You might know this iconic ringtone, but probably haven't heard it in years.

The blings and ringtones and so forth.

It's nostalgic to me.

It all started here in the tiny country of Estonia, only 12 years after

the collapse of the Soviet Union.

A group of childhood friends teamed up with two Scandinavian entrepreneurs to transform

the way we communicate across borders with an app called Skype.

Skype came out in the early 2000 as a way for people to

communicate mainly by voice calls over the Internet.

It was basically an alternative to using your phone.

Right now, this is completely commonplace.

Back then, that was not the case and Skype was the first to really bring this to the masses.

This is the story of Skype and how it went from hundreds of millions of monthly users to a

nostalgic sound of the past.

CNBC explores Skype's past its present and what's next for the company after it

was one of Microsoft's biggest acquisitions in 2011.

Skype was launched in 2003 after Scandinavian entrepreneurs Niklas

Zennström and Janus Friis teamed up with four Estonian tech developers and former

schoolmates Jaan Tallinn, Priit Kasesalu, Toivo Annus and Ahti

Heinla. Heinla left Skype in 2008 and now runs Starship Technologies,

a robot delivery business.

As the Chief Technical Architect at Skype, he helped design it from the ground up.

It took a relatively short amount of time, I think about nine months, to develop the initial

concept. We were smart engineers.

We learned on the go.

None of us had any telecoms background.

I think that was the key thing about why it worked so well.

It didn't look like telecom.

It didn't behave like one.

So there were such outsiders, so they thought completely differently about what

they could do with Skype.

Jaan Tallinn was a founding engineer at Skype, and he went on to start the Centre for the Study of

Existential Risk at the University of Cambridge.

At the time we started Skype, we already had like a bunch of experience from a previous project,

things like Kazaa and a few other projects that didn't go anywhere.

Even more importantly, before that, we had experience programing computer

games for a decade.

The group used knowledge.

They learned building Kazaa, a peer-to-peer file sharing platform that at the time was one of the

world's most downloaded Internet softwares to build Skype.

Skype stands for Skype peer-to-peer.

The software initially used Voice Over IP technology, which allowed users to make and

receive calls over the Internet, and it caught on quickly growing to over 11 million users

in its first year.

The fact that Skype is going to be big became clear.

Like pretty much in the first day.

One thing that we did borrowed from Kazaa was this online counter, like how many users

are currently connected?

And then this like when we launched Skype, we started calling our friends and come on, come

online. We need to need to make the number go up.

And suddenly we saw like the numbers that just like going up like crazy

withou, without any any help from our friends.

It really captivated people.

10,000 people downloaded and installed our app on the first day.

It was a very big number back in 2003.

It immediately signaled to everybody that this is something really successful.

This is something that that will really catch on and and very soon it was not 10,000, but it was

100,000. It was a million.

It was 10 million and so forth.

It snowballed from there.

In the same year the app was launched, laptop sales surpassed desktop sales for the first time,

and by 2005, Skype had 59 million registered users and had been downloaded more than

182 million times worldwide.

One thing that really helped Skype to be successful is that it is a product that you as a

consumer can not possibly use alone.

You have to tell somebody else that, hey, you know, you get this app as well because then you

can talk to me for free over the Internet and we can see each other and so forth.

So that meant that people naturally talk to each other immediately.

I never really experienced anything that easy to use,

even if the quality wasn't that great before that.

Like it was just so dead simple.

Skype's early success made it attractive to investors.

In 2005, eBay bought Skype for $2.6 billion under then

president and CEO Meg Whitman with the idea of integrating online shoppers and

sellers.

A lot of people after the acquisition started criticizing eBay

that, you know, why did they do this?

You know, was the acquisition price too high?

They completely didn't understand the complexity of the product, how difficult it would

be for them to actually make it work with eBay.

Despite skepticism, Whitman praised the acquisition.

What we bought was the leader in voice communications in every country of the world.

We think we bought a tremendous business in addition to some really interesting synergies with

PayPal and eBay. And as a result, we feel like we paid a fair price.

It's true that under eBay we can say that Skype grew

in terms of users and in terms of the number of minutes people were paying to call from Skype

to landlines and mobile phones.

That's great. But ultimately what happened is that there were no synergies

that Meg Whitman had imagined.

In 2008, John Donahoe took over as president and CEO of eBay and he wanted

Skype gone.

And the only question was, was there synergy with eBay's other businesses?

And the answer to that is no.

I thought it was a ludicrous idea, and I still think it's a ludicrous idea.

I mean, there's a reason why it didn't work out and they had to spin out the company and sell it

again.

Ebay decided to sell Skype briefly exploring IPO options, but settling on selling the

majority of its stake to private equity firm Silver Lake in 2009.

The deal valued Skype at $2.75 billion.

Ebay retained a 30% stake in the company and gained $1.9 billion in

cash.

Once eBay realized actually there isn't that many synergies with Skype.

They mostly left Skype alone, which was great, because they just Skype kind of continued to grow

like crazy.

Under eBay, Skype did grow at the end of 2007, Skype had over

200 million registered users with over 50 million connected monthly users.

Connected users are defined by Skype as the number of users that login in a given

calendar month.

By the end of 2009, Skype had nearly 500 million registered users, with

105 million of those being connected.

By 2010, Skype had 560 million registered users and over 207

billion minutes of voice and video conversations, once again making it attractive

to investors.

Google and Facebook were rumored to have interest in the company, but in May 2011, it was

Microsoft that announced the purchase of Skype from Silver Lake for a whopping $8.5

billion, meaning Silver Lake more than tripled its investment, while eBay gained an

additional $1.4 billion on its original investment.

So I expect Skype to be an accelerant of our financial results.

You know, the truth of the matter is communications is one of the the

big scenarios that's driving our financial success.

And Skype is going to accelerate that.

Under then CEO Steve Ballmer, Microsoft's plans included incorporating Skype into its

existing products, including the Xbox, Outlook and smartphones.

As part of the announcement, then Skype CEO Tony Bates announced Skype's goal to reach

1 billion daily users.

But things didn't work out as planned.

They failed to capitalize on Skype 100%.

Steve Ballmer was the king of buying things and not knowing what to do with them.

And today, Microsoft says it has 36 million daily active users.

What happened with Skype is the story of every large

company with a lot of middle management.

They didn't innovate on the product for a very long time.

Tony Bates can say whatever he wants to say in reality is that the whole thing

blew up on his watch.

In 2017, WhatsApp reached 1 billion users.

By 2020, it had 2 billion.

And like the early days of Skype, it uses Voice Over IP to transmit calls.

The reason WhatsApp worked was it was just simple and it was easy and it

wasn't really fussy.

And Skype by then had become bloated, slow, complicated.

In fact, I'll go as far as saying the Skype missteps allowed WhatsApp to

grow and become this big.

In 2016, in response to Slack, a growing messaging platform, Microsoft

announced Teams.

However, when Teams launched in 2017, it became a direct competitor of Skype.

Microsoft Teams has been successful at taking users from Skype.

It's provided a number of additional features that Skype honestly does not have at this

time.

But Microsoft's Corporate VP tells a different story.

We see it as complementary on the core infrastructure, right?

So the communications, the idea of having one contact list, we think of the user

experience as being unique and distinct for those teams is focused increasingly more on some

communities work, getting groups of people to do that.

Skype is more point to point family, much more for international expansion.

Microsoft is pouring a lot of engineering resources into making

Teams a big destination for communication.

It's not doing the same thing with Skype.

For example, in 2021, Skype announced it would support up to 100 people

on one call.

But in the previous year, Teams announced it could support up to 300 people on one call.

And in 2020, when the Covid-19 pandemic made virtual communication a priority,

many people's go to were apps like Zoom and Teams, not Skype.

A lot of users went to Zoom because it was available.

Skype was known as well, but they were already on the

downslope. With the move to Teams.

In response to Zoom, Microsoft added updates to Teams such as breakout rooms and

increasing the number of meeting participants to 1000.

It also made some changes to Skype, including allowing virtual backgrounds.

But Teams still grew at a faster rate.

In July 2019, Microsoft announced Teams had 13 million daily

users. By November, it was 20 million.

That number soared in March 2020 during the pandemic to 44 million growing

by 12 million over a seven day period.

In that same month, Skype had 40 million daily users, but by

April 2020, Teams had 75 million daily users.

Microsoft would not confirm how many daily users Skype had in the same period.

However, it told CNBC that Teams usage is at an all-time high and surpassed

300 million monthly active users this quarter.

So, how close are we to seeing Microsoft retire Skype?

It's hard to retire a product with 40 million users because

migration is risky.

Migration could easily happen in the way technology is moving now.

They know there are a lot of options and they'll find another one.

Today, Skype exists, but it's not the phenomenon that it was in the

2000s. Skype is a product with an uncertain future.

Microsoft is where consumer brands go to die, just like AT&T

used to be the place where all Internet services used to go and die.

It's the same thing.

20 years later and Skype's founders have moved on, going on to start their own

companies. Ahti Heinla is the CTO and co-founder of Starship Technologies.

He teamed up with another Skype founder, Janus Friis, to start the company.

Starship specializes in autonomous robot delivery and says it has done millions of deliveries

across 50 locations around the globe.

Niklas Zennström went on to head Atomico, a venture capital firm, and Jaan

Tallinn spends most of his time discussing the dangers of unchecked AI development.

I don't know what the future holds for Skype.

I mean, I'm concerned about humans being wiped out, so it's unlikely that I will need we need

Skype if that happens.

One thing that is guaranteed is that there will be massive changes now, so I'm not sure if

video calling will be a thing even like five years from now.

I myself use Skype right now fairly little.

It is. I still have it installed on my phone, but my

primary communication methods now are elsewhere.

With apps like WhatsApp and Zoom being a clear choice for many people.

Can Skype make a comeback?

Skype had a really good run and then perhaps like asking too much

too for like a bigger, bigger run.

Anything is possible.

Microsoft is trying to make Skype happen in a bigger way now.

There's the Bing chat bot that has generative artificial intelligence, which is all the

rage now. And you can talk to Bing in Skype.

Will that make Skype explode in popularity or make a

comeback? I don't think so.

Microsoft, as a rule, cares about being profitable.