Significantly, the Netscape story wasn’t all hype. In eighteen months, Navigator reached an installed base of 38 million users.66 From $17 million in revenue at the time of the IPO, Netscape would surge to $346 million in sales the very next year, 1996, and $533 million in 1997.67 In three years, Netscape grew revenue to levels that it had taken Microsoft almost fourteen years to reach. By some measures, Netscape was one of the fastest-growing companies in history. People believed that Netscape would become the next Microsoft, the colossus of the new, coming Internet Era. A browser like Navigator would be the Internet’s operating system, replacing the old PC operating systems like Windows. Navigator 2.0, appearing shortly after the IPO, integrated email and newsgroup features, and added support for plugins, which allowed third parties to integrate ever more sophisticated features. Navigator was now, as one Netscape product manager put it, “a real platform that people could actually write applications to.”68 It was Microsoft’s tried-and-true platform strategy, but for this whole, new, limitless digital realm. The press was already calling Marc Andreessen “the new Bill Gates.”
There was just one problem. Why would Bill Gates willingly cede his throne atop the technology industry? Why would he allow his platform to be supplanted by a new one without a fight? In fact, one final but key reason Netscape had raced headlong toward an IPO was that Netscape management was terrified of Microsoft. They knew Netscape had to get as big as it could and gain as much market share as possible before Bill Gates and Microsoft woke up to the Internet in general and the potential of the web browser market in particular. In his autobiography, Clark likened Gates to the evil Lord Sauron from Lord of the Rings, “whose all-seeing eye searched ceaselessly for any threat to his tyranny.” As the business press beat the drum that Netscape could be the new Microsoft, Gates couldn’t help but hear of this new threat to Microsoft’s then-total hegemony. And if he had somehow missed all of these messages, Gates had to have heard a particular, infamous jab from Marc Andreessen himself. A few weeks after the IPO, Andreessen was quoted in InfoWorld magazine saying that Netscape would turn Windows into “a mundane collection of not entirely debugged device drivers.”69
*So named because Senator Al Gore introduced and championed the legislation. One could insert a joke here about Al Gore inventing the Internet, but the Gore Bill played a crucial role in the early experiments we’re about to discuss, as Marc Andreessen himself would later credit.
2
BILL GATES “GETS” THE INTERNET
Microsoft and Internet Explorer
Netscape was right to fear Microsoft. These days, it’s almost impossible to imagine how completely Microsoft dominated the computer industry at the dawn of the Internet Era. Bill Gates’s company had been founded right at the dawn of the personal computer revolution. Like other pioneers of the PC era, Gates had a vision for a computer ecosystem of billions of machines, and all he wanted was for every one of those machines to have his software on them. Microsoft’s corporate motto was, famously, “A computer on every desk and in every home.” Early employees say that the original motto (before the lawyers advised Microsoft to tone it down) was: “A computer on every desk and in every home, running Microsoft software.”
By the early to mid-nineties, Microsoft’s operating systems were on 70% to 90% of the computers sold around the world. This dominance meant that by 1994, Microsoft could boast a $38.5 billion market cap; its market valuation would soon surpass longtime tech-industry standard-bearer IBM.1 In the previous five years, Microsoft’s annual profits, revenues and stock price all quadrupled.2
At least at first—and to Netscape’s great relief—Bill Gates was not even remotely paying attention to the Internet. Almost all of Microsoft’s resources were at that point being marshaled toward the development of a program codenamed “Chicago,” the greatest update to Microsoft’s operating system to date. Better known as Windows 95, this release would represent the absolute pinnacle of Microsoft’s primacy in the tech industry.
If you had asked Bill Gates in 1994 if Microsoft was prepared for the next wave of computing, he would have said yes: that next wave would be named Windows 95. But if you pressed him further and asked about a different kind of computing, about something more networked and interactive—about something, in short, like what the Internet would become—he would have said, “Absolutely.” But he wouldn’t have used the term “Internet” to describe the future as he saw it. He might have mentioned a personal favorite acronym, IAYF (Information at Your Fingertips) or used a term like “information superhighway.” As far as he was concerned, Microsoft already had that locked up as well.
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IF YOU WERE ALIVE in the early 1990s, chances are you remember the term “information superhighway.” It was bandied about in all corners of the media. It was the Jetsons-like futuristic media technology that many in various industries were convinced would change the world. You could be forgiven for assuming that the information superhighway is the Internet, or at least, the Internet is what the information superhighway became. But that is wrong.
The information superhighway was the fever dream of the telephone industry and the cable industry and the computer industry and even of Hollywood. The idea was that we’d all be linked together via a Frankenstein-like combination of the television and the PC. We’d be able to shop from home, and exchange video chats with each other, and rent movies on demand and receive personalized news and media based on our interests. I know. Sounds exactly like the Internet we know today. But all of this was supposed to happen on your television.
TVs were going to become interactive. More than a decade before our phones got “smart,” the tech gurus and the big-money guys were convinced that televisions would become “smart” and that would be the innovation that would really change everything.The colossus of the cable industry, John Malone, announced a future of five hundred channels, shopping and movies on demand. Media titans like Time Warner’s Gerald Levin predicted: “Once you digitize the material, then the consumer can summon the material at will. It’s profound: not the technology but the psychology.”3 Raymond Smith, CEO of Bell South, opined, “The three principal consumer communication devices—computer, TV and telephone—are margining into one, and as they do, so too are the distinctions among once-separate business.”4 On April 12, 1993, a special issue of Time magazine headlined: “The Info Highway: Bringing a Revolution in Entertainment, News, and Communication.”
Why was everyone so sure that television was going to be the medium that delivered interactivity to the mainstream? When Smith was asked this by Wired magazine, he replied: “Because that’s where the people are. You’ve got to start with entertainment,” Smith said. He simply could not envision that computer networks would be able to deliver this anytime soon. And even if they could, “you’re not going to watch television on a little monitor. You’re going to watch it on a big set. That’s what you’ll use when you want entertainment, and you’ll use the PC and keyboard when text is more important.”5
To a large degree, Bill Gates shared this vision. He came from the world of computers, but even to him, computers were still hopelessly nerdy. Television was decidedly mainstream, technologically sophisticated and, crucially, high bandwidth. Gates believed that the networked future would come via the TV because that was where the bandwidth was; 14.4 modems, clunky dial-up connections—these could not deliver the multimedia extravaganza Gates was envisioning. But high-bandwidth coaxial cable (or maybe DSL lines from the telecom companies; or maybe satellites)—could do the trick. Gates shared the vision of an interactive, smart-television world. In industry circles, Gates began to evangelize IAYF heavily as the future of all of these overlapping industries. He agreed that the living room was the logical place for this to happen. That’s where the eyeballs were and that’s where the existing infrastructure was.
Throughout the early 1990s, Gates took meetings with all and sundry, from film studio moguls to telecom executives. All
of this was in aid of one common goal: making sure that no matter what the telcos, cable companies and Hollywood studios had planned, Microsoft would be a part of it. It was a repeat of the playbook that had won in computing: Bill Gates just wanted his software in every device that took up pride of place in the living room.
Gates was not alone in chasing this interactive television dream. If you read business and technology magazines from the period, all the way through the summer of 1995, the articles were all about the information superhighway, the convergence of telephony, television and computing, and which corporate conglomerate would come out on top. All around the country, hundreds of millions of dollars were poured into interactive-television initiatives. The biggest project, and the one to get the most attention, was Time Warner’s Full Service Network in Orlando, launched to 4,000 homes in January 1995.6 It was made possible via hardware from Jim Clark’s Silicon Graphics, which helped build the set-top boxes. The service had movies on demand, interactive video games, print content from Time Warner’s stable of magazines, and a virtual shopping mall where couch potatoes could order items from the Sharper Image, Crate and Barrel, the U.S. Postal Service, a Dodge dealership and a local supermarket.
“I challenge anybody to say that video-on-demand isn’t what the consumer wants,”7 Jerry Levin, CEO of Time Warner, declared. He could have just asked the consumer. One by one, all of the interactive TV experiments failed spectacularly. A GTE test in El Cerrito, California, was designed for 7,300 households. Only 350 ever signed on.8 The bestselling item in the vaunted Full Service Network virtual mall? Not new cars or groceries, but postage stamps.
The “interactive TV” aspect of the information superhighway was largely a bust. But this didn’t concern Bill Gates too much. He didn’t care who won the mad scramble to deliver this golden future: cable, telephone, satellite or other. Microsoft would sit back and let others lay the groundwork and infrastructure of a fully connected IAYF world. Once all the kinks were worked out, Microsoft would swoop in and overlay its next-era platform on top of everything and take a generous cut for doing so. It was a strategy that had worked for Microsoft time and again in the 1980s: let others do the hard work of proving a market, then come in and dominate it once the dust had settled. Various industry estimates said that true broadband wouldn’t become common in North America until the turn of the century (an accurate prediction, as it turned out.) Gates believed he had time to wait. The networked world he was envisioning couldn’t happen until broadband was ubiquitous. The future wouldn’t happen overnight.
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EXCEPT, OF COURSE, IT HAD.
It all came down to this: no one in tech, no one in media, no one from Bill Gates to Jerry Levin to Hollywood ubermogul Barry Diller had realized what Marc Andreessen and Jim Clark had realized: the information superhighway was already here. The Internet and the World Wide Web were the information superhighway. The revolution was now, and it was being delivered not by the television, but by the computer.
Part of this misjudgment was probably just generational bias. Bill Gates (born 1955), Barry Diller (born 1942), Jerry Levin (born 1939), John Malone (1941), and all the rest were baby boomers or near-boomers. They had grown up in the Age of Television. For these men, it was taken for granted that television was the apotheosis of mainstream technology, the cultural force that united all of late-twentieth-century society. Like any good computer hacker, Bill Gates had used the Internet in the 1970s and ’80s. In fact, when Gates developed Microsoft’s first-ever software product (a version of BASIC to be used on the Altair, the first personal computer), he had used FTP on Harvard University’s computers to beam his work for storage on Carnegie-Mellon’s computers. But to Gates, the Internet was like Unix: it was a technology for geeks. What average computer user could be bothered to figure out something arcane like FTP?
The Internet was not for mainstream users, as far as Bill Gates was concerned. Microsoft was a company that thrived by selling carefully controlled user experiences. Microsoft had come to prominence by making computing more mainstream and user-friendly. That was why Gates’s vision for the information superhighway developed by Microsoft and its big media partners would be a safe and controlled technology, palatable to mainstream users, and above all, managed.
What Gates missed most crucially was how the latest iteration of the Internet, the World Wide Web, was different. It was, in fact, more user-friendly, and more robust than anyone realized at the time. Gates simply missed that the Internet had undergone the equivalent to the personal computer/GUI revolution that Microsoft itself had delivered in computing. The web could deliver on all of the promises of the information superhighway, and it delivered on those promises in the democratic, utopian way that so enthused early adopters of the web like Marc Andreessen. The information superhighway was interactive, sure. It let you talk back to your TV. But it didn’t allow you to create your own television program. The web, by contrast, allowed users to consume content, and create it. Any user. Anywhere. Any kind of content. And anyone could do so outside the control of a major media corporation or gatekeepers like the cable companies or Microsoft.
A young Microsoft executive named Brad Silverberg, who joined the company in 1990, put it this way, “If you’re Microsoft in the middle of 1995, the world is pretty good! You’re king of the hill! The technology world revolves around you! Why would you ever want the world to change? Understandably, you don’t.”9
But the world had changed, and it took Gates a little while to understand this. The best illustration of this comes from the book that Bill Gates agreed to write sometime in the early 1990s called The Road Ahead. It outlined Gates’s own vision of the future of technology. Published in November 1995, the index of the hardcover edition had 68 references to the term “information highway,” 46 references to the term “Internet” and 4 references to the World Wide Web.
About a year later, the paperback version was released, and it had been heavily rewritten. In the paperback version of the book, “information highway” got only 39 references. The Internet, conversely, got 169. The web suddenly had 59 mentions. Why the change? Between the hardcover and paperback editions, Netscape happened.
“The Internet was the information highway everyone was looking for,” Netscape’s Jim Barksdale said. “They just hadn’t recognized it.”10
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BUT THERE WERE PEOPLE at Microsoft who recognized it. They were younger Microsofties, a bit older than the Marc Andreessens of the world, but generally of the same Gen X age cohort. These younger executives and engineers, in various ways, and in sporadic, uncoordinated efforts of agitation, would begin a slow but steady drumbeat to wake Microsoft up to the web revolution. They did so in, probably, the only way that change can be made in large corporate environments: via the quiet, measured insurrection of memorandums.
James Allard, born in 1969, took it upon himself to become Microsoft’s first intermediary to the net/web revolution. Before this time, Microsoft made little contribution to the development of the web and the Internet at large. Microsoft had no seats on standards committees. It had no one participating in the WWW-Talk forums. Allard began representing Microsoft at early Internet confabs, like the Internet Engineering Task Force, and made sure that Microsoft became a founding member of the Internet Society. In early 1993, Allard started an in-house Microsoft discussion group on the Internet called “inetdisc.”11 Out of 14,400 Microsoft employees at the time, 5 people joined. Undeterred, Allard printed a batch of Microsoft business cards that read JAMES ALLARD, PROGRAM MANAGER, TCP/IP TECHNOLOGIES.12
On January 25, 1994, around the time that Marc Andreessen was first getting to know Jim Clark, Allard wrote an internal Microsoft memo titled “Windows: The Next Killer Application on the Internet.” The memo outlined the recent explosion of growth on the Internet and of Mosaic. Allard asserted that the Internet represented a great opportunity for Microsoft. “By embracing current technologies available on the Internet,” Allard proposed, “w
e position Windows as the choice system for interactive Internet services and prepare for the shift to the native IAYF (Information At Your Fingertips) technologies offered [by Microsoft Products].”13
One of the people cc’ed on the memo was Steven Sinofsky. Sinofsky was another young Microsoftie enamored with the Internet. As the technical assistant to the CEO, Sinofsky’s purview was to keep Bill Gates abreast of industry and technology trends. Also a Gen Xer and heavy Internet user in his college days, Sinofsky had given Gates a personal tutorial on an array of Internet tools as recently as October 1993, including a browsing session on the nascent World Wide Web. At the time, Gates was intrigued but not overly impressed.
At the time of Allard’s memo, Sinofsky had taken part in a recruiting trip to his alma mater, Cornell. In between interviewing bright young prospects for possible employment with Microsoft, he couldn’t help but notice how prevalent the Internet had become in everyday campus life. At least among these college kids, things like email, web browsers and newsgroups weren’t opaque, fringe technologies. Seemingly overnight, they had become mainstream. On Valentine’s Day, February 14, 1994, Sinofsky wrote a memo of his own, with the title “Cornell is WIRED!”
Around this same time, Microsoft began hedging its bets when it came to trends in networked computing. Microsoft studied the existing consumer online services like Prodigy, CompuServe and America Online. These services had nothing to do with the Internet or the web (more on that in the next chapter) but they were training a small yet growing population of pioneers to begin to settle cyberspace. Microsoft began development of an online service of its own, a service that would eventually be known as the Microsoft Network, or MSN. It was slated to launch alongside Windows 95.
How the Internet Happened Page 5
