Article by Christos Kotsakas*
May 10th, marks 9 years since Skype, the popular VoIP app with millions of users around the world, passed into the hands of Microsoft. However, the history of this service goes through pubs, legal entanglements and a music file sharing application: Kazaa.
In the early 2000s, Napster was at the heart of the tech world. It is a peer-to-peer application through which users can download, completely free (and illegally) any piece of music they wish from the collections of other members. Napster, although revolutionary, will be in the spotlight of the music industry (and Metallica), as both users and the service do not have the relevant licenses for the music they exchange.
Towards the end of the first wave of applications of this kind, Kazaa will appear, an application developed by the Estonian developers of BlueMoon Interactive. Swedish Niklas Zennstrom and his Danish friend Janus Friis, after leaving the Danish Tele2, where they worked on the presentation of the internet service provider get2net and portal everyday.com, will develop Kazaa with the help of other developers.
The application allowed the transfer of files directly from the computer to another without an intermediate server, thus solving one of the most important problems of Napster. Kazaa will be available to the public in September 2000 and will quickly become the application with the most downaloads, worldwide, gaining a new user every second. Its developers (Estonian Heinla, Tallinn and Kasesalu) drink wine and think “so it’s like feeling half of the global internet traffic going through your software”.
But on the business side, Zennström and Friis fail to reach agreements with American film and music giants. As a result, Kazaa will be sued for piracy. “Stolen” copies of music, movies and pornography will be distributed through the network of the application and its owners will soon be the target of an army of American lawyers. They will avoid court summonses, will pay attention to every visitor to their offices and will encrypt their every communication.
And while legal disputes will continue – with Kazaa taking its own course, being acquired, licensed and following other procedures, the “company” behind its development already had other ideas on how to took advantage of the peer-to-peer technology on which the network was based. And somewhere in the summer of 2002, the first foundations were laid for what would later become one of the most revolutionary communication applications.
The group’s office in Tallinn was located behind the Stenbock House, then the seat of the Estonian government. On their way, the team was often in one of the city’s favorite spots, Valli Bar. The pub will go down in history later because every new employee or visitor had to go through it. This experience also included Millimallikas, a notorious cocktail consisting of aniseed vodka, tequila and Tabasco sauce.
The moment they will shout “Eureka” is when they decide that they could take advantage of Kazaa’s technology for direct calls between computers. In the spring of 2003, an early version of the app will be available for testing in a closed group of 20 people. The service had problems. The sound was not good. But when the experimenters realized that they could now talk on the computer to people on the other side of the world for free, their minds changed. The foundations for Skype had been laid.
At first, the service did not make money and faced serious financial problems, with investors being skeptical and nervous after the dot-com bubble. William Draper, an American investor, was one of the few who thought it was the right time to invest in P2P technology. His “envoy” Howard Hartenbaum will arrive in Europe for an agreement with Zennström and Friis. Hartenbaum wanted to invest in the team, whatever they wanted to do, whether they had a product or not. They already had unwavering confidence in Kazaa.
Skype will be available to the general public for the first time on August 29, 2003. The Skype team, which consisted of about 20 people, will celebrate in Stockholm by watching Startup.com, a documentary about the technological “explosion”. On the first day, it will be downloaded by 10,000 people. Within a few months, it will have a million users. The name of the project came from the words “sky” and “peer”. Following the example of Napster and others, the name will be abbreviated to “Skyper”. But because the Skyper.com domain name was already available, the “r” was cut off.
On September 12, 2005, eBay agreed to acquire Skype Technologies for a sum of up to $ 2.5 billion. On September 1, 2009, eBay announced that it was selling 65% of Skype to Silver Lake, Andreessen Horowitz and the Investment Board of the Canadian Retirement Program for $ 1.9 billion, estimating Skype at $ 2.75 billion. On May 10, 2011, Microsoft Corporation will acquire Skype Communications for $ 8.5 billion. The company was absorbed as part of Microsoft, which acquired all its technologies. The acquisition was completed on October 13, 2011.
Shortly after the acquisition, Microsoft began incorporating Skype into its own products. Along with the development of the existing application for desktops and mobile phones, the company has developed an exclusive application for Windows 8 and Windows RT operating systems. The following year, the default messaging app for Windows 8.1 was made, replacing Windows 8 Messaging, and pre-installed software on every Windows 8.1 device.
In addition, Microsoft discontinued its Skype applications: in a one-month transition period, from April 8 to 30, 2013, Microsoft stopped the long-term Windows Live Messenger messaging service, although Messenger continued in mainland China. On November 11, 2014, Microsoft announced that in 2015, Lync would be replaced by Skype for Business.
Skype was the main way consumers talked to each other over the Internet, with video calls accounting for 40% of total usage in 2011. It had become so big that in 2011 “The Onion” joked that it would be added to dictionary. Three years later, the verb was added to the Oxford English Dictionary, noting how popular the service was. In recent years, Skype has evolved into a Microsoft application, and for some time now it has no longer used peer-to-peer technology, as in the beginning, but MS servers.
However, Microsoft faced major challenges early on to turn Skype into a profitable business and keep it competitive. Today, in the age of pandemics and social constraints, Skype seems to be not the main application that users choose for communications, with options such as Zoom gaining more and more adoption.