The Fall of a Giant: How Microsoft's $8.5 Billion Skype Purchase Led to Its Demise

Microsoft's $8.5 Billion Acquisition of Skype Leads to Its Impending Closure in 2025

Background

• Skype's Early Success: Once a revolutionary app, Skype allowed free voice calls over the internet and was significant enough for eBay to buy it for $2.6 billion in 2006.
• Microsoft's Acquisition: In 2011, Microsoft acquired Skype for $8.5 billion, aiming to leverage its presence in conferencing technology.

Decline of Skype

• Lack of Focus: After the acquisition, Skype received minimal attention from Microsoft, leading to a slow decline. It still remained popular among certain users, such as podcasters and tabletop gamers.
• Introduction of Teams: In 2016, Microsoft launched Teams, which unofficially replaced Skype for many users. Despite Teams' own issues, it targeted the paying market, implying that Skype was not worth paying for.

End of an Era

• Official Announcement: Jeff Teper from Microsoft acknowledged Skype's contributions but announced its closure in May 2025. The company plans to focus on Teams, aiming to deliver more innovation and simplicity.
• Impact on Users: Skype played a crucial role in establishing the internet as a necessity for audio and video communication. However, its lack of development under Microsoft led to it being overshadowed by competitors like Zoom during the pandemic.

Reflections

• Missed Opportunities: The article reflects on how Microsoft could have owned the video conferencing market during the pandemic by either improving Skype or focusing solely on Teams from the beginning. It also mentions Apple's missed opportunity to make FaceTime an open-source standard.