“How can they be so good?”: The strange story of Skype

A terrific article that not only describes how a small team of European programmers built a global business brand and enabled millions worldwide to facilitate both personal communications and business dealings, but also illustrates the danger of cross-cultural divides and how they can threaten international enterprises no matter how well-known, well-funded, or technologically advanced they are. (A.G)

As Skype turns ten, a look back at how six Europeans changed the world.

From a company powerpoint, here’s an artist’s impression of the moment when Skype’s idea was fostered. (Zennström on the left, next to Friis.) Malthe Sigurdsson

“I don’t care about Skype!” millionaire Jaan Tallinn tells me, taking off his blue sunglasses and finding a seat at a cozy open-air restaurant in the old town of Tallinn, Estonia. “The technology is 10 years old—that’s an eternity when it comes to the Internet Age. Besides, I have more important things going on now.”

Tallinn has five children, and he calls Skype his sixth. So why does he no longer care about his creation?

On August 29, 2003, Skype went live for the first time. By 2012, according to Telegeography, Skype accounted for a whopping 167 billion minutes of cross-border voice and video calling in a year—which itself was a stunning 44 percent growth over 2011. That increase in minutes was “more than twice that achieved by all international carriers in the world, combined.” That is to say, Skype today poses a serious threat to the largest telcos on the planet. It also made Jaan Tallinn and other early Skypers rich.

But something changed along the way. Skype is no longer the upstart that refused to put signs on its offices, that dodged international lawyers, and that kept a kiddie pool in the boardroom. This is the real story of how a global brand truly began, told in more detail than ever before by those who launched it.

In the year 2000…

In 2000, as dot-com fever swept America, an entertainment and news portal called Everyday.com brought together a sextet of European revolutionaries.

It began with two people from the Swedish telecom Tele2—a Swede named Niklas Zennström and a Dane named Janus Friis. Zennström was Tele2 employee no. 23; Friis worked his way up in customer service for a Danish operator.

The Swedish owner of Tele2, Jan Stenbeck, was determined to launch the Everyday portal and launch it quickly. As the Swedes were having trouble, Stefan Öberg, the Marketing Director in Tele2’s Estonian office, proposed finding some Estonians for the job. In May 1999, Tele2 published an ad in a daily newspaper calling for competent programmers and offering the hefty sum of 5,000 Estonian kroons (about $330) a day—more than an average Estonian earned in a month at the time.

The work went to Jaan Tallinn, Ahti Heinla, and Priit Kasesalu—Estonian schoolmates and tech fans. They had been into Fidonet, a computer network which preceded the Internet, since the Soviet era. They started a small company, Bluemoon, which made computer games such as Kosmonaut. (In 1989, Kosmonaut became the first Estonian game to be sold abroad.) The game earned its creators $5,000 dollars, which at the time was a large sum for any Estonian. But by the turn of the century, the three friends were down to their last penny and Bluemoon was facing bankruptcy.

Short of money, they applied for and got the Tele2 job. The PHP programming language needed for the work was new to them, but the team learned it in a weekend and completed their test assignment much faster than Tele2 requested.

The last of the Skype sextet, Toivo Annus, was hired in Tallinn to manage the development of Everyday.com. The site would soon be complete, with Zennström and Friis working in Luxembourg and Amsterdam, and Annus and the Bluemoon trio working from Tallinn.

Tele2 was thrilled with the Estonians, but the Everyday.com portal failed commercially. Zennström and Friis left Tele2 and lived in Amsterdam for a while. The homeless Friis stayed in Zennström’s guest room, and they turned the kitchen into a temporary office.

Together, Zennström and Friis pored over new business ideas. As the US was fascinated at the time with the scandal surrounding Napster, Zennström and Friis planned something similar. But where Napster infuriated the music and movie industries, Zennström and Friis hoped to cooperate with them. They didn’t have the slightest doubt about where their new product should be created—in Tallinn, obviously. Kazaa was born. READ MORE

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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