Does Skype save $3.4 million by failing its customers?

Does Skype save $3.4 million by failing its customers?

Summary: the more you dig into Skype service failure, the worse it gets. Here is what I have found so far.


That's an evocative title for sure and one that may get me into trouble but bear with me. According to the last reports I could see covering Skype's earnings, it was tracking $860 million in annual revenue. That was back in July. Since then Microsoft has acquired Skype and we await any breakdown Microsoft chooses to provide in its next earnings call, sometime in January 2012.

Searching for card fraud rates, I discovered that back in 2010, an industry report from Aite Group estimated that US card fraud cost card providers $8.6 billion on $2.1 trillion transacted value. That's a rate of 0.409%, surprisingly low given the alarming numbers of fraud cases that are surfaced anecdotally each year and the devastating impact they have on people's lives. That doesn't take into account the monies people actually lose, despite widespread though tacit acceptance that fraud is often the responsibility of the card provider.

Using those metrics as a basis for calculation, I am assuming that Skype is no different to any other provider and, therefore, based upon reported revenue, is subject to fraud amounting to $3.4 million per annum. It's a pittance in the scale of things but an issue that Skype consistently and insistently refuses to acknowledge could be partly to do with their systems.

In addition, I discovered that if, like may others, you use PayPal as the means to service your Skype credit, PayPal may well refuse to consider unauthorised debits as fraudulent, even when it is obvious that something out of gauge is occurring.

In other words, while everyone in the chain of activity may have some measure of responsibility, the customer ALWAYS ends up paying.

What is worse, this is nothing new. A search on Google reveals numerous complaints stretching back at least to 2007 all of which say basically the same thing. If you're Skype account is hacked or in some other way compromised then Skype will not refund any losses you incur. Period.

Back in 2008, The Register said: PayPal Ambushes Users With Mystery Skype Charges. The same problems we see today were being repeated back then. The Skype forums are littered with complaints and they all say more or less the same thing. In fact when you look through the forum posts, other than questions about Windows, billing questions attract the highest number of posts - 15,000 at the latest count.

That omits the many who will quietly put up with whatever they are told. Without published metrics, we can have no way of knowing what the true scale of issue might be. But then I see Lithium provides support for Skype forums. I'm betting they know because Lithium is run as a cloud service and has permission to use its customer data to improve its algorithms. And if they know then Skype/Microsoft knows. Just how bad might it be? Continuing the story...

Yesterday and for the second time I explained how, in spite of clear evidence of broken systems and fraud perpetrated either/and on Skype and its customers, Skype refuses to take responsibility for reimbursing customers who lose money as a result of security breaches.

Since that time I have received more emails from Skype that are basically reiterating what they said in the first place i.e.

  1. We take security seriously
  2. Directing me to the security instructions pages
  3. Refusing to provide any refund

There is a caveat to that. I do have ONE email that acknowledges fraud and says I need to deal with it via the PayPal resolution center. But even that information is wrong for reasons I explained yesterday.

All of this is despite increased attempts to escalate the problem, continue to provide details of the issues and attempt to clarify what has happened. By any standards, I have done my bit. So I dig deeper.

Based upon my experience with Skype I have been attempting to figure out the company's email workflow process. This is a simplified diagram that illustrates how it works from the customer perspective.

There is a subprocess for those who reply to email responses with further information. It mostly requires repeating what has gone before.

From what I have seen so far, I could also add that when fresh email responses come in against the original ticket they are randomly assigned. There is no obvious escalation process. Once again, Skype merely provides its standard responses.

With that in mind and bearing in mind Microsoft acquired Skype earlier in the year, I attempted to find out who is in charge. It's a person called Tony Bates. I then attempted to find out how best to contact this person. Why go straight to the top? If you look at the management structure, there is no one assigned to customer service at the executive level. In other words, customer service is not important enough to warrant a seat on the board.

I was then advised that because I am deemed to be a 'journalist' my chances of being able to speak with him are 'very, very, very low' and that in any event any conversation would likely be moderated by Microsoft's PR team. If you've been in this position before, then you know how well that goes. I was also advised that for all practical purposes, Skype/Microsoft management are in shut down mode until Jan 2nd, 2012.

Question: if this was Verizon, AT&T etc, would they get a pass? No way. There would be uproar. So why don't we hear more about this problem? I have a theory.

The Skype forums provide a wonderful resource for those wanting to vent. It is open, anyone can go look. BUT - the moderators only refer users back to Skype policy. There is no attempt to offer real help. It is easy to see how frustrated users get ground down by the relentless repeating of policy and weblinks that do nothing to solve customer problems. It is easy to see why complaining customers, all of whom are losing modest amounts will simply give up when faced with a huge corporation. But I'm not one of those people.

That's why I am throwing down this set of challenges to Skype and Microsoft.

  1. When are you going to proactively respond to customer complaints beyond the scripted responses?
  2. When are you going to review what is clearly a long run and highly repeatable set of problems that include badly broken processes?
  3. When will you fix these problems?
  4. When are you going to accept that while there may be some people who are slack in their attention to security, the recorded evidence suggests that it doesn't matter what people do, their accounts still get compromised?
  5. What assurances can you provide that business customers who may be tempted to your broader range of services, will not be faced with similar problems?

Anything I've missed? Talkback in comments.

Topics: Enterprise Software, Collaboration, Social Enterprise

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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  • RE: Does Skype save $3.4 million by failing its customers?

    While I have not yet been faced with billing issues with Skype, I have been purchasing their services for several years and have faced them with quality of service issues before. Customer service is null and my satisfaction is very low, generally. The few times I attempted to interact with them to solve issues was a complete and utter failure on their part. If only there was a viable alternative to skype that doesn't require a huge learning curve and budget. I am sure there must be, I just haven't yet stumbled on it.
    • RE: Does Skype save $3.4 million by failing its customers?

      @mps1773 - there are many alternatives for paying services like JahJah but they nearly always require steps that Skype removes. It's a case of how much pain before you switch to something you can learn, live with its idiosyncrasies yet feel more secure/cared for?
      • RE: Does Skype save $3.4 million by failing its customers?

        @dahowlett - I have actually gone through steps to set up SIPs. Many, many steps and a lot of technical learning... in the end, there was always one step that required about $50 or the service (when using free services) could not reliably connect an overseas call that was of decent enough quality to render the voice of the person I was connected to as understandable. I am not talking third-world here, either. She lives in the UK. So I pay Skype $3 a month for forwarding to my phone and $12 every three months for a UK-local phone number. This is through the convenience of paypal and I do nothing else to make this work. If you can convince me that JahJah is even anywhere near as easy to set up and anywhere near as affordable, I might look into it. At this moment, my time and willingness is limited.
    • Simple. Stop using Skype, use another option!

      Skype is not the only service around. <br><br>Personally I always avoid Skype since it became part of MS. When MS gets involved, its doomed to fail. So I do pay alternate services like Google Voice/Talk that works nicely. Though you have 3Jam, VoxOx (allows faxes too!),Viber, oovoo, Line2, RingCentral.<br><br>Skype is not the only solution. And if they provide lousy support. Use another provider. Netflix got the message. Skype will too when it hits their bottom line.
      • RE: Does Skype save $3.4 million by failing its customers?

        @Uralbas - Has GVoice finally gotten overseas-local numbers? I would have went with that, back then, but that option was not available at that time.
  • How does this happen ?

    Could time be better served finding out how and why this actually happened ? Could it be the that that Firefox, Chrome, Safari, Explorer, etc.... addin has given over your Skype information to a hacked website ? Who's fault is it really ?
    • RE: Does Skype save $3.4 million by failing its customers?

      @oliver-forge - nope: don't use an add-in
  • RE: Does Skype save $3.4 million by failing its customers?

    Well, certainly, if you use the ???clunky??? PreyPal to interact financially with Skype, what else would you expect? Anything that has ever been touched by eBay is probably irreparably broken.

    ???Study Sees PayPal Adoption Down Among Multi-Channel Merchants

    ???Twenty-two percent of EPIS merchants who had accepted PayPal on their own websites and off-eBay stores in October 2010 stopped accepting PayPal as a payment method on those sites in October 2011.

    ???There were 19% more merchants who accepted credit cards on their own websites and stores in October 2011 than in October 2010.???

    And, Visa is to launch its new online payments gateway ??? in 2012. The idea is similar to that offered by PayPal: you upload details of your payment cards to Visa???even if they're not Visa-branded???and Visa will process the payment???directly with your banker???without revealing your card details to the merchant. No card details are revealed, so the using of this ???professional??? system will reduce the risk of online credit card fraud on both payers and payees to virtually zero.

    Off-eBay online merchants will be able to free themselves from the most unprofessional, parasitic, unscrupulous and ???clunky??? PreyPal. And, undoubtedly, PreyPal will then atrophy back to it???s mandated use on the eBafia marketplace only, from whence, without its mandated use thereon, PreyPal would never have had the success that it has had. Unfortunately, there is no relief in sight for on-eBay merchants.

    But, be in no doubt that, except for its mandated use on whatever will be by then left of the Donahoe-atrophied eBay Marketplace, the clunky PreyPal will elsewhere be quickly buried by Visa???s professional online offering, ???, once it is up and running in 2012. Thereafter, as eBay continues to sink lower and lower in the water, so will PreyPal.

    And, as for PreyPal???s projected move into B&M point-of-sale. Pure science fiction??????Beam me up Scotty [Thompson]???.

    So, no more underpinning of eBay???s sagging bottom line by the clunky PreyPal. What will the ???eBafia Don??? do then? Maybe, if Mittless Romney wins the GOP nomination we can hope that he will pick as his running mate his fellow ???Pain from Bain???, the headless turkey, John Donahoe. Donahoe's nearing the completion of his destruction of the eBay marketplace and so he should soon be looking for an even bigger challenge.

    PayPal claims PayPal Is Not a Payments Processor!

    eBay / PayPal / Donahoe: Dead Men Walking.
    Philip Cohen
    • ScamPal

      @Philip Cohen I've never set up a PayPal account, and every time I read of an internet horror story, it usually centers around PayPal siding with scammers and refusing to help innocent users.

      One time, it will be PayPal pulling money back, after a transaction has been completed, because a scammer said he didn't get the goods, the next report is a user can't get their money back, even though they haven't received the goods...

      PreyPal or ScamPal, either way, their behaviour and inconsistency gives me no confidence in using their service.
  • RE: Does Skype save $3.4 million by failing its customers?

    Skype and Paypal are evil? How is this news!! Paypal has been screwing over users since their inception. Skype's p2p model, while it has its pros, is often the bane of network administrators everywhere. I don't consider the problems fixable. Why not just use Google Talk/Voice?
    • RE: Does Skype save $3.4 million by failing its customers?

      @wendellgee@... I would if it wasn't for the fact GV isn't available in all territories and my network of contacts is global.
  • Skype's ills are hardly Microsoft's doing.


    If you pick up a starving dog and make him prosperous, he will not bite you. This is the principle difference between a dog and a man.
    ~ Mark Twain[/i]
    • They are now

      Or did you miss the bit about Microsoft buying them up?
    • RE: Does Skype save $3.4 million by failing its customers?

      @WinTard - you would be right if it wasn't for the fact that some months into ownership, Microsoft has said nothing about these issues. Which is odd because they usually take security VERY seriously.
  • A flowchart?

    I last drew one of those in 1984. <br><br>Does this come directly from Skype or is Dennis Howlett responsible for this piece of industrial archeology?

    Big blow to your credibility as a modern analyst if it's from you Dennis.