What went wrong with Skype?

Skype was Microsoft’s biggest-ever acquisition in 2011, a deal brokered by former CEO Steve Ballmer when the company was trying to compete with the rise of the iPhone. But after spending $8.5 billion on Skype, Microsoft dropped the ball again and again over the past 14 years, to the point where Skype was so irrelevant during a global pandemic that everyone used Zoom instead.

Skype has been relegated to a forgotten relic of an era before Google and Apple’s mobile dominance, and Microsoft is now laying it to rest alongside other failed mobile efforts like Windows Phone. It wasn’t always this way, though.

In early 2012, a few months after Microsoft’s acquisition, I visited the Skype offices in Stockholm that engineers had just moved into. Skype had just passed 41 million concurrent users, more than even Steam’s recent record. Skype was so popular at the time that people kept stealing the Skype signs outside its offices, so the company simply stopped replacing them.

Inside the Skype Stockholm office, I met engineers who were excited and nervous about Microsoft’s acquisition, but who had been reassured by a visit from Ballmer, who shook their hands and promised that Microsoft was investing in the team to double its size from 100 employees to 200 by the end of 2012. While that investment happened, Microsoft closed the Stockholm office five years later as it reorganized engineering teams.

The one thing that struck me from that visit was that Skype’s office felt nothing like a typical Microsoft office: there was no formal dress code, the walls were covered in special acoustics panels, and meetings were held over Skype’s network. Some Skype employees told me at the time that they were struggling to get used to the heavy use of email by Microsoft’s various teams. It was an early sign that integrating Skype into Microsoft’s way of working was going to be more challenging than just updating software.

In the early days of the Skype division at Microsoft, the team was focused on building a new version of Skype for a touch-friendly version of Windows. Rick Osterloh, former head of Skype products and design, told me during my 2012 visit that “Windows 8 is a big focus for us.” Osterloh, who now oversees Google’s devices and services efforts, left Skype just months after my visit and rejoined Motorola Mobility. Skype shipped a Windows 8 app the same year Osterloh left, with huge backend changes that were supposed to prepare it for a mobile future.

As Skype increasingly turned its focus to mobile, the problems with overhauling its aging peer-to-peer infrastructure started to emerge. Microsoft began migrating Skype users to its Messenger platform in 2012, which previously helped power MSN Messenger, to improve the ability to send chat messages and pick up calls on multiple devices. This transition lasted years and resulted in many bugs, including calls, messages, and notifications repeating on multiple devices. There were countless app redesigns, and basic problems with calling and messaging were becoming apparent. I wrote in 2016 that “Microsoft needs to fix Skype” after a painful couple of years of issues with the service.

Microsoft was too busy adding emoji and trying to compete with the rise of WhatsApp, FaceTime, Snapchat, and Facebook Messenger that it had fallen short on the very basics of Skype. It had gotten to the point, in 2016, where people were using Skype begrudgingly, simply because it was ubiquitous and nothing had replaced it yet.

Instead of addressing the many fundamental issues with Skype calling and messaging, Microsoft went ahead and introduced a radical redesign of Skype in 2017 that didn’t go down well. The layout looked nothing like Skype and resembled something more like Snapchat. Microsoft was forced to redesign Skype once again in 2018 and walk back the Snapchat-like changes, but it was too late. WhatsApp, Messenger, FaceTime, WeChat, Line, and Telegram had already become entrenched by then, offering easy video calls and reliable messaging.

I wrote in 2018 that it would be “difficult for Microsoft to now win back consumer trust when there are now so many reliable alternatives,” and that’s exactly what happened. Microsoft’s Skype struggles created a Zoom moment in early 2020, when the covid-19 pandemic forced everyone to use video and voice calls to connect with friends and family. Instead of heading to Skype, consumers picked Zoom for its ease of use and reliability.

In response, Microsoft quickly pivoted its consumer focus to Teams, launching a personal version in the middle of 2020. That’s what is slated to replace Skype in May. Teams doesn’t try to compete with WhatsApp, Messenger, or other chat apps; instead, it’s there for people who want to do more than just chat and is designed around groups of friends or family activities.

There’s no longer a Skype division inside Microsoft, and there hasn’t been for some time. What’s left of the Skype team has been combined with the Teams org and will work on future features of the app.

Microsoft might have stumbled with Skype, but this acquisition helped bring Teams to life in 2016, and it even acted as a bridge to transition business users from its Lync enterprise messaging software to Skype for Business and, eventually, Teams.

“It’s very much true that a lot of the learning from Skype and some of the code evolved into Teams,” said Jeff Teper, president of Microsoft 365 collaborative apps and platforms, in an interview with The Verge recently. “The calling and message infrastructure did evolve, on the backend, out of the Skype codebase. At this point the amount of code that’s different is extremely high, but there was definitely an evolutionary path of us learning how to do A/V calling.”

Now, we wait to see how Microsoft Teams will fare on the consumer side. While Teams has 320 million monthly users overall, the vast majority of those are business users. Teams is still a little clunky for personal use, despite the company moving to a single app for personal and work. None of my friends or family members actually use Teams outside of the office, but I get a sense that Microsoft might be fine with serving this smaller market. After all, Microsoft’s early experiences with Skype helped it build a communications platform that now makes its paid Microsoft 365 subscriptions even stickier.

MSN Messenger and Skype walked so Microsoft Teams could run, but given the amount of complaints I hear about Teams these days, I don’t know that Microsoft has moved past the issues it faced with Skype 10 years ago. I often run into issues joining Teams calls because of the complexities of switching tenants, or just because I’m using a personal Microsoft account and Teams gets confused. I also have two Teams icons in my system tray for some reason.

Compared to Slack, the messaging part of Teams is still very basic, although Microsoft is looking to address that with threads and combined chats and channels soon. There are plenty of areas for improvement with Teams, and while the faster and redesigned client is a good step in the right direction, it should be the foundation for bigger changes. The Teams complaints are growing — Microsoft will need to address them a lot faster this time if it wants to avoid another Skype situation.

What do you think about Microsoft killing off Skype? Drop a comment here, or you can always reach me at notepad@theverge.com if you want to discuss the Xbox AI changes in more detail. If you’ve heard about any of Microsoft’s secret projects, you can also reach me via email at notepad@theverge.com or speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram, if you’d prefer to chat there.

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