speaker 1: Skype would be positioned to be more for one on
Speaker 1: one personal communication between users. So it almost was like
Speaker 1: Microsoft Teams is the corporate version of this tool and
Speaker 1: Skype is for the personal communications version. And the decline
Speaker 1: in that user base has led lots of people to
Speaker 1: say Skype is essentially on the road to being obsolete,
Speaker 1: that it'll just be a matter of time before Microsoft
Speaker 1: ends support for Skype, but that for the moment, enough
Speaker 1: people are using it to justify keeping it around for
Speaker 1: a while. But who knows. It is possible that Microsoft
Speaker 1: will find a new way to inject life into Skype.
Speaker 1: That could happen, or maybe Microsoft could spin off Skype
Speaker 1: the way that the plan had been back in two
Speaker 1: thousand and eight, but we'll have to see right now.
Speaker 1: Or maybe they'll even look to sell it to a
Speaker 1: different owner. That's another possibility. But that's pretty much where
Speaker 1: Skype is today. Just kind of a crazy journey from
Speaker 1: a peer to peer network to a cloud based communications service,
Speaker 1: one that could have been the pivotal communications service during
Speaker 1: the pandemic, but because of various poor decisions, which is
Speaker 1: easy to say in hindsight. I mean, at the time,
Speaker 1: I'm sure they didn't feel like they were poor decisions,
Speaker 1: but in hindsight they are. It just means that Skype
Speaker 1: was a communication service that some people used and most
Speaker 1: people didn't. But I think it's still very important company.
Speaker 1: I don't know if it's actually on the road to
Speaker 1: slow obsolescence and death. I hope it's not. I hope
Speaker 1: that they're able to find ways to make better use
Speaker 1: of it, because I think that there's a there's a
Speaker 1: good story there, and it does play a very important
Speaker 1: part for people who need to be able to communicate
Speaker 1: with each other across the world and can't afford to
Speaker 1: do that through more traditional telecommunications routes. So yeah, that's it.
Speaker 1: That's the full full story on Skype so far. I
Speaker 1: hope you enjoyed this pair of episodes, and I've got
Speaker 1: a lot more stuff coming in the very near future.
Speaker 1: On next week, we've got an interview with a neuroscientist
Speaker 1: that's going to go up, and we've got another entry
Speaker 1: in the Ignobel Prize series, and of course tech News.
Speaker 1: So I hope you are all well, and I'll talk
Speaker 1: to you again really soon. Tech Stuff is an iHeartRadio production.
Speaker 1: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts,
Speaker 1: or wherever you listen to your favorite shows.