- In 2011, Skype has 100 million active users and nearly 8 million paying customers.
- To capitalize on integration of Windows Phone and mobile apps the company transitioned the app from P2P networks to cloud-powered servers.
- The transition resulted in calls, messages, and notifications repeating on devices making Skype unreliable.
- In November 2016, Microsoft shifted its focus from Skype and launched Teams.
- Skype users were disappointed, so, Zoom focused on the struggles of its user base and offered high-quality audio and video calls.
- Pandemic amplified demand for the app boosting its sales and stock price to paving a path for its success.
Offices and other places of social interactions such as schools and universities have shifted at home. The only way for people to interact with friends, family, and colleagues is through the internet. This has led to an increase in internet activity for several mobile and computer applications that provide productivity and easy communication. This drastic change in society has shifted focus from messaging app to teleconferencing software.
Since the beginning of the lockdown, Zoom has considerably dominated the global teleconferencing market. Teams and Google followed its lead closely behind. However, in between all the chaos Skype – a popular video calling app for nearly two decades failed miserably to make any headline. This posed the two most important questions for everyone – What happened to Skype? and How did Zoom surpassed an app twice older?
Success of Skype
To understand why Skype failed, we need to first understand – How Skype dominated the market in the first place. Back in 2011, Microsoft acquired Skype for $8.5 billion. During this time the app not only had more than 100 million active users but also nearly 8 million paying customers.
The reason for the app’s success can be traced to the new and exciting communication tool it offered. It provides users the ability to talk via the internet. Additionally, Skype provides quality audio and video service than was way ahead and better than its competitors. In the early stages, the founder of the app patented their technology which was another crucial reason for its success.
The app has become the main way for consumers to talk to each other with video calls over the internet. Voice and video calls made up 40% of all Skype usage back in 2011. The app had become a grand success, The Onion joked that work “Skype” would be added to the dictionary. Nearly three years later, the verb was added to the Oxford English Dictionary. This highlighted the success and popularity of the service.
Fall of Skype
Nevertheless, once Microsoft successfully acquired Skype it faced some big challenges. This happened during the initial period of turning Skype into a profitable business while simultaneously keep it relevant for consumers. The acquisition took place around the time when chat apps like WhatsApp and WeChat were gaining momentum. This was also the same time when Zoom and Snapchat were founded. These apps were starting to challenge the dominance of Skype.
The first step Microsoft took for Skype was to ditch its own popular Windows Live Messenger service. However, the company still had a major problem – Skype’s service was based on P2P technology. This started a series of problems. In 2013, to capitalize on integration of Windows Phone and mobile apps the company transitioned the app from P2P networks to cloud-powered servers.
The company also made Skype its default messaging app for Windows 8.1. and took the app on the web as part of Outlook. However messy it was, these steps made the transition from the app’s traditional P2P networks. The transition resulted in calls, messages, and notifications repeating on devices making Skype unreliable.
So, in 2017, the company went off-road with the design. This new design turned the app into something similar to Snapchat. The design still failed to please people and attacked a lot of criticism. Eventually, they were forced to kill off Snapchat-like features. By this time Microsoft acknowledged that there are some serious problems Skype had.
During November 2016, the company shifted its focus from Skype and launched Teams. The company also integrated video calls into Teams. It was designed to take over Slack as a sophisticated tool for workplaces. On September 2017, Microsoft notified Skype’s business department that it will be replaced by Teams and its consumer version of Skype. Microsoft said that it will keep investing in Skype.
However, finally, in July 2021, Skype disappeared.
Rise of Zoom
Skype users were disappointed after giving several chances. While Microsoft was focusing on adding and designing new features, video and voice quality of Skype never improved. People started switching to similar alternative options (which were offering better quality for free).
During this time Zoom focused on the struggles of its user base. In contrast to Skype, their users were offered high-quality audio and video calls. It also offered good quality recording and sharing of conversations. This started to increase the users while simultaneously increasing its popularity.
Moreover, the video calling app offered a useful and unique beauty filter and virtual background instead of emoji and Snapchat like features. The built-in beautification filters smooth out skin tone and blemishes to give a polished appearance.
The virtual background features help user’s with custom backgrounds to cover the clutters, running pets and children, and others. Milky Way galaxy and Burj Khalifa top have become one of the most popularly used backgrounds. Users are also provided several options to add images and customize their videos.
One of the most important features that gave enormous Zoom over Skype and other video conferencing apps was its ability to allow the host to split participants into different rooms. Similar to how colleagues in different departments sit separately for work at workplaces. The hosts can split their employees into 50 breakout rooms (different sessions). This allows the employee’s room to discuss and collaborate with teammates. It also allows bosses and managers to pop-in and out of breakout room to follow up and get updated. These features have only helped become Zoom became one of the most popular apps and dominate the market.
Lastly, the selling point for an app to the broader consumer world was its free 40-minute conference calls for up to 100 attendees. The app had a simple and intuitive user interface, the app is extremely easy to use, and people wanting to join meeting don’t need to login for accessing meetings.
Success of Zoom during Pandemic
Previously, the Zoom customer base mostly consisted of workers with a desk job. They usually preferred the platform for video conferencing over Hangouts by Google, Teams by Microsoft, and many others. Nevertheless, coronavirus pandemic shifted the office at home.
Soon the concept of work from home became socially acceptable due to new social distancing measures. Today, most of the countries across the globe are under strict lockdown. This has led to a mandatory work-from-home situation for offices. To bridge the communication gap between employees companies had no other option than to rely on video conferencing platforms during the home quarantine.
The demand amplified the sales and stock price of Zoom, paving a path for its success. This could have become the success story of Skype but all changes made by Microsoft led to its collapse. During this time, Zoom was right around the block and took over the planet when the time was ripe.
Difficulties and Short Comings of Zoom
Today, the rapid success of the California based video conferencing app has become the talk of the town with its popularity among employees and students. However, Zoom had its shortcomings that were vastly different from Skype. App users soon started discovering security issues due to customer complaints. So here are some of the issues company faced:
This is probably one of the most popular security issues on Zoom. A caller on Zoom has a randomly generated ID. This ID is between 9 to 11 digits long and it is crucial to gain access to a meeting. Several researchers have found that these IDs are very easy to guess and even brute forceable. Hence, allowing anyone to enter meetings and leaving calls vulnerable.
The ease of entering into random meetings has led to the concept of “Zoombombing”. The pranksters join ongoing Zoom calls and broadcast porn or shock videos. Even though the host can remove users from meetings they usually come back with new accounts. To fix this flaw, Zoom has rolled out two new features to enhance password usage for meetings. It has also advised users to not share meeting IDs in public.
- End-to-end encryption
The Intercept report revealed that Zoom’s meetings aren’t end-to-end encrypted, unlike what the company said. The company later stepped forwards to clarify that it has encryption in place, however, its concept of end-to-end encryption is different from other companies.
Even though the data is encrypted, the company can see and hear conversations as they are is decrypted at the server. Despite this, the company has assured its users that it doesn’t decrypt user transmissions.
- Email Addresses Leak
Email addresses of all the users who have shared the same email domain can find them in a universal company folder. This folder is visible to all the members. This format doesn’t work for major email clients such as Gmail, Hotmail, Yahoo, or Outlook. Nevertheless, similar can’t be said for users that are using small email clients.
- Selling user data
In the wake of these issues and angry customers, Eric S. Yuan, CEO of Zoom, apologized for all the security issues in a company’s blog post. It also announced a 90-day freeze to focus on privacy and security issues.
Benchmark of Zoom’s Success
To understand the success of Zoom let’s understand see some of the metrics and stats. Recently, Zoom has surpassed the top free apps list on Apple Store. It has become the second most downloaded Mobile application after TikTok according to Sensor Tower. Also, it has been downloaded over 50 million times on the Google App store. Lastly, according to Apptopia, Zoom ranked on top of the Free Apps list on both iOS App store in the US, Italy, Japan, Hong Kong, and many other countries.
According to Tomasz Tunguz, Redpoint Venture’s Partner, in the past three, Zoom’s revenue grew from $61 million to $331 million and is growing at 148% and 119% in ‘18 and ‘19.
Zoom has become the fastest-growing, edging New Relic by 5 percentage points.
Zoom has also grown profitably with a 2% net income margin recorded last year. The only companies having charted similar numbers in the year of the IPO are Atlassian and Fleetmatics.
Zoom is simple-to-use software and was able to successfully grow and adjust to its user’s needs. It was provided quality without compromising on the user experience. On the other hand, Microsoft’s aggressive integration with users failed Skype. It was unable to keep up with the changing times as it was trying hard to become Snapchat like app. It saw a similar fate as Internet Explorer.
Today, Zoom has replaced Skype similar to Google Chrome replaced Internet Explorer. Even Microsoft’s approach to the situation is any indication; we still cannot expect Skype to change any time soon. However, Zoom is not the only fish in the pond. More competitors are entering the market such as Facebook, Google Hangout, Teams, and others with several new features.
This has increased the importance of Zoom to constantly monitor the trends and keep its users base satisfies. Similar to its recent updates that focus on the safety and security of its users. Furthermore, there should be additional features that could water down the experience and make the app more robust.
To avoid a similar fate as Skype, Zoom’s creators should remember what made the software appealing in the first place: Ease of use and a business model that was built for acquisition. They should see to it that there are no compromises made in this area. Losing those advantages will also mean, compromising its appeal.