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Summary:

Skype is one of the most revolutionary services to hit the Internet. Long before people talked about viral growth & network effects, it swept the planet with a simple idea: anyone could make free calls over the internet. Skype celebrated its 9th birthday August 29.

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It is hard to imagine that Skype, a service that is so deeply embedded into our broadband life, is nine years old. August 29, 2003 is the official birthday of the service, which celebrated its ninth birthday just ahead of the long holiday weekend here in the United States. It is a service that started as a simple idea – free calling for everyone who had an Internet connection. That radically simple idea changed the telecom industry and the voice-calling business forever.

Looking back, it is clear as day that the service succeeded in what it set out to do. Research from Telegeography projected that at the end of 2011, Microsoft-owned Skype accounted for 33 percent of all long-distance minutes – 145 billion of the total 438 billion minutes. According to Skype CEO Tony Bates, Skype has 254 million monthly active users and is “growing somewhere around 40% year on year.”

But that success comes bearing a harsh reality: What comes next for Skype, which admittedly has lost much of its sexiness? Skype has become a default setting in our lives and today the only time it generates any excitement is when the company manages to mess up the user experience of its applications. Skype’s future was on the mind of my fellow VoIPers - a small but still very active community of bloggers who love all things pertaining to Internet Voice.

Dan York, who is amazed by the success of Skype, is wondering what happens to Skype next, especially now that it is part of Microsoft. He believes that Skype hasn’t really had a challenger for a long time — or as he put it: “Instead of the little company taking on the Man, Skype has now become the Man.” Skype is being challenged not by other VoIP players but instead by other means of communication. It is and will always be in a battle for attention. Today’s social communication tools are the enemy of Skype.

Not everyone is worried. Skype Journal’s Phil Wolff (in a colorful presentation on SlideShare) is predicting Skype inside Windows, the web version of Skype and Skype for Kindle, amongst many things that will add up to glorious things for the service. But it is not going to be that easy for Skype, which has lost some of its early simplicity and needs to work hard to improve its user experience.

In a recent interview with USA Today, Skype CEO Bates said:

It needs to become more seamless, and, quite candidly, easier to use on mobile smartphones. The big No. 1 focus for us is we see this huge shift to more and more people on the go and bringing their own devices, and we need to have the best possible experience to do that.

But there is a lot to celebrate when it comes to Skype. Andy Abramson puts it best when he writes: “Skype may have been the single most disruptive service ever to hit the telecommunications world. For starters Skype really defined the idea of “free” calling.” Amen to that!

  1. Oh yes and don’t forget SMART-TV (mobile is sooo last year) . My pre-WWII parents who want to enjoy retirement at home love Skype, though you do not see it as selling feature in the U-mart pixel-focused TV sales depts hereabouts. And the reason is the UI …. GoogleTV3.142 is launching here but I doubt it will save Sony.

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  2. I first became aware of Skype when I read an article in one of the mainstream business mags on founders Janus Friis and Niklas Zennström. They were living in Estonia at the time but the article didn’t identify their location beyond naming the country, because big telecom saw Skype’s free calling as a threat and wanted to serve Friis and Zennström with lawsuits to crush Skype.

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    1. Rich

      You might have been thinking Fortune. It was one of the earliest articles on the Skype and that was infact how many people in the business got to know about them.

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  3. One of the problems with Skype as a company is that its a bit slow in evolving and as a result there have always been other players who are now capturing the market where Skype was dominant. Take for instance Viber is growing very fast and capturing a big chunk of Skype users. Similarly I have seen more meetings now being conducted on Google hangouts. Unless Skype improves some of its shortcomings significantly they may lose their lead.

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    1. Zahid

      Couldn’t agree more. I have written in the past about why Skype is losing its sizzle and your arguments make it clear that it is facing a lot of challenge and has to reinvigorate the product. They have done nothing with GroupMe for example.

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  4. What’s next for Skype: break beyond the walled garden and federate with other VoIP providers (via IP, not PSTN). Beyond collecting users, Skype wants to grow via traffic and interconnecting should satisfy that end.

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    1. Off-topic much?

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  7. One big thing holding Skype pack was lack of over-arching enterprise services (e.g., consolidated billing, fraud support, centrally managed accounts). This should change with integration into the Microsoft ecosystem.

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  8. Skype will continue to struggle to evolve the platform and expand the product. Why? They are limited to a client-side SDK. With Skype’s present architecture, federating with other networks (there is no precedent for this being successful in any of the IM players) is impossible. But that’s only part of the story.

    Similarly, Skype’s totally decentralized architecture makes it virtually impossible to expand the service offering — everything must be done in the client. Skype’s Product Team have promised a cloud API (once called ‘SkyHost’) since at least 2005, and have never actually delivered. And they don’t just need that to enable partners.. they need it in order to be able to build service-level features that don’t depend on the client.

    So while Skype has lots of room to grow, the thing holding them back is the very thing that made them successful. I wouldn’t look to them to do anything particularly innovative apart from deploying the SDK onto more and more platforms and expanding their device reach. Everything to the north of those efforts is both difficult and risky.

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    1. Well said Ian. You and I have often talked about these very same issues for a long time, though not lately.

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    2. isn’t that what IMO is doing (including skype and a few others)? so why would that be so hard to replicate that federation in a skype client? I think its more of a business strategy than technology which prevents this..

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  9. I can’t believe Skype is already 9 years running strong. I love Skype. Thanks to Skype, I can contact my family anytime I want. Great article, Om Malik!

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  10. I can’t believe Skype is only 9 years old. I completely take it for granted- using it every day at work, etc.

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