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The Evolution of Skype

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Today, Skype is known as the web's leading communications company, connecting hundreds of millions of customers around the globe with voice calls, video calls, and instant messaging. The service has over 521 million users and incredibly carries 13% of the world's total international calling minutes, enough to make it the world's largest voice carrier. But Skype wants to be known for much more than that.

Last Tuesday, the company announced the beta version of the SkypeKit Software Development Kit, which will allow consumer electronics device manufacturers and desktop application developers to build Skype-powered voice and video calls into just about any internet-connected device. The SDK is Skype's bid to expand its business far beyond it's current personal computer to personal computer stronghold. It will enable the service to be integrated with the many devices that were once strictly offline but are now becoming linked to the internet. The possibilities are abundant and far-reaching: Television manufacturers could build Skype video chatting into the next generation of internet-connected televisions, automakers which are already beginning to build connected cars could integrate Skype for in-car calling, and so on and so forth.

SkypeKit is the company's latest effort to try to turn Skype's enormous user-base into larger revenue streams. For all of its hundreds of millions of users, Skype's latest reported quarterly revenues (from Q3 2009) were a relatively small $185 million, which averages out to just over $1.42 in revenues per user annually. In fact, many people have thought recently that Skype would never be able to fully monetize its large userbase, and that the business was bound to fail. But now, with these new integration possibilities, it is starting to look like Skype may succeed after all. Let's take a look back at how Skype has gotten to where it is now:

August 2003: Skype is first released to the public, created by the same group of Estonian developers behind the popular and controversial peer-to-peer file sharing service Kazaa. At this point, the service is simply Skype to Skype audio calls and instant messaging.

July 2004: SkypeOut launches, allowing users to call external landlines anywhere in the world via Skype at highly competitive local rates.

April 2005: SkypeIn launches, offering users the ability to receive calls from external landlines with Skype with a monthly subscription. Combined with SkypeOut, SkypeIn gives users the option to use Skype as a fully-capable internet softphone. 

October 2005: eBay purchases Skype for approximately $2.5 billion.

December 2005: Skype incorporates video capabilities into its Skype to Skype service. Videotelephony is a major update to Skype's product, attracting many new users and changing the way customers use the service.

April 2006: Skype reaches 100 million users.

2006-2009: Many feel that Skype languishes under eBay's ownership. Aside from the introduction of Skype for SIP and video capabilities, which surely must have been developed and prepared before the eBay purchase, Skype's product remains largely the same, with no major changes to the way the application is utilized by most consumers.

March 2009: Skype launches Skype for SIP, allowing companies with SIP-enabled phone systems to receive calls from Skype users directly as Skype-to-Skype calls, and to make calls over Skype using Skype's low international rates. Skype for SIP represents a bid to enter the business VoIP market as a low-cost alternative to higher-end VoIP systems.

September 2009: eBay sells Skype to an investor group in a deal valuing the company at $2.75 billion, just barely more than eBay purchased it for in 2005. Over that time, eBay reportedly wrote down nearly $1 billion of the deal's value after realizing that supposed synergies weren't going to work out as anticipated.

Also in September 2009, Skype for SIP becomes more viable as Skype announces interoperability with Cisco and Avaya UC equipment.

And, after a series of interviews with Skype exec Jonathan Christensen, TechCrunch's Michael Arrington predicts that Skype will eventually release a software development kit that "allows developers to integrate deep into Skype and make calls over the Skype service without opening the Skype client. In other words, people may start to think of Skype (voice, video, chat) as a service rather than a client that must be installed and used to communicate." Which sounds exactly like the SkypeKit SDK that we're seeing now. Very prescient, Mr. Arrington.

November 2009:  Om Malik of GigaOm interviews Skype CEO Josh Silverman about the company's platform plans. Silverman confirms: “We want Skype to be embedded in more and more devices, and we want to offer our APIs for developers to embed into their applications."

January-March 2010: Skype announces platform support on iPhone, Android, Blackberry, and Symbian smartphones, as well as on compatible Verizon Wireless smartphones through an agreement with the mobile carrier. This is a major step towards moving Skype off the personal computer and onto other consumer devices.

June 2010: Skype announces SkypeKit SDK, and hopes that a widespread adoption will see Skype moving into a wide variety of internet-connected products as a prevalent communication tool. Integrating with Apple's new FaceTime, with its open standards, may be just one of many interesting possibilities.

However, Skype has tried this sort of thing before. Way back in November 2004, before eBay came into the picture, Skype announced the Skype API Beta, which allowed developers to incorporate Skype into their applications. However, the API clearly never really took off and was criticized as being limited, and Skype as being developer un-friendly.

Skype certainly hopes that the new SkypeKit SDK will be far more successful. The last 3 years have brought a change in developer mindset that has made many more open to utilize others platforms (see iPhone, Android, Salesforce) for development of their apps. This bodes well for Skype's new initiatives, and hopefully for our new universally connected devices.