The Birth of the DOTCOM Giants
Becoming super successful in businesses don’t ever come easily. It comes with its hurdles of failures and setbacks, wars with competitors, government and even customers. How many react can be the sole difference between death and survival.
I somehow stumbled on some podcast shows while also reading some books. The shows do justice to how the biggest brands were able to surf the ocean of uncertainty, engage in fierce competition and overtake the big players.
This write up was inspired by @businesswars
So, In the spirit of influencing business decisions through successful and failed companies, I’ve decided I’ll be posting write-ups about the @businesswars shows with additional researched contents to get you inspired as much as the show does.
The purpose is so as we can relate, share ideas, and make useful, some gained strategies and knowledge used by some of the well known iconic businessmen to survive their businesses.
Today, we dive into a rather geeky part of business. What brought about the revolution of the internet. What gives you the power to be reading this article here, we dive into the birth of DOT COM GIANTS.
Dec 1992, Andreesen, a 21-year-old computer science student finding the easier way to get Computer on the internet. He’s studying CS at the National Center for Supercomputer application at the University of Illinois.
While in the library one day, Andreesen thought to himself, what if there could be a way for people to communicate audio, text between one another, anywhere in the world? The idea lightens up his brain and immediately he’s driven to make it a reality.
He approaches his friend and colleague, Eric Bina. Andreesen is a risk-taker, evangelical where Bina happens to be apprehensive and with caution. Bina is shy while Andreesen speaks in grand words. Andreesen needs Bina to help him.
Web browser makes about 1% of web traffic. Everything made up of simple text and computer codes. The university approved the project and they started on it. they coded round the clock consuming cookies.
Jan 23rd, 1993, Andreesen unveil Mosaic. He knows he and Bina have done something special. Little does he know that what he’s just build something that will kickstart the beginning of a technological revolution and literality change the world. The success of Mosaic kickstarted what is today known as the network effect… popularity begot the spread of popularity.
After Mosaic success in increasing the no of websites on the internet from a mere 50 to 600 and internet users from 100k to 6M, Andreesen knows he’s been able to radically increase the no of geeks on the internet but, he wants more. He wants to put Mozaic in the hands of ordinary users, teachers, students. He wants to liberate the world.
In 1994, Mosaic for Microsoft was released. Free and easy for Computer novice. Soon after launch, traffic on the school server increases, thousands of users are downloading the Mosaic browser.
in Dec 1993 after Andreesen graduates and getting ready to pick his diploma, he sees the front story in the New York Time. The story hails Mozaic as the map to the buried treasure of the information age. The director of the university’s national center for supercomputing application quoted Mozaic as the first window into cyberspace. He bulges to the director’s office the tusks the paper on his desk. Andreesen demands an explanation of why his name or Bina’s was never mentioned in the article and why the director is stealing away all credit for the Mozaic browser he coded with Bina.
Andreesen went into a fury with the university but was denied the right of ownership to Mozaic browser having done as a research project in the University through the University’s National Centre for Supercomputing Application and those, belongs to the school and not Marc or Bina.
Andreesen was livid and without his diploma certificate, he left the University, far away to Silicon Vallery. Andreesen’s dream of making the internet more open and accessible has just been stolen from him. He wants revenge, he wants a fightback. But, he himself knows if he has to do this, he needs a partner and more enough, he needs one with a deep pocket.
It’s 1994, Jim Clark is a year shy 50 and he’s just been voted out of Silicon Graphic, the company he co-founded and built for more than a decade ago. He feels like he’s been pushed off a cliff. Clark is berated, he also wants a fightback. Clark was formerly a computer science professor. Being a neophyte in business, he believes the best way to kickstarts his SGI idea is by selling multiple rounds of share to investors to raise money and in the process, dilutes his equity and control. As SGI gets off the grown, the investors brought in a new CEO and kick Clark to the chairman position, a rather symbolic position. When the company transition from a scrappy startup to an established player and with Clark incessant fight with the executives, Clark was kicked out with a 15M exit package. Furious, Clark plots his revenge. Clark is leaving and vow to start a new venture that would make SGI looks like a mere garage.
He seeks around for names of good computer geeks he could work with and Andreesen came handy. SGI came up with the process that transforms 3-dimensional graphics. SGI enables users to completely visualize what they want to build. SGI was responsible for special effect in different Movies.
After a bit of background check about Mark Andreesen and his Mosaic browser, he knows Mark will provide him the ammunition he needs to strike back at SGI. Jim emails Andreesen and their partnership begin a new era in internet technology that will put Microsoft at it kneel at least, for now.
Every evening, they toss for ideas, sitting together in bars and discussing the next internet venture. But, Andreesen couldn’t just get over his Mosaic, he proposed to Jim to build a Mosaic killer by bringing his initial Mosaic team on board. Jim loved his challenge and the company Nescape Inc. was born. The browser will be called The Navigator. They both understand, to make a move like this, the whole world will be watching but, if they failed, the humiliation will be disastrous.
Andreesen poaches all his old Mosaic teammate from the University of Illinois, backed with $3M from Clark, they work tirelessly, losing track of what day it is. When Navigator was done, it was 10 times faster than Mosaic. wow!
Andreesen tries to convince the team to put The Navigator away for free. After all, a market share today equal to revenue gain tomorrow. But, with Jim Clark frontier as the money bank, nobody is feeling the pressure more acutely like him. Jim and Clark's debate overpaid and free model and, a compromise was made. Navigator will be available for free to students and educators and will cost $39 to everyone else.
Netscape Navigator was destined to sail pass Mosaic not only because of its speed but Netscape Navigator is also more secure, with features to build a more complex user interface. Most importantly for eCommerce success, Navigator introduces a secure means of communication that would encrypt credit card number, the HTTPS of today.
Oct 13, 1994, the team is ready to unveil the Unix, Mac and PC beta version of the Navigator to the world. it started as a trickle of download becomes a stream, and then the internet was flooded with Navigator downloads. Within 1hr, the Navigator’s got 10 thousand downloads without any advertisement. While Netscape continues to soar, the environment at the University of Illinois was bullish. Mosaic is currently accounting for more than 60 of the internet traffic and they won’t stop there, the university has assembled a team of lawyers suing Mark and Jim Clark for an alleged infringement on the Mosaic browser he himself created. The University isn’t the only one looking to bury Netscape Navigator before its arrival, somewhere exists, a company with the size and pocket to launch a competitor with a lucrative strategy of giving it away for free. That company is Microsoft.
Going back in time to the genesis of Microsoft infiltration of the computer industry.
Microsoft was established in 1975 by Paul Allen and Bill gate. The company major success began when Paul and Bill made a compelling deal with Micro Instrumentation and Telemetry Systems (MITS) by selling to MITS the first computer operating system to power MITS’s Altair 8800, the first personal computer. MITS CEO, ED Roberts, proposes a 10% royalty to the cap of $150,000 for every basic operating system sold with the Altair 8800. A rather lucrative deal to make with business kiddies like Paul and Allen. Gate and Allen manage to sign the deal with a nonexclusivity clause mandating MITS to promote BASIC operating system with its best resources which would later prove to be the biggest win for them setting up Microsoft as the bloody Shark ready to squeeze any fringe before they could learn how to swim in the ocean.
To improve the popularity of the basic software, MITS bundles it into Altair 8800 for an additional price of just $75 dollars when the standalone price cause over $500. This to Bill and Allen is an eye-opening to the power of bundling to popularize a product and create a monopoly. A strategy that would eventually kill the Netscape browser in the future.
The basic software became highly pirated and Bill had to activate the other end of the contract clause by licensing the basic software to other OEM apart from MITS. ED Roberts confronted Bill and in 1977, the case was settled in the court of Arbitration in favor of Bill’s claim which eventually hands the control and power of the already popular basic operating system to Microsoft away from MITS and Roberts. A giant is born, rule by an innocent-looking but a devilish business-minded geek. The beginning of the new revolution in computing as just begun.
The company moves back to Seattle with a classmate and later head of marketing, Steve Ballmer and strikes a deal with IBM to run the basic operating system, turning both companies into juggernauts. The money starts flowing in and at 31, Bill gate becomes a Billionaire. The subsequent release of Windows version follows and in 1995, at 40, Bill Gate becomes the World riches and one of the most powerful people on earth. By this time, Microsoft has revenue of nearly $6B and employee of over 17,000 worldwide.
Netscape remains the only dominant browser running on Windows operating system as at this time and with Microsoft market share and Bill gate power, they’re ready to go after Netscape by releasing a competing browser that will put Andreessen and his team on their toes.
Amidst the growing success of the first version of the Navigator, Andreessen and Netscape already found themselves in lockdown with the University of Illinois Super Computer department after the Netscape company was renamed to Mosaic Communication Corporation, a rather indirect way to send a middle finger down to the university. This leads to a counter legal claim from the university that Netscape infringes on the Mosaic browser by using codes from the Mosaic own by the university in building the Netscape browser. In return, the University demands 50 cents on every download of the Netscape browser.
The court adjudge in favor of Netscape having found no similarity in the code after a forensic analysis but, demand Netscape pay the University $3M for using the name “Mosaic Communication Corporation”
In 1994, Netscape releases the second version of the Netscape browser and before summer, the browser has been downloaded more than 10M times, a rather interesting figure given the number of people on the internet as at that time.
Back in Seattle, Microsoft CEO, bill gate sits on his seat, raging with fury as he clicks around and Navigator browser on his own operating system. He couldn’t but admire the high speed, the comfort of his surfing experience. He surfs the Netscape for many hours and while doing this, he found no existence of Microsoft on the internet. The only company he sees on every page is Netscape and the only celebrity, Marc Andreessen. Bill knows a revolution is about to happen and its brewing already under his nose. If Microsoft is to be part of this revolution, it needs to act now.
Bill summons his chief marketing officer, Steve Ballmer and later drafts a memo which will be sent to the entire company employee on where Microsoft stands with the internet and the urgent need to readjust or face extinction.
While competition is being born at Microsoft, Netscape fills for an initial public offering in late 1995 and racks home worth of more than a billion-dollar. The IPO of Netscape will later be regarded as the touch that sparks the beginning of the internet boom. Marc Andreessen and Netscape will need every excitement and money from the IPO to battle Microsoft for internet supremacy.
A week after the Netscape IPO, Microsoft hastily releases its own browser called the Internet Explorer. Well, the internet explorer didn’t really go as planned by Bill. Web pages are slow to render, not as fast a Netscape and all these leads to a fall in the share of Microsoft resulting in an 80% increase in the market share of Netscape. The wall street doubt if Microsoft and Bill gate could match the technological ingenuity of Netscape and Marc Andreessen.
Shortly after the release of the Microsoft Explorer browser in 1995, Bill gate calls for a partnership meeting with the board of Netscape in his office. Bill offer a large investment in Netscape browser and in turn, forbids Netscape to release a version of the browser for new releases of the Windows operating system, restricting Netscape to users of the about to go extinct versions of windows. Andressen and Jim stroll out of the meeting rejecting the offer and compare it to a godfather who demands respect and admiration for his rather gimmick status.
Bill gate orders his chief marketing officer and demands a way out. Ballmer and Bill find a way out by licensing Andreessen’s first browser, the Mosaic from the University of Illinois in the bit to copy it codes to enhance the next release of the Microsoft Internet Explorer.
Microsoft was experiencing one of its first declines after coming into prominence a decade ago. Worst is that the source of this decline is a year old company averaging revenue of $400M+.
In August 1995, Microsoft released the 2nd version of the Internet Explorer and this time, it’s faster than the Netscape thanks to the Mosaic. Andreessen is now faced with the challenge of fighting with himself.
Bill gate and Microsoft now has a smarter, faster and smoother software in hand to compete against the Netscape. What the lack is the market share and Bill gate will do everything possible including losing money and anti-competition strategy to get the borne off the dog’s mouth.
Bill Gate compulsory every Windows Licenced OEM to bundle Microsoft Explorer as their default browser or Microsoft will revoke their license which would, of course, kill off any OEM giving Microsoft is the only available operating system as at then. This move will definitely choke Netscape until it bleeds to death. Bill wouldn’t stop there, he also went after commercial online services and hope to convince the largest ones, America Online, and ATandT to replace Netscape with Internet Explorer as it features browser. After all, AOL controls about 50% of internet traffic. In exchange for this deal, Microsoft offer AOL premium placement on windows, a deal worth up to $1B to AOL.
By the end of 1996, Microsoft Internet Explorer is already available in almost 90% of all PC released. The drastically has not only stunted the growth of Netscape but as well, a resulted in a colossal loss for the golden startup. By 1997, Microsoft released Internet Explorer 4.0, Netscape loses $88m and share drops by more than 20% and by 1998, Internet explorer soar way past Netscape in market share. Whenever it looks like Netscape is about closing a deal to move forward, Microsoft appears with cash in hands to dissuade the plan and buys away loyalties. The future is beginning to looks blurring for Netscape and Andreessen. To compound their wound beyond Windows, Apple will also be shipping out with Internet Explorer after Microsoft invested a $100M in Apple. Netscape seems to be lost of any escape route and Andreesen looks more like a Christmas chicken eyeing its own death. The company loses 132M in 1997 and lays off 400 employees. The end seems nigh. in 1998, Netscape finds solace in one of its betrayal AOL. AOL buys Netscape for $10B and plans to bring the browser back to life by putting it 15M internet user back on it. The deal never materializes as users continue to use Internet Explorer and Netscape continue to fade away. The company that orchestrated the kickoff of the internet boom and was once worth a $1B is now on life support.
While Microsoft seems to be taking away the glory, the attorney general of the United State, Janet Reno, was watching as Microsoft unfairly stiffs away the competition and she’s determined to make life unbearable for Microsoft and Bill Gate. Janet Reno is known as a no-nonsense lawyer who often describes herself has found joy in crushing witnesses. This time, the witness will be Bill Gate.
The case found its way up to another strict judge Thomas Penfield Jackson. in Dec 1997, Jackson issues an Injunction to allow PC maker to offer Windows without internet explorer. Microsoft filed a counter, claiming to remove Internet Explorer from windows will lead to a system that is “degraded, deficient and dysfunctional”. The claim was however nullified and Bill Gate resulted to unbundling internet explorer from the outdated windows 95 but still leaves it bundled with a newer operating system which leads to a $1m daily fine for going against the court ruling. Later in 1998, 20 state attorney general also filed the same anti-trust case against Microsoft.
In 1998, the Department of Justice rules that Microsoft strategy to outwit competition in the browser market does constitute a monopoly and more likely to crush competitor rather than offering any valid consumer advantage. After the ruling, Microsoft stock falls by 14% and Janet Reno, the attorney that presented the initial case is pleased with the verdict. In 2000, the court ordered Microsoft to split into 2 with one company in charge of the operating system and the second part in charge of software and drivers. Although Microsoft loses the case, they were able to scramble back into business by capitalizing on the biased judgment of Judge Thomas Penfield Jackson claiming it violates the Oath of Office. In 2002, Microsoft settled with the Department of Justice and part of the settlement terms being Microsoft mustn’t force PC manufacturers into bundling internet explorer with the Windows Operating system and they must share codes with developers that depend on Windows software.
Technically, Microsoft may have lost the case but in reality, they continue business as usual and nothing could resuscitate the already buried Netscape.
I hope you’re able to learn one or two things about business in this series of “behind the scene of successful businesses”. Have any idea what Netscape did wrong and what they could have done right to still stay in business? Share your thought and share this also with your friends. That definitely will keep me awake every weekend to write a new series. It’s a new business week. I hope we all play our cards right to remain in business.