Skype was founded in 2003 by
Janus Friis from Denmark and
Niklas Zennström from Sweden, having its headquarters in
Luxembourg with offices now in
Berlin, Frankfurt,
Tallinn,
Tartu, Stockholm, London,
Palo Alto, Prague, and
Redmond, Washington. The Skype software was originally developed by Estonians
Ahti Heinla,
Priit Kasesalu, and
Jaan Tallinn, who together with
Janus Friis and
Niklas Zennström were also behind the peer-to-peer file sharing software
Kazaa. In April 2003, Skype.com and Skype.net domain names were registered. In August 2003, the first public beta version was released. One of the initial names for the project was "Sky peer-to-peer", which was then abbreviated to "Skyper". However, some of the domain names associated with "Skyper" were already taken. Dropping the final "r" left the current title "Skype", for which domain names were available. In September 2005, SkypeOut was banned in China. In October of the same year,
eBay purchased Skype for $2.6 billion. (In 2011, the
Ars Technica estimated the purchase price at $3.1 billion, not $2.6 billion.) In December 2005,
videotelephony was introduced. In April 2006, the number of registered users reached 100 million. In October 2006, Skype 2.0 for Mac was released, the first full release of Skype with video for Macintosh, and in December, Skype announced a new pricing structure, with connection fees for all SkypeOut calls. Skype 3.0 for Windows was released. In 2006, a feature called "Skypecasting" was introduced as a beta. It allowed recordings of Skype
voice over IP voice calls and
teleconferences to be used as
podcasts. Skypecasting remained in beta until it was discontinued on 1 September 2008. Skypecasts hosted public conference calls for up to 100 people at a time. Unlike ordinary Skype p2p conference calls, Skypecasts supported moderation features suitable for panel discussions, lectures, and town hall forums. Skype operated a directory of public Skypecasts. Throughout 2007, updates (3.1, 3.2, and 3.5) added new features including Skype Find, Skype Prime, Send Money (which allowed users to send money via
PayPal from one Skype user to another), video in mood, inclusion of video content in chat, call transfer to another person or a group, and auto-redial. Skype 2.7.0.49 (beta) for Mac OS X released adding availability of contacts in the Mac Address Book to the Skype contact list, auto redial, contact groups, public chat creation, and an in-window volume slider in the call window. During several days in August, Skype users were unable to connect to full Skype network in many countries because of a Skype system-wide crash which was the result of exceptional number of logins after a Windows patch reboot ("
Patch Tuesday"). In November, there was controversy when it was announced that users allocated certain London
020 numbers (specifically those beginning '7870') would lose them, after negotiations with the provider of this batch of numbers broke down. By early 2008, the tumultuous ownership relations between the founders and eBay had resulted in significant leadership churn, with a succession of Skype presidents including Niklas Zennström, Rajiv Dutta, Alex Kazim, Niklas Zennström (again), and Henry Gomez, all holding that title at various points between 2005 and 2007. The business had failed to meet certain earn-out targets, growth was decelerating, product development had slowed significantly, and in October 2007 eBay took a $1.4 billion 'impairment' on the value of Skype, admitting it had overpaid, and now valuing the company at about $2.7 billion. In October 2008, analysis revealed TOM-skype — the Chinese version of Skype run by TOM Online — sent content of text messages and encryption keys to monitoring servers.
Two original founders depart, new CEO, and the eBay years For the six months after the departure of Zennström and Friis, Michael van Swaaij led the company as interim CEO, until the appointment of
Josh Silverman in February 2008. Silverman was "widely viewed as bringing in stability to Skype after a tumultuous phase that followed the exit of the two Skype co-founders." Under Silverman's two-and-a-half-year tenure, the company focused its product efforts around video calling, ubiquity (gaining high penetration on smartphones, PCs, TVs, and consumer-electronic devices), building tailored offerings for enterprise customers, and diversifying revenue through subscriptions, premium accounts, and advertising. In advancing this strategy, Skype released many new products, substantially revamping its flagship
Windows software (3.8 -> 4.0), and its
macOS and
Linux software; while introducing new software products for smartphones, and consumer electronics. In 2009, Skype 4.0 was released, featuring full-screen high-quality video calling. the Linux client was updated, and an
iPhone application was launched which topped the charts with over 1M downloads in its first two days. Skype also announced the launch of its software for the
Android platform. During this period, Skype also discontinued lesser-used services such as support for the "Skype Me" presence indicator, which meant that a user was interested in receiving Skype calls from a non-contact. Skype also discontinued its SkypeCast service without explanation and added internal monthly and daily usage caps on their SkypeOut subscriptions, which had been advertised as "unlimited". Skype also discontinued its "dragonfly" feature, a community-generated yellow-pages product, and other features which were deemed to be under-performing or a distraction to management. Many users and observers had commented on the high rate of dropped calls and the difficulty reconnecting dropped calls. Updates including versions for the
Sony PSP handheld video game console, version 2.0 for Linux with support for video-conferencing. As part of its efforts to diversify revenues, Skype launched in April 2008
Skype for SIP, a service aimed at business users. At that time around 35 per cent of Skype's users were business users. In targeted premium products to consumers, Skype launched new monthly premium subscriptions products in May 2010. Marketing efforts were also revamped, with a particular focus on innovative partnerships with TV broadcasters to integrate Skype into their programming.
The Oprah Winfrey Show began using Skype regularly to host video calls between Winfrey and her viewers at home, culminating in a show dedicated exclusively to the wonders of Skype ("where the Skype are You", aired first in May 2009). Skype also became commonly used by network news stations around the world, as a cost-effective replacement for sending
satellite trucks, and enabling fast response from citizen journalists. Skype was also integrated into scripted TV programming, such as
Californication; and in the seventh season of the U.S. syndicated version of the British game show
Who Wants To Be a Millionaire in a new
Ask the Expert video chat lifeline. These efforts led to accelerating growth of Skype's Connected Users and Paying Users and by 2009 Skype was adding about 380,000 new users each day. By the end of 2009 Skype was generating around
US$740
million in revenue. In January 2010, Josh Silverman was recognized for his accomplishments at Skype by being named First Runner Up in the TechCrunch "Crunchies" award for "Best CEO", beaten only by
Mark Pincus of
Zynga.
Independence and Silver Lake Building on the revitalization which had begun in 2008,
eBay announced, in April 2009, plans to spin off Skype through an initial public offering in 2010. In August,
Joltid, Ltd. filed a motion with the U.S. Securities and Exchange Commission, seeking to terminate a licensing agreement with eBay which allowed eBay (and therefore Skype) to use the
peer-to-peer communications technology on which Skype is based. If successful, this could have caused a shutdown of Skype as it existed, and made an
IPO challenging to execute. In September, eBay announced the sale of 65 per cent of Skype to a consortium of
Index Ventures and
Silver Lake Partners. Early in September, Skype shut down the Extras developer program. In November, Skype settled the Joltid litigation and acquired all Skype technology in exchange for equity in the company and eBay completed the sale of 70% of Skype to a consortium comprising Silver Lake Partners, Joltid,
CPPIB, and
Andreessen Horowitz for approximately $2 billion, valuing the entire business at US$2.75 billion. In May 2010, Skype 5.0 beta was released, with a capacity to support group video calls involving up to four participants. Also in May, Skype released an updated client for the Apple iPhone that allowed Skype calls to be made over a 3G network. Originally, a
3G call subscription plan was to be instituted in 2011, but Skype eventually dropped the plan. Rounding out its ubiquity push, Skype also announced deep integration of Skype software into the IP-connected TVs from
Panasonic,
Samsung, and
Sony. In June 2010, following the rapid departure of Daniel Berg, the chief technology officer, and then chief development officer Madhu Yarlagadda,
Mark Gillett, an
operating partner at Silver Lake Partners, assumed the role of chief development officer, taking responsibility for development of Skype's client software, cloud services, and product management following a period of several months working closely with Joshua Silverman to drive the transformation of the business, and the acceleration of cross-platform and mobile product delivery. With its newfound independence and under ownership, Skype's growth accelerated and by 2010,
Telegeography estimated that Skype accounted for 25 per cent of the world's international calling minutes. According to their research, the overall international calling market grew a tepid 5 to 6 per cent annually in 2010. "Skype, however, has seen a huge uptick in growth, particularly in the last two years." On 9 August 2010, Skype filed with the
United States Securities and Exchange Commission (SEC) to raise up to US$100 million in an
initial public offering. Sources reported that the company expected to raise at least US$1 billion. In October 2010, Skype announced the appointment of
Tony Bates as CEO; Bates was a senior VP at
Cisco and was responsible for its multibillion-dollar enterprise, commercial, and small business division. On 14 October 2010, Skype 5.0 for Windows was released with a number of improvements and feature additions, including a Facebook tab to allow users to SMS, chat with, or call their Facebook friends via Skype from the News Feed. The "Search for Skype Users" option was omitted from this version. On 14 January 2011, Skype acquired
Qik, a mobile video-sharing platform. In March 2011, Skype named Jonathan Chadwick as its new chief financial officer and confirmed that Mark Gillett would serve full-time as chief development and operating officer following the departure of chief financial and administrative officer Adrian Dillon.
Microsoft subsidiary (2011–2025) On 10 May 2011,
Microsoft announced it had agreed to
acquire Skype for $8.5 billion. This marked a 300% increase in value for the company in the three years since the eBay write-down in October 2007. This constitutes Microsoft's second largest acquisition to date. It was announced that Skype would become a division within Microsoft, with Skype's former CEO
Tony Bates —now its president— reporting to Microsoft CEO
Steve Ballmer. The price Microsoft agreed to pay for the company is 32 times Skype's operating profits.
Ars Technica and the
BBC have questioned the value for Microsoft in the purchase. Microsoft's acquisition of Skype got EU approval on 7 October 2011. In October 2012, one year after the closure of the Skype acquisition, the newly formed Skype Division took responsibility for Microsoft's other VoIP and Unified Communications product
Microsoft Lync. On 11 July 2013, Microsoft's then-CEO Steve Ballmer announced a reorganization of Microsoft along functional lines and with four engineering groups each led by a senior leader. Microsoft's new Applications and Services Group, led by executive vice president
Qi Lu was to include Skype along with Bing and Microsoft Office. Following a period where the strategy for the Skype business as a part of the broader Microsoft portfolios including Office 365 was established, and Skype's share of the international communications market rose to 36 percent (over 214 billion minutes),
Mark Gillett announced that he would be leaving Microsoft to return to
Silver Lake. In September 2016, after Qi Lu stepped down from Microsoft, Skype and Office became part of the Office Product Group, led by Rajesh Jha. The other part of the former Apps and Services Group (which includes Bing) became part of a new AI and Research Group. Between 2020 and 2023, Skype lost daily users, mainly to its main competitor,
Zoom. On 28 February 2025, Microsoft announced Skype's retirement on 5 May 2025, with Microsoft instead focusing on
Microsoft Teams, its proprietary videoconferencing software. ==Palo Alto office==