The legendary era comes to an end! Microsoft officially announced the shutdown of Skype on May 5th. Why has the once pioneering communication tool fallen into decline?

Once a global sensation that changed the way people communicate, Skype ultimately could not withstand the tide of the times.

Microsoft announced on Friday that the 21-year-old calling and messaging service will officially shut down on May 5, encouraging users to switch to Microsoft's free app, Teams.

Jeff Teper, President of Microsoft 365 Collaboration Apps and Platforms, stated:

"Over the years, we have learned a lot from Skype and incorporated those experiences into Teams. Over the past seven to eight years, we have continuously improved Teams, but we believe it is now time to simplify the market and user experience. By focusing on Teams, we can deliver more innovative features faster."

Microsoft stated that in the coming days, users will be able to log into Teams directly using their Skype accounts, and Skype contacts and chat history will be automatically transferred. Users will also have the option to export their Skype data. Meanwhile, the company will stop selling Skype subscription services, but any remaining balance that users have will still be usable in Teams.

Looking back at Skype's history, it was once a pioneer in global internet voice calls, influencing the communication methods of a generation, but gradually declined in the wave of mobile internet and cloud computing.

How did the once global calling pioneer fall into decline?

In 2003, Janus Friis and Niklas Zennström launched Skype in Estonia, collaborating with a group of classmates with no telecom experience to create this VoIP (Voice over Internet Protocol) software. The name Skype comes from "sky peer to peer."

With the advantage of free online calls, Skype quickly swept the globe. In 2004, the number of users surpassed 11 million; by 2005, the user base grew to 54 million, with projected annual revenue reaching $60 million. This astonishing growth caught the attention of eBay, which ultimately acquired Skype for a high price of $2.6 billion.

At that time, eBay planned to use Skype to enable direct communication between buyers and sellers, increasing the transaction rate for high-priced items and profiting from the calling feature, while Skype's global users could also access eBay and PayPal. Under eBay's management, Skype's user base continued to grow, exceeding 405 million in 2008, and revenue from communication services also increased.

However, with the outbreak of the global financial crisis in 2008, eBay's performance turned negative, and its stock price fell to its lowest point since 2001.

In 2009, eBay's new CEO John Donahoe believed that Skype had not brought significant benefits to eBay's core business and decided to spin it off, planning to take it public through an IPO (Initial Public Offering). However, four and a half months after announcing the IPO plan, eBay reversed its decision and announced the sale of Skype to an investment group led by Silver Lake for $2.75 billion, while retaining a 30% stake.

The investment group also attempted to take Skype public, but ultimately failed. It wasn't until 2011 that Microsoft acquired Skype for $8.5 billion, earning eBay over $2 billion in returns At the time of acquisition, Skype had reached 170 million monthly active users. Microsoft CEO Steve Ballmer believed that the collaboration between Microsoft and Skype could provide hundreds of millions, even billions, of users with new and interesting ways to communicate, and planned to integrate Skype with several Microsoft products.

However, Skype did not achieve its goal of 1 billion active users as hoped. With the rise of mobile internet, the way users communicate underwent significant changes: Apple's iMessage and FaceTime became popular on iOS devices, and in 2014, Facebook acquired WhatsApp and launched international calling features. Tencent's WeChat also expanded globally.

In the face of competition, Skype underwent multiple interface redesigns but faced criticism from loyal users. Meanwhile, Microsoft took a different approach and launched Microsoft Teams in 2016, positioning it as an enterprise-level collaboration tool, deeply integrated with Office productivity software, directly challenging the emerging competitor Slack at the time.

During the pandemic, the demand for remote work and online learning surged, with a large number of users needing to use video calls. Although Skype's usage increased, users preferred Zoom, and Cisco, Facebook, and Google also offered video services. Additionally, Microsoft focused its main efforts on Teams, resulting in a growing number of Teams users, which exceeded 320 million by 2023. In contrast, Skype's daily active users dropped from 40 million in March 2020 to 36 million in 2023, no longer being a market leader.

Microsoft CEO Satya Nadella has not mentioned Skype in earnings call meetings since 2017, and the product's status has been marginalized.

In light of Teams' strong growth, Microsoft ultimately decided to abandon Skype and officially shut down the service on May 5. Users can transition to Teams, retaining their original contacts and chat history.

Microsoft executive Jeff Teper reflected on Skype's history, stating:

"Looking back at Skype's development, a significant landmark shift was the rise of mobile and cloud, which profoundly changed the communication industry."