Microsoft just bought Skype for $8.5 billion. Not to get too personal, but that’s many, many billions more than I make in a year. But unlike buying a human writing machine like yours truly at an affordable price, Microsoft is paying $8.5 billion for something called Skype. Here’s what it’s getting.
Kazaa, in case you don’t remember or have never heard of it, was a peer-to-peer file sharing program used by millions of people in the early 2000′s just as Napster was getting shut down for enabling the illegal sharing of music files. Kazaa enabled people to share music files but it also let people share videos and programs as well, which made it very, very popular.
The basic structure of a peer-to-peer file sharing network is that whoever’s on the network is connected to everyone else on the network, with no official, central server or group of servers sitting in the middle holding all the files. The more people who are on the network, the faster the network can send files back and forth. And the more people who have the same file on their computer, the faster it could be sent to someone trying to download it.
So the magic of Napster and later, Kazaa, was that when a popular file—say, a music file labeled HumptyDance.mp3—was made available on the network, everyone could download it really fast. And better yet, no one person could really be held accountable for facilitating piracy since the file wasn’t stored on a central server anywhere—though as we’d see later, the people that actually owned Napster and Kazaa eventually got sued anyway.
Kazaa was initially built by some programmers in Estonia and then purchased by two guys: Niklas Zennstrom of Sweden and Janus Friis of Denmark. Zennstrom and Friis developed Kazaa a bit more and by around 2003, it became the most downloaded piece of software ever. They sold the company to Sharman Networks shortly thereafter and set out to build Skype.
Skype’s Peer-to-Peer Roots
Skype leveraged the same type of peer-to-peer networking idea that Kazaa was built upon, but applied it to voice transmission instead. The idea was that the more people that used Skype, the more reliable the connection would be for each of them. Oh, and it was free. That helped a lot. Skype’s big selling point was that users could make free voice calls (using their computers and a headset) to each other from anywhere in the world. After all, since it was a peer-to-peer network it was to Skype’s advantage to have as many people using the network as possible so that it’d be stable and fast.