When a product doesn’t fit: Skype’s decline inside Microsoft

Microsoft is shutting down its Skype service in May, 14 years after it paid $8.5 billion for the once pioneering video calling company. Skype users will be migrated to Teams. The service had 36 million users in 2023, when Microsoft last reported user numbers, compared with 300 million users at its peak.

It’s a decision that has surprised no one. It illustrates how often big tech companies struggle to integrate acquisitions, despite their huge resources, and how such attempts can be plagued by problems like mismatched strategies, difficulties integrating products, rebranding failures, user backlash and culture clash. 

And while not all of the above apply to Skype, the decision follows years of challenges and missteps to integrate Skype into the Microsoft product suite. MS already had a number of comms tools when it bought Skype (from eBay, who had bought it in 2005 and then couldn’t find a use for it), including Lync for enterprise users and Messenger for personal chat. Caught between enterprise and consumer, Skype struggled to find its place in the MS ecosystem, a problem which was exacerbated when Teams was launched in 2017. Skype for Business was discontinued in the same year. 

A 2017 redesign also proved a disaster. Microsoft rolled out a Snapchat-inspired redesign for Skype that focused on emoji reactions, highlights, and bright colours rather than functionality. Users hated it, saying it was an aesthetic nightmare and was less productive than previous versions. MS had to roll back the redesign the following year. Not only that, but Teams was built from the ground up for Cloud use, whereas Skype, which was built on peer-to-peer technology, had to be retrofitted to MS Azure cloud services, and was consequently less efficient. 

As Microsoft has focused its efforts on Teams and newer apps like Zoom have gained ground, Skype - burdened with technical debt - simply got left behind. It’s an old story, and Skype was simply an aging product where the effort and cost of extending its lifecycle had become too big. Its ownership by Microsoft hasn’t helped, if it had been an important product for a smaller organisation then more might have been done to manage its maturity and extend its lifecycle.  Microsoft never had a clear strategy or vision for Skype and never clarified its role once Teams started to dominate. 

For Skype users, logging into Teams with a Skype account will automatically transfer chats and contacts, so users can continue conversations and keep their data, according to Microsoft. Users who don’t want to switch to Teams can export their data, including chats, contacts, and call history.

A statement from Jeff Teper, MS President, Collaborative Apps and Platforms, tried to soften the blow for Skype users, saying that Skype has been an integral part of shaping modern communications and supporting countless meaningful moments: “We also understand that change can be challenging and want you to know that we’re here to support you every step of the way.”

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