How the Internet Happened (2018)
Brian McCullough
▪ When computers were first developed in the 1940s and ’50s, it was never imagined that the common man or woman would ever need, much less have use for, them
▪ One of the true godfathers of the Internet was a man by the name of J. C. R. Licklider. In the 1950s, he worked at Bolt, Beranek & Newman, which would go on to build the computers that were connected to the first four nodes of the ARPANET
▪ The logic that was driving device manufacturers to cram a kitchen sink’s worth of technology into the singular form factor of the smartphone was simple. Why carry multiple devices around when you could just carry one
▪ If you were looking for a single company that exemplified the dot-com era, you could do worse than Priceline.com
▪ Soon after HotWired’s launch at the end of 1994, it was estimated that the number of websites in the world had passed 10,000
▪ In the technology world, the ultimate success of a new idea is very much dependent on timing. Even great ideas that are quite obviously “the next big thing” can fail to deliver on their promise because the underlying technology or infrastructure isn’t mature enough yet
▪ Computers were designed for big problems: calculating missile trajectories; putting a man on the moon.
▪ But even though “professional” sites like HotWired and Pathfinder were beginning to proliferate, the vast number of websites and webpages remained random, even individual, affairs.
▪ There was more than a century of precedent for doing commerce remotely: the multibillion-dollar catalog sales industry. A webpage could be a more dynamic and effective catalog than what Sears or Lands’ End could offer. And the Secure Sockets Layer technology developed by Netscape made actual transactions possible on the web; no need for 1-800 numbers or customer service reps to take the orders.
▪ Legend holds that the founder of IBM, Thomas J. Watson, once remarked, “I think there is a world market for maybe five computers.” This quote is probably apocryphal, but it does capture the early thinking when computers first began to serve man.
▪ What exactly were people doing on the early web? Well, it was hard to say at the time, and maybe even harder to say twenty-five years later. The early web was sort of everything and nothing at the same time.
▪ PayPal began life as Confinity, launched in July of 1999 by Peter Thiel and Max Levchin with the immodest proposal of disrupting the global financial system
▪ Most of the early websites had to publish wherever they could, and that often meant piggybacking on existing academic or corporate websites. It wasn’t until 1995 that individuals were broadly allowed to register their own .com domain names.
▪ In 1963, he wrote the key internal paper that would plan for, and ultimately make the case for, the development of the ARPANET, the key precursor to today’s Internet.
▪ In many ways, the dot-com bubble and its subsequent bursting are a similar bogeyman, at least to Silicon Valley. Any time a new technology leads to the proliferation of startups, any time venture capital investments increase year over year, any time company valuations pass stratospheric levels and high-profile IPOs hit the market, people inside and outside of tech fall all over themselves to declare that a new bubble is here, and everyone should head for the hills. But the fact is, the dot-com bubble was a truly singular event, brought on by a unique mixture of causes, and we are unlikely to see its kind again in our lifetimes.
▪ Is it a fact—or have I dreamt it—that, by means of electricity, the world of matter has become a great nerve, vibrating thousands of miles in a breathless point of time? Rather, the round globe is a vast head, a brain, instinct with intelligence! Or, shall we say, it is itself a thought, nothing but thought, and no longer the substance which we deemed it!”
—THE HOUSE OF THE SEVEN GABLES, CHAPTER 17, “THE FLIGHT OF TWO OWLS,” NATHANIEL HAWTHORNE
▪ Mark Zuckerberg was eleven when Netscape IPOed. As a middle-schooler and high-schooler, he came of age on AOL.
▪ The entrepreneur and venture capitalist Chris Dixon has remarked that “the next big thing always starts out dismissed as a ‘toy.’ ”1 This is very often true with Internet technologies; a new site or a new tool can, on first encounter, seem gimmicky. Why would I ever want to use/do that? is many a first user’s impression of the new. The web and the Internet itself engendered this reaction among many during its early days. At the time, the most enthusiastic net cheerleaders were touting it as a revolutionary medium that would completely change our lives. But there were still others who looked at the net and saw, yes, a toy. And we have to admit that these skeptics had a valid point of view, even with the benefit of hindsight. Because so much of the early web was decidedly amateur.
▪ From the first days of the web, people had wanted to use the Internet to create some form of ecurrency. “As far back as 1995, there were a hundred companies that used cool technologies for moving money and that were going to change the world,” Thiel recalled.1 In the midst of the bubble, there were well-funded digital money schemes like Flooz.com and Beenz.com that did not survive the nuclear winter.
▪ But like most computer scientists of his era, Licklider was also a theoretical visionary. In 1960, he wrote a paper called “Man-Computer Symbiosis,” which is considered a fundamental text of modern computer science.
▪ In 1999, he had a personal homepage on Angelfire, a competitor to GeoCities where anyone could host a website for free. “Hi, my name is . . . Slim Shady,” the site’s About Me page said.
No, really, my name is Slim Shady. Just kidding, my name is Mark Zuckerberg (for those of you that don’t know me) and I live in a small town near the massive city of New York. I am currently 15 years old and I just finished freshman year in high school.
▪ Check it out at www.internethistorypodcast.com or on your podcast app of choice.
▪ Indeed, perhaps the longest-lasting legacy of Netscape Navigator setting the standard for the early web is that, to this day, SSL, via its descendant, TLS, enables the vast majority of online commercial transactions worldwide.
▪ In 1960, as today, there were many who believed that true artificial intelligence was just around the corner. Licklider, however, put his money on cybernetics, the idea that man would meld with machine
▪ PayPal’s crucial insight was that payments in cash could be beamed directly to your virtual person: your email address. By the end of the nineties, everyone had an email address. PayPal simply turned your email address into a virtual bank account routing number. Need to send me $10? Use PayPal to send it to my email address.
▪ I think one of the things that really separates us from the high primates is that we’re tool builders
▪ In “Man-Computer Symbiosis,” Licklider argued that thinking machines many orders of magnitude smarter than humans might arrive someday. They might even be inevitable. But in the meantime:
There will nevertheless be a fairly long interim during which the main intellectual advances will be made by men and computers working together in intimate association.
▪ computers were not conceived to be user-friendly because it was never assumed a nonexpert user would interact with one.
▪ I read a study that measured the efficiency of locomotion for various species on the planet. The condor used the least energy to move a kilometer. And, humans came in with a rather unimpressive showing, about a third of the way down the list.
▪ And so, necessity dictated that search engines would become the most popular and most important early websites. And because the problem of a business model had been solved by HotWired, search sites, and Yahoo in particular, would become the web’s first great companies.
▪ For example, one of the notorious early websites was the Netscape Fishcam, which was maintained by Lou Montulli, one of the original Mosaic six that Marc Andreessen and Jim Clark had recruited from the University of Illinois. This was, simply, a live webcam of a fish tank. Nothing more. It still functions to this day at Fishcam.com.
▪ But, then somebody at Scientific American had the insight to test the efficiency of locomotion for a man on a bicycle. And, a man on a bicycle, a human on a bicycle, blew the condor away, completely off the top of the charts.
▪ Even when computers began to infiltrate the workplace in the 1960s through the 1980s (much to the surprise of the computer industry itself), it was still assumed that an “average” computer user could only achieve competency in limited, specific tasks or programs.
▪ Credit card merchant accounts cost hundreds, even thousands, of dollars to set up, and were designed for actual businesses. But what if you just wanted to unload your used record collection on eBay?
▪ In a time of near-total Windows domination, Jobs and Apple struck on the idea of rebranding their Macs as machines uniquely designed for the Internet Era.
▪ The not so secret truth about all the early search engines was that they weren’t very good. They returned results in a way that could be comprehensive, but often had no accuracy. A search for, say, “windsurfing” might give you a list of every webpage in the world that mentioned the word “windsurfing,” but made no effort to sort for context.
▪ And that’s what a computer is to me. What a computer is to me is it’s the most remarkable tool that we’ve ever come up with, and it’s the equivalent of a bicycle for our minds.
▪ Men will set the goals, formulate the hypotheses, determine the criteria, and perform the evaluations. Computing machines will do the routinizable work that must be done to prepare the way for insights and decisions in technical and scientific thinking. Preliminary analyses indicate that the symbiotic partnership will perform intellectual operations much more effectively than man alone can perform them.
▪ Zuckerberg, like almost everyone he knew, was a heavy AIM user. He was also a member of Friendster when it debuted. He blogged. He voted on HotorNot.com. Napster had been the biggest cultural and technological event of his young life. And so, Zuckerberg’s youthful hacks all featured elements that, in one way or another, we might call “social.”
▪ Pioneers of new technologies are rarely the ones who survive long enough to dominate their categories; often it is the copycat or follow-on names that are still with us to this day: Google, not AltaVista, in search; Facebook, not Friendster, in social networks. But in a case of the exception proving the rule, the company that broke the most ground in what would be known as ecommerce is still the company that dominates today: Amazon.
▪ Enter PayPal. Sellers on eBay simply asked buyers to “PayPal” them the payment for a successful auction to their email address. PayPal would withdraw the funds from one, and forward to the other.
▪ And yet, the tantalizing, almost forbidden mystique of computers seduced a generation of what were considered hobbyists in the 1970s
▪ The hobbyists wanted to master computers themselves. They wanted computers that responded to them directly, without intermediaries. They wanted personal computing. And so, they made it happen. Steve Jobs, Steve Wozniak, Bill Gates, the Homebrew Computer Club—the hobbyists created the personal computer category (originally, they were called microcomputers) and thus, the PC Industry.
▪ As the 1980s turned into the ’90s, the Newton team was working on a tablet computer the size of an eight-and-half-by-eleven-inch sheet of paper. This experimental device weighed about eight pounds but was only three-quarters of an inch thick. Named Figaro, the machine was navigated using a stylus on a grayscale screen, had three processors, an internal hard drive and wireless networking and got about ten hours of battery life. Oh, and it cost about $8,000 to produce.2 Per device.
▪ The irony was that the very company that had announced to the world that there were riches to be found on the Internet couldn’t find a reliable way to make money on the Internet
▪ First, we connected all the world’s computers together. Then, we uploaded all of humanity’s collected knowledge into the virtual space that networks created. Then, we made all of that knowledge searchable. We tied our commerce systems, our financial systems, even our media and information systems, to the network. We created a world where any good, any piece of media, any piece of art, any fact or thought, any idea or meme, is available, on call, for the instant gratification of any curiosity or desire. Over the course of a decade, we learned how to behave, and then to actually live with this new networked paradigm—to actually exist in this virtual environment
▪ Forbes put Walker on its cover as a “New Age Edison.” He told the Industry Standard: “The long-term legacy of Priceline [will depend on] whether or not we can successfully introduce the first new pricing system in probably 500 years
▪ 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.
▪ That still wasn’t quite enough to make computers friendly to the average person. Almost a decade into the PC era, the industry remained trapped in the paradigm of the “command line.” If you sat in front of a computer, you would see a blinking cursor and would need to type something to make the machine do anything for you.
▪ To this day, a “search engine” is actually a database of website copies. The search engine sends out “spiders,” which are computer programs that go out onto the web and find new web pages. The spiders locate the pages and then copy some or all of the code into the search engine’s own database. When a user searches a search engine, they’re not actually searching the web itself, but are instead querying the database of copied webpages the search engine has compiled.
▪ PayPal had early competition from another company that had neighboring offices in Palo Alto. X.com was founded by a serial entrepreneur named Elon Musk, who had a vision that was just as grandiose as Thiel and Levchin’s: a next-generation suite of banking and financial services that would be entirely virtual.
▪ Bill Gates felt it was imperative to grow Internet Explorer’s market share and surpass Netscape’s Navigator. He made this decision despite the fact that Microsoft had already spent hundreds of millions of dollars to develop and market MSN
▪ 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.
▪ For a while, the two competed fiercely for users, but in March of 2000, X.com and Confinity merged, eventually adopting the PayPal moniker for the combined company
▪ After such a high-profile debut, few investors were concerned about the fact that in its first few quarters in business Priceline racked up losses of $142.5 million.9 Or that it had to buy tickets on the open market—at cost—in order to fulfill the lowball bids its customers were placing, thereby losing, on average, $30 on every ticket it sold. Or that Priceline customers often ended up paying more at auction than they could have paid through a traditional travel agent.10 Investors were more interested in grabbing a piece of a company that was going to change the future of business.
▪ 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.
▪ But there were early websites with serious utility as well. The first commercial web publication was called Global Network Navigator, or GNN. It was launched all the way back in May of 1993, under the umbrella of the technology publishing company O’Reilly & Associates. O’Reilly published computer books and manuals, and in 1992 published The Whole Internet User’s Guide and Catalog, one of the first books about the Internet targeted to mainstream users.
▪ And then, we started wearing actual supercomputers on our bodies, taking them with us at every waking moment of our days, to navigate, not only the intellectual, the social, but even the physical space of modern life. And we did all this unbidden, undirected, unplanned—almost as if we were following a biological impulse, guided by some unconscious evolutionary imperative.
▪ This problem was solved by the invention of the GUI, or graphical user interface. Computers were humanized by graphics, by colors, by friendly icons and drop-down menus and a cute little tool called a mouse
▪ At the All Things D conference in 2004, the venture capitalist Stewart Alsop Jr. virtually begged Apple to make a phone. Jobs demurred. “We’ve visited with the handset manufacturers and we’ve talked to the Treo guys [Palm],” Jobs said. “They tell us horror stories.”
▪ Microsoft usurped the browser market by giving away its browser for free. And more than free, there were instances where Microsoft was essentially paying valuable partners—Internet service providers, computer manufacturers—to favor IE over Navigator. Netscape, the smaller company by far, couldn’t afford to give away its browser. The whole reason that Netscape tied itself in knots trying to reinvent its business model was that it knew it couldn’t match Microsoft’s deeper pockets when it came to competing in the stand-alone browser market.
▪ The result of this strategic pivot, the Newton MessagePad, was released to the public on August 2, 1993. It cost $699, ran on four AAA batteries and weighed 0.9 pounds. But at 7.24 inches by 4.50 inches (about the size of a VHS cassette) it was hardly pocketable, except in the most generously sized pockets.4 With optional add-ons, you could send faxes and (eventually) email using a wired modem. But the main features of the Newton were its productivity apps, including a calendar, address book, to-do list and notepad. It had no keyboard, instead boasting a touchscreen that you interacted with using the included stylus. The intention was, you would write on the Newton just as you would if you were writing on a piece of paper. The software would interpret your handwriting and turn it into on-screen text
▪ Brin’s hobby project was creating a software program that could provide movie recommendations based on the tastes and viewing habits of other people who had seen similar films (not unlike what Netflix later perfected). Page’s dream obsession was creating a system of networked, autonomous cars to ferry people around.
▪ Zuckerberg also created a HotorNot for Harvard students called Facemash that let users vote on the looks of their fellow classmates. “Were we let in [to Harvard] for our looks?” the site asked. “No. Will we be judged by them? Yes.”3 Facemash was an instant hit on campus, but was quickly shut down because Zuckerberg had stolen the student profile pictures used on the website from Harvard’s internal networks. Also, student groups objected to the blatant misogyny and privacy violations inherent in the project. Zuckerberg was put on probation by Harvard’s administration for the stunt.
▪ Though they worked hard to make them otherwise, the algorithms the early search engines used to sort and rank pages were crude and wildly ineffective.
▪ On the Friday night before Labor Day weekend in 1995, Omidyar holed up in his home office on the second floor of his town house and began writing code for his auction idea. By the end of the long weekend, he had cobbled together a crude website that allowed users to do three simple things: list items for sale, view items that were on sale, and place bids on those items. He hosted the site on his home server and published it to the web via his $30-a-month account with a local ISP. He called the site AuctionWeb. But he hosted it as a subsite on his personal webpage, ebay.com. So, the URL was ebay.com/aw.
▪ Invented by Xerox, popularized by Apple Computers and the Macintosh, and then mainstreamed by Microsoft and its Windows operating system, the GUI was the evolutionary leap that would eventually make computers friendly to the average user.
▪ The obvious alternative to this state of affairs was to bring a curatorial element to search. And in fact, the dominant player that would emerge in search was not strictly a search engine at all, but a directory, compiled not by bots but by actual humans
▪ But perhaps what’s most interesting to observe about the rise of blogging is how the habits and behavior of web users themselves changed. If the web in the dot-com era had been about, in the words of the technology journalist Sarah Lacey, “taking prepackaged content from the offline world and throwing it onto a site,”3 the new web was about you (and everybody else) putting up your own content, discovering it for yourself (and others), organizing it yourself and determining that your content was just as interesting and valuable as anything else in the media landscape.
▪ In a last-ditch effort to shore up market share, Netscape released the source code to its browser on a website called Mozilla.org in January 1998. The Economist magazine said that this move was “the computer-industry equivalent of revealing the recipe for Coca-Cola.”
▪ In the 1980s, when PCs were still struggling to find a “killer” use case that would justify their entry into Americans’ lives, online services were dreamed up as “something else to do” with computers once you brought them home
▪ By 1990, only 42% of U.S. adults said they used a computer even “rarely.”
▪ But doubters were proved wrong a mere five months later when eBay acquired PayPal for $1.5 billion, one of the biggest acquisitions in the wake of the dot-com implosion.
▪ This open-source browser project would later evolve into the Firefox web browser, which would, in the 2000s, eventually take the market-share crown back from Internet Explorer. But it did nothing for Netscape at the time. By February 1998, Netscape’s stock was down by half from its IPO, and 88% off its all-time high.
▪ SO MANY OF THE COMPANIES that would embody what we think of when we remember the dot-coms shared some or all of Priceline’s traits: a business plan that promised to “change the world”; a Get Big Fast strategy to reach ubiquity and corner a particular market; a tendency to sell products at a loss in order to gain that market share; a willingness to spend lavishly on branding and advertising to raise awareness; and, above all, a sky-high stock market valuation that was divorced from any sort of profitability or rationality.
▪ Or, at least, it was supposed to. The Newton was ultimately done in by its notoriously flaky software, which, more often than people could tolerate, simply refused to recognize what had been written. Oddly enough, the longer the word, the better the software was at translating, because longer words gave the handwriting interpreter more information to work with. The Newton struggled primarily with shorter, monosyllabic works like “or” and “the.”
▪ Why eBay? Well, after cashing out from the eShop sale, he had done some web consulting and freelance work and decided to do so under the rubric Echo Bay Technology Group, a name he simply liked. However, the domain EchoBay.com was taken, so he registered what he considered to be the closest approximation: eBay.com. Omidyar was already hosting an assortment of other properties on the domain, so AuctionWeb was born sandwiched between a handful of other sites, including one with links to recent Ebola outbreaks, an interest of Omidyar’s.
▪ In that same year, the number of American households that owned a computer had not yet passed 20%.
▪ On April 12, 1993, a special issue of Time magazine headlined: “The Info Highway: Bringing a Revolution in Entertainment, News, and Communication.”
▪ In January 1996, LarryandSergey ended up working in the same office, number 360, in the just-completed William Gates Computer Science Building on Stanford’s campus. The building was of course named after the founder of Microsoft, who had donated $6 million to the construction. All his career, Bill Gates repeatedly predicted that one day, some student somewhere would found a company that would challenge Microsoft for dominance of the tech industry. His prediction turned out to be right, and from a building with his name on it.
▪ The Internet is the reason that computers actually became useful for the average person.
▪ It had taken about a decade for mainstream users to acclimatize themselves to the web, but now that they had the lay of the land, they were no longer content to merely “surf.” Even everyday web users were now ready to participate in the web
▪ Why was everyone so sure that television was going to be the medium that delivered interactivity to the mainstream?
▪ The Internet is the thing that made a computer something you check in with daily, even hourly.
▪ In late 2000, an Apple executive named Jon Rubinstein made a routine trip to Japan to visit electronics supplier Toshiba. In his meeting with Toshiba’s engineers, he was told about a new, incredibly small, 1.8-inch hard drive the company had developed that could hold up to five gigabytes of data. Toshiba wasn’t sure what it could be used for. Laptops, obviously. Or maybe digital cameras? Rubinstein knew exactly what it could be used for. Toshiba’s hard drive was the size of a silver dollar but had the capacity to store about 1,000 MP3s
▪ 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
▪ Elon Musk, of course, went on to found Tesla. Peter Thiel became the first major investor in Facebook. Early PayPal employee Jeremy Stoppelman founded Yelp. Max Levchin founded slide. And PayPal alumni had a hand in founding, funding or contributing to the development of so many subsequent companies (LinkedIn, YouTube, Yammer, Palantir, and Square, just to name a few) that folks in technology often refer to a “PayPal Mafia” that runs Silicon Valley today
▪ And that is what this book is about: how the web and the Internet allowed computers to infiltrate our everyday lives
▪ The Newton’s software was supposed to learn your handwriting over time, but PC Week complained that, “The Newton is almost worthless . . . basically shelfware. After three weeks, it still couldn’t consistently differentiate my 1’s from my t’s.”6 Other reviews were just as scathing. “Apple promised too much and failed to deliver a useful device,” wrote the New York Times.7 In a classic example of a rolling PR catastrophe, after the Newton came out, the comic strip Doonesbury spent a week turning the Newton’s handwriting recognition foibles into a national joke.
▪ Wary of working with the carriers directly, but looking to protect the iPod/iTunes franchise, Apple dipped its toe into the cellular waters by partnering with one of the existing handset makers, Motorola, in early 2004
▪ The granddaddy of the online services was CompuServe, which was born in 1969 as the Compu-Serv Network
▪ This is not a history of the Internet itself, but rather, a history of the Internet Era, that period of time from roughly 1993 through 2008 when computers and technology itself stopped being esoteric and started becoming vital and indispensable
▪ He ran across some data by an analyst who claimed that the amount of bytes transmitted over the web from January 1993 to January 1994 had increased roughly 205,700%.4 As Bezos himself later pointed out, “Things just don’t grow this fast outside of petri dishes.”5
▪ Apple would merely license the iTunes software, while Motorola would design the hardware, and—most important—deal with the carriers. “We thought that if consumers chose to get a music phone instead of an iPod,” remembered Tony Fadell, Apple’s executive in charge of the iPod franchise, “at least they would be using iTunes.”
▪ To quote the title of a popular book from shortly after this era, the postbubble Internet was a moment of Here Comes Everybody.
▪ Sharing. Social networks. Mapping relationships online. It was just in the air at the moment. In the zeitgeist.
▪ PAGE WAS STRUCK by a fundamental truth about the web that is glaringly obvious when you state it out loud: it is built on links
▪ In those days, it was still possible to visit every single website in existence in a matter of a few hours. But new websites were popping up every day. Always a bit competitive, the two began collecting and trading links to the new websites they found. They started compiling these favorite links into a list, each trying to outdo the other by finding the coolest new site of the day.
▪ Some credit can be given to Napster for opening these floodgates. All those tens of millions of users who traded MP3 files were proactively and spontaneously self-organizing and using their own libraries to create content for others. Napster was the first time mainstream web users saw the utility in producing, not just consuming, content. And baked into Napster was a “social” component to all this activity. If you found a song you liked from another user on Napster, you could also browse the other files in that user’s library. If you both shared an interest in a given band, then maybe you would like that other band that your friend on Napster had so many MP3s of. It was like the Netflix recommendation engine, but impromptu and self-created. It was the act of finding like-minded individuals, of creating community out of silos of shared interest.
▪ 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.
▪ For years, newspapers dreamed of electronic delivery of their product; digital would mean the elimination, or at least mitigation, of their greatest cost centers: paper, printing and physical delivery.
▪ On October 20, 1997, the Department of Justice announced that it was investigating Microsoft for violation of a previous consent decree, and in May 1998 the attorneys general of twenty states joined the DOJ in filing antitrust suits against Microsoft.
▪ LIKE COMPUTERS, THE INTERNET was not designed with you and me in mind
▪ Apple settled on working with Motorola because it dominated the handset business with its recent release, the RAZR flip phone. The RAZR was a “dumb” phone, not a smartphone, but it was thin, sexy, well designed. In short, it was the sort of product Apple was willing to associate itself with. The RAZR was a huge hit, selling 50 million units in just two years.
▪ Computers were first hooked together in a meaningful way in 1969. This was the ARPANET, the grandfather of the Internet, and (mostly) true to legend, it was birthed by a Cold War–era alliance of the United States military and the academic-industrial complex
▪ Apple had expected to sell 1 million Newtons in the first year. It sold only 85,000.8 Subsequent models would improve immeasurably, especially the second-generation device that was Jony Ive’s first assignment after being hired at Apple. But it was too late. In the court of public opinion, the Newton could never overcome its poor reputation.
▪ Harvard had a decades-long tradition of publishing “facebooks,” or directories of student portraits that helped people look each other up and make connections. The university had made some noises about bringing these directories online, and just that December of 2003, Harvard’s student newspaper, the Crimson, had published an editorial titled “Put Online a Happy Face: Electronic Facebook for the Entire College Should Be Both Helpful and Entertaining for All.”
▪ Google was the one service that had the greatest impact after the nuclear winter, but there was one important trait that Google shared with the departed dot-coms: it wasn’t making very much money. It’s somewhat forgotten now, but Google existed for several years without much of a business plan.
▪ Funded by DARPA, the Defense Advanced Research Projects Agency, the Internet’s first four connections, or “nodes,” were all at academic research centers: the University of California, Los Angeles; the Stanford Research Institute; the University of California, Santa Barbara; and the University of Utah.
▪ So, for its first, experimental foray into cell phones, Apple thought it would be injecting its software magic into one of the hottest devices around.
▪ THE NEWTON’S HIGH-PROFILE failure took the entire nascent handheld computing market down with it. Most of the handheld startups went out of business in the coming years, just as Silicon Valley was turning its attention to the web.
▪ The vision Larry and Sergey had sold the venture capitalists involved a three-pronged strategy. First, Google would license its search technology to the major portals. Second, the company would sell its search technology as a product to enterprises. And third, there were some vague promises about selling ads against searches on its own website.
▪ 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.
▪ The list was called “Jerry’s Guide to the World Wide Web,” and it proved popular among Yang and Filo’s group of friends. Word of mouth spread news of the list even further, and soon complete strangers were emailing suggested websites for inclusion. In order to keep things reasonably organized, Yang and Filo broke the list out into a hierarchical directory. Thus, to find MTV’s home page, a user drilled down by category: Entertainment > Music > Music Videos > MTV.com.
▪ The ARPANET was a blue-sky research project that, ostensibly, would allow for greater (and more resilient) communications among decision-makers during a nuclear strike
▪ Their parents had published academic papers. They, themselves, intended to publish academic papers in order to earn their Ph.D.’s. And they knew that any academic paper worth its salt built its argument by citing other academic papers and studies. In the world of academia, those citations, the accumulated number of “votes” from paper to paper, served, over the years, to accrue value to given ideas—to essentially rank them based on the number of citations. The most cited papers were understood to be the most authoritative. “It turns out, people who win the Nobel Prize have citations from 10,000 different papers,” Page would say later.4
▪ But the main feature of CompuServe throughout its life was its forums, hundreds of moderated special-interest sites catering to almost every interest and niche imaginable. CompuServe gained a reputation as the geek and hobbyist’s playground, with forums catering to everything from stamp collecting to Star Trek.
▪ Zuckerberg decided not to wait for the university to get its act together. On January 11, 2004, he registered the domain Thefacebook.com for $35. Using the examples of Friendster, Course Match, Facemash—even drawing from AIM, Buddy Zoo and Zuckerberg’s own “The Web” app—Zuckerberg coded up a website that would bring college facebooks into the web era.
▪ Within a month of going on sale, customers were returning the ROKR at six times the industry average for a cell phone.8 Wired magazine asked of the ROKR, “You Call This the Phone of the Future?”9
▪ In the twelve months of 1998, Yahoo stock returned 584%, AOL 593% and Amazon 970%.5 These were three of the best-known, most talked-about stocks of the mid-nineties, widely heralded as the vanguard of the new economy that the Internet was supposedly bringing into existence. They were hardly needles in the haystack.
▪ The ARPANET evolved into the Internet we recognize today not as a populist or mass-market communications system, but as an electronic playground where a priesthood of academics could play and exchange ideas.
▪ For Yang and Filo, it wasn’t work; it was fun. “We wanted to avoid doing our dissertations,” Yang admitted.
▪ At first, Jobs refused even to listen to Cingular’s entreaties, instead toying with the idea of launching a stand-alone, Apple-branded cellular network. “Jobs hated the idea of a deal with us at first,” Cingular executive Jim Ryan said. “Hated it.”11 But Ryan stressed to Jobs the headaches involved in becoming a carrier, not just a hardware maker.
▪ Yahoo seemed not to mind that Google was essentially stealing its search audience because at the time it didn’t feel search was a core product. It was still pursuing its portal strategy
▪ Even as computers became personal, even as computing itself was becoming colorful and democratized, the Internet remained stubbornly aloof, sequestered in the ivory towers of academia.
▪ Newspapers and magazines repurposed some of their content for Prodigy, and big-name media personalities such as Howard Cosell and Liz Smith wrote columns exclusively for the service
▪ Hawkins began carrying a rectangular piece of balsa wood, about the size of a deck of cards, around Palm Computing’s offices. With this dummy mock-up, Hawkins tested out the ideal dimensions that would allow a handheld device to be useful in everyday situations.
▪ The Internet, in short, needed its own GUI revolution, that application/user interface innovation that would make the Internet user-friendly just as the graphical user interface had done with computing itself. The World Wide Web arrived just at the right time, and provided this exact paradigm shift just when it was needed.
▪ A convention among software developers at the time was to name projects “Yet Another Something Something.” For example, YAML was Yet Another Markup Language. So, Yang and Filo settled on the name Yahoo!, which they claimed stood for Yet Another Hierarchical, Officious Oracle.
▪ So, in March of 1996, Larry Page launched BackRub by sending search bots, known as “spiders,” out into the web to find all the links. He started with a single page—the Stanford computer science department homepage—and then fanned out, following link after link, cataloging them all, and then ranking web pages based on these link citations.
▪ The resulting product would be known as a PalmPilot (though it had various names due to branding and trademark issues over the years). By sticking to Hawkins’s ethos of simplicity, not only was the Pilot eminently pocketable (it was about a third the size of the Newton and weighed 5.5 ounces); it could also hew to a $300 price point, thereby making it seem like a logical desktop or laptop accessory.
▪ New metrics like counting “eyeballs” and “mind share” were used to show companies were growing, even if that growth couldn’t be measured in dollars and cents
▪ The exclamation point was irreverent and entirely intentional—as Filo put it, “Pure marketing hype.”
▪ Del.icio.us (launched in September of 2003) let you do just that, allowing users to discover cool new things on the web by sharing their bookmarks with each other, just as Napster had allowed them to exchange songs
▪ The URL became http://akebono.stanford.edu/yahoo.
▪ Palm would sell 1 million Pilot units in eighteen months on the market, thereby becoming the fastest-selling computing device in history
▪ The new postbubble web was about the users and the content in equal measure. It was about spontaneous impulses like “sharing” and self-organizing schemes like “tagging” and taxonomies
▪ Americans believed all this, because all the so-called experts were telling them it was true. This Time It’s Different™ was a rallying cry of the time period.
▪ But the problem for Google was that the Yahoo deal simply wasn’t lucrative. The fees that Yahoo coughed up were barely enough to cover the increased processing and bandwidth costs Google incurred to service the traffic. The Yahoo deal taught Google that licensing alone wouldn’t be a big enough home run to build a company around—or at least, not a very big company
▪ When Netscape launched its beta browser late in 1994, it decided to make Yahoo the default link when a user clicked the DIRECTORY button on the top menu of the browser. No one could have anticipated it beforehand, but having a button in Navigator’s menu bar was almost as valuable as having an icon on the Windows desktop.
▪ Larry and Sergey called their combined citation-ranking system PageRank, either as an ode to Page himself or as an obvious descriptor of what the system was intended to do.
▪ It was about how the content created by and for the hoi polloi often ended up being more engaging and exciting than the content that was prepackaged or professionally produced
▪ The web took the fundamental concept of the Internet (connecting computers together) and made it manifest through the genius of the hyperlink.
▪ “The idea behind PageRank was that you can estimate the importance of a web page by the web pages that link to it,” Brin says. “We actually developed a lot of math to solve that problem. Important pages tended to link to important pages. We convert the entire web into a big equation with several hundred million variables which are the PageRanks of all the web pages, and billions of terms, which are all the links.”
▪ The second leg of Google’s original strategy was proving little better. Google produced an actual hardware device, known as the Google Search Appliance, which was a rack-mounted box meant to be installed in corporate data centers. It was designed to provide corporations and other organizations with large amounts of data and the ability to organize, index and search that data the same way that Google did with the web
▪ One website linked to another. One idea linked to another. This metaphor of the link made the whole conceptual idea of the Internet, of linking computers together, of linking people’s minds together, of linking human thought together, finally and wonderfully real.
▪ Thefacebook was founded by a bunch of kids who had lived through the dot-com era as well as the Napster supernova. To them, starting a website—or even a web company—was not some crazy notion
▪ In Canada, another small company took notice of the rebirth of the pocket computer and decided to come at the market from a different angle. If Jeff Hawkins focused on the simplicity of productivity and organization while on the go, Mike Lazaridis, the founder of Research In Motion (RIM), focused on communicating while on the go. In 1996, RIM launched the Inter@ctive Pager, a two-way wireless messaging device
▪ These arguments—that technology was changing the game and that investment markets overall were being transformed—fused until they were almost one and the same, a self-reinforcing battle cry
▪ And yet, the web itself was still a child of academia. It remained a researcher’s dream of a scholarly utopia
▪ Indeed, Microsoft’s diminished stature over the course of the 2000s would seem to validate one of the company’s key claims during the trial itself: that the technology industry is so dynamic, so competitive, that no player, no matter how dominant in one market or at one point in time, can really be thought to be monopolistic. Because, in the blink of an eye, that entire market could change thanks to the arrival of new competitors or new technologies.
▪ It is well known that Tim Berners-Lee invented the web while he was employed at CERN, the great multinational scientific research institution in Switzerland.
▪ In the first half of 2000, while the RIAA was in the midst of shutting Napster down, music sales were actually up 8%.
▪ But the next year, the impact of file sharing appeared. In 2001, the number of CDs burned worldwide matched the number of CDs sold in retail stores.
▪ As the Internet was born in the midst of a great scientific effort to win the Cold War, the web was born in the midst of a great scientific effort to reveal the secrets of the Big Bang.
▪ 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.
■
EXCEPT, OF COURSE, IT HAD.
▪ Kinsley very much intended the new publication, called Slate, to be a “magazine,” complete with issues and publishing dates. In an early memo to staff, Kinsley wrote: “There should be a notional moment each week when we ‘go to press’ and ‘hit the stands’ (one and the same in this medium). I would say Friday midnight. This will allow us to summarize the week, and allow people to read us ‘fresh’ over the weekend.”
▪ A veteran software developer named Ward Cunningham brought this practice to the web for the first time on his Portland Pattern Repository, a website for other programmers to contribute and share programming ideas. On March 25, 1995, Cunningham installed a subpage on the site called WikiWikiWeb. The “wiki” (the term came from the Hawaiian word for “quick”) constituted a series of pages that could be edited by any user. So, a given user might post some code patterns to the wiki, and another user might come behind him and add to those patterns, change them, even completely replace them. But all edits were stored, and the page could revert to previous versions if any user chose to do so. It seems counterintuitive that such a system could work, but Cunningham learned that, given enough input from enough interested users, his Wiki system worked quite well.
▪ If you wanted to find the most authoritative webpage about a topic such as, say, windsurfing, BackRub/PageRank could tell you. It would know based on the accumulated links, of course, but also from the authority passed on from other authoritative sites. Thanks to Brin’s math (largely linear algebra and something about the eigenvector of a weighted link matrix, for those who know what that means), citations from obviously important websites were more valuable than others.
▪ Berners-Lee saw his new Internet protocol as an improvement on top of the existing structure of the Internet itself. He built the web upon previous conceptual and philosophical notions (hypertext, cyberspace, collaboration) to create what was really a new medium
▪ 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
▪ Books In Print was basically the industry bible, the source that every bookseller in the country, large and small, used to order titles. When you went to your local bookseller and asked for a specific book to be special ordered, Books In Print was the resource they referenced to see if they could accommodate you. All Amazon did was take this resource, insert itself as the middleman, and take it directly to consumers. Could R. R. Bowker have put Books In Print online itself? Probably. But it didn’t, and Jeff Bezos did. Amazon supplemented this catalog with inventory data from the two major book distributors, Ingram and Baker & Taylor. When a customer searched for a book, Amazon ordered the title itself, took delivery of it temporarily, and then turned around and shipped it to the customer.
▪ By 2002, music revenue came in at $12.9 billion, down 13.7% from its $14.6 billion peak in 1999
▪ In his Usenet post announcing the web, Berners-Lee declared, “The WWW project merges the techniques of information retrieval and hypertext to make an easy but powerful global information system.”3 But he still envisioned it—at heart—as a research medium, a way for the hundreds of CERN scientists from all around the world to share their data, disseminate their ideas, and collaborate on research.
▪ The revolution was now, and it was being delivered not by the television, but by the computer.
▪ Readers would be encouraged to print up articles and read them at their leisure. Within the editorial brain trust, there were actual debates over whether any normal person could be asked to read any piece over 700 words on a cathode ray screen without eye strain or boredom.
▪ The phone project gained the internal code name Purple. Early prototypes were patched together that were merely that: existing iPods, with attached cellular and WiFi radio antennas
▪ The WWW project was started to allow high energy physicists to share data, news, and documentation. We are very interested in spreading the web to other areas, and having gateway servers for other data. Collaborators welcome!
▪ To test its concept, Webvan built a 330,000-square-foot warehouse in Oakland, California, to serve customers in the San Francisco Bay Area. The company also spent three years and hired eighty software engineers to design the inventory management, delivery and logistics systems required to make the operation function.23 The idea was that once San Francisco proved the market, Webvan would expand to other cities and regions, building similar distribution centers, to the tune of $35 million per facility. Webvan promised that each distribution node would serve the equivalent customer base of eighteen conventional supermarkets, but with less than half the labor costs and double the selection of items.24
▪ Cunningham is famous for coining “Cunningham’s Law,” which finds that “the best way to get the right answer on the Internet is not to ask a question, it’s to post the wrong answer.”4
▪ IT TURNED OUT THAT the reason search engines had never worked very well prior to PageRank was not that they were broken, but because they were missing the key innovation that Brin and Page had stumbled upon: relevancy. If, in 1997, you did a search for “automobile company” on even the best search engine at the time (AltaVista) you’d find yourself disappointed because the websites of Ford, General Motors or Toyota would probably not show up. It’s not that AltaVista couldn’t find those sites. It most certainly had! Ford.com or GM.com or Toyota.com were most likely in the list of tens of thousands of results that AltaVista had found. It was just that AltaVista had no way of surfacing those most relevant results to the top. So they were on page 3 of the search results. Or page 300.
▪ The web, for all the structural ways that it would eventually prove friendly to the average computer user, was still intended for the priesthood, not the masses.
▪ Of course, advertising, the third leg of Google’s theoretical business model, was still an option, but in spring 2001, the existing advertising model of throwing banner ads at the top of every web page had imploded
▪ 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.
▪ A journalist who followed Microsoft through the 1990s and 2000s, Foley argues that after the trial, no matter what product or feature it looked to develop, Microsoft had to think about legal issues first.14 And so, one must consider to what degree Microsoft was distracted by the trial, allowing it to miss, say, the development of paid search as a dynamic new market, or the rise of social networks as an entirely new paradigm.
▪ The first-ever order of the beta test, and thus the first-ever Amazon order, was from a former coworker of Shel Kaphan named John Wainwright, whom Kaphan had invited to the beta test. Wainwright ordered the book Fluid Concepts and Creative Analogies by Douglas Hofstadter on April 3, 1995.
▪ Web advertising in general was in a deep freeze, the overall online ad market plunging to $6 billion in 2002, down from $8.2 billion in 2000. All the surviving portals were suffering because of this state of affairs
▪ PC Windows had penetrated all the desktops, the Mac was a huge success, and point-and-click interfaces had become part of everyday life. But to use the Net you still had to understand Unix. . . . And the current users had little interest in making it easier. In fact, there was a definite element of not wanting to make it easier, of actually wanting to keep the riffraff out.
▪ On January 19, 1999, RIM launched the 850, the first device that would carry the name BlackBerry
▪ Google had never really experimented with ads, because the company’s founders were originally firmly against the idea. In their 1998 academic paper introducing Backrub/PageRank, Page and Brin had attacked the very notion of search companies relying on advertising to generate revenue because it made them “inherently biased towards the advertisers and away from the needs of the consumers
▪ The bestselling title for Amazon’s first year of existence was How to Set Up and Maintain a World Wide Web Site: The Guide for Information Providers by Lincoln D. Stein.
▪ In early 2000, he launched what he called his Nupedia project, soliciting experts in a wide range of fields to contribute articles for what he hoped would eventually become an infinity encyclopedia
▪ 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
▪ The boys had learned by watching Napster, and especially by watching as the Friendster fiasco unfolded before their eyes. They only released Thefacebook to a new college when they knew they had the infrastructure in place to handle the additional traffic.
▪ RIM also began integrating more PDA-like functionality into the BlackBerry and subsequent models, so that eventually they had all the functionality of a PalmPilot, but with comprehensive messaging capabilities.
▪ They studiously avoided site crashes and service outages. They made sure the pages loaded quickly by assigning each school to a unique database, thereby avoiding the complicated networking calculations that slowed down Friendster.
▪ 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.
▪ This was literally a phone call to a local number, so all the online services maintained a network of local modems for people to dial in to and avoid paying long-distance charges. While you were online, the phone line you were using was occupied, so anyone trying to call your number would get a busy signal.
▪ In frustration, on January 10, 2001, Wales installed a descendant of Cunningham’s original wiki software on Nupedia’s server. This “Wikipedia” was merely intended as a separate feeder service to speed up the Nupedia submissions process. Articles would be collectively written and edited on Wikipedia, then fed into the existing peer-review editing process. Almost immediately, however, Wikipedia overtook Nupedia not just in the quantity of articles that were created, but in the quality as well
▪ When you watch old video of the AOL/Time Warner merger announcement, you can see Jerry Levin and Steve Case checking their BlackBerrys to see how the news was affecting the stock price of their respective companies
▪ The group was more interested in the sort of computer wizardry that had been shown off in the recent sci-fi film Minority Report. Gestural input, waving your hands around to manipulate data, etc. The group became fascinated with technology from a small Delaware technology company called FingerWorks.
▪ Webvan nonetheless ignored these hiccups and barreled ahead, opening additional warehouses serving Atlanta, Chicago and Sacramento, where the losses only widened. None of the warehouses reached an order volume that allowed them to break even, and by the spring of 2001, the company was losing $100 million a quarter.30
▪ Many, if not most, of the early customers phoned in their credit card numbers, not trusting the online transactions to be safe. “Some people would even just email their full credit card number to us,” says Kaphan, “as if that was somehow more secure than entering it in a form on the web.”13 To make sure that the orders were secure from hackers, credit card numbers were recorded on one computer, copied to a floppy disc and then physically walked to a second computer, which would batch the transactions.
▪ FingerWorks produced a plastic touchpad that allowed users to interact with data directly, in a manual, tactile way, using what was known as multitouch finger tracking.
▪ “It wasn’t that they [Page and Brin] sat down and said, ‘Let’s build the next great search engine,’ ” said Rajeev Motwani, who was Brin’s academic advisor. “They were trying to solve interesting problems and stumbled upon some neat ideas.”
▪ The first article created, on January 15, was on the letter “U” and investigated the origins and usage of the twenty-first letter of the English alphabet
▪ 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 idea of a “search” engine that only returned ads was extremely distasteful to most; indeed, Gross was nearly hissed off the TED stage during his presentation. But advertisers loved the idea, and signed up in droves because they quickly intuited that Bill Gross had stumbled upon one of the greatest advertising models in the history of the world. Paid search represents a uniquely powerful nexus point for advertisers to insert themselves into. Users who search are searching for something. You don’t perform a search like “hotels in Marietta Georgia” without having at least some passing interest in booking a hotel in that city in the near future.
▪ When Oprah Winfrey broadcast one of her annual “Oprah’s Favorite Things” specials, she gushed: “I cannot live without this. It’s with me everywhere I go. It’s called a BlackBerry. It’s literally changed my life.”18
▪ IT WAS A GOOD THING Page and Brin had not set out to build the next great search engine, because, at the time, no one was really clamoring for one. In the late nineties, when Page and Brin began refashioning BackRub/PageRank into a search engine, there was a universe of major search players: Yahoo, Excite, Lycos, AltaVista, AskJeeves, MSN, and on and on
▪ It was called X Mosaic. On Saturday, January 23, 1993, the official “0.5” version of the browser was posted to the Internet on the NCSA’s servers.
▪ Fortunately, Page and Brin were not business-focused at that time. They were academics, more interested in defending a dissertation and publishing a paper on their research than starting a company around their idea.
▪ For his part, Netscape’s other cofounder, Jim Clark, was already ensconced in his third billion-dollar startup, Healtheon (later, WebMD), which enjoyed one of those 292% first-day pops when it IPOed in February of 1999.
▪ Wikipedia had more than 100,000 articles, and versions of the service were springing up in every language imaginable. By that point, Nupedia and its rigorous system of editors and peer review had long been abandoned.
▪ For one thing, think of the basic user interface of ecommerce: the shopping cart. If users are shopping your site, they might have several things to purchase. You don’t want them to have to begin the checkout process for each item they want to order. You need a virtual place to store the items customers are considering. You want a virtual shopping cart. Amazon popularized this metaphor.
▪ They were looking like idiots; worse, they were looking like obstructionists, unwilling to deliver what their customers were demanding. But third, they were willing to experiment with Apple because, at the time, Apple was an insignificant player. Both iTunes and the iPod were, at this point, available only to Mac users. “We used our small market share to our advantage by arguing that if the store turned out to be destructive it wouldn’t destroy the entire universe,” Jobs said later.1
▪ BlackBerry users were the first people to confront the social etiquette implications of conversations and person-to-person interactions being interrupted by digital notifications. And they were the first to wrestle with the uniquely obsessive mindset that an always-on information device can engender. This pull of the “now” only got worse as BlackBerrys eventually gained web-browsing functionality and new applications such as the BlackBerry Messenger instant messaging service.
▪ So, they produced that paper: “The Anatomy of a Large-Scale Hypertextual Web Search Engine,” which was presented at a conference in Australia in May of 1998
▪ Again, no one was focused on inconvenient details like the costs of doing business or profit margins. Investors, entrepreneurs, venture capitalists and Wall Street tended to prefer numbers like those from an OECD report in 1999, which assured everyone that by 2005, online commerce would be a $1 trillion market, representing 15% of overall retail sales. So, hurry up! Stake your claim! There was nothing but growth ahead, so if you locked consumers in with low prices now, you could always raise prices later, once you had killed your category.
▪ This was the second key innovation: with the GoTo model, an advertiser only “paid for performance.” If no one clicked on your ad, you paid nothing. This was a radical but extremely enticing option at a time when click-through rates on banner ads had dropped to minuscule percentages.
▪ From a technical perspective, remembering a given customer from one visit to the next is a useful thing. Amazon remembered what a customer had ordered previously—or almost ordered, before abandoning their cart—so it could store that information and prompt the returning customer accordingly. Again, using cookies, Kaphan and his small team set up the site to change so that once a customer bought a book, it wouldn’t be promoted to them again.
▪ In the end, despite being the most aggressive and well-funded early content pioneer on the web, Time Warner simply couldn’t make heads or tails of how the web could work as a publishing business. “We’re all looking at the elephant,” said Time Inc. editor in chief Norman Pearlstine at the time, “but what people think we should do depends on what part of the elephant they’re looking at.”11
▪ As for the two founders, Yang took the official title of “Chief Yahoo” and continued to be the face of the company. Filo took the title “Cheap Yahoo” and dedicated himself to keeping the tech side running smoothly and frugally.
▪ The devices earned the sobriquet “CrackBerry” because users seemingly couldn’t tear themselves away.
▪ The obvious move was to license PageRank to one of the existing players, and indeed, this is what Page and Brin attempted to do. They met with everyone from the Yahoo founders Jerry Yang and David Filo, to another search pioneer, Infoseek’s Steve Kirsch. No one was interested.
▪ Today we’re used to the idea that when I visit an ecommerce site I might see offers for entirely different products than you might, based on our different shopping histories. Amazon was one of the first sites to tailor its storefront individually in this way.
▪ “I was sitting with Steve at lunch one time,” remembered Scott Forstall. “And Steve said, ‘Do you think we could take that demo we’re doing with the tablet and multitouch, and shrink it down to something big enough—or small enough—to fit in your pocket?’ ”
▪ Palm eventually released handsets with radios that mimicked the BlackBerry and enabled messaging, especially the popular Palm VII in 1999, which added email to Palm’s traditional organizer applications. But by 2005, RIM had replaced Palm as the largest seller of pocketable computers
▪ And then there was the brilliant innovation of product reviews. Prior to the Internet, few general retailers offered reviews of the products they were selling. A supermarket doesn’t say one brand of toothpaste is higher-rated by shoppers than another. Quite the opposite in fact: a traditional retailer wants to be seen as a neutral broker. But Amazon felt it needed to mimic a real-world book retailer in one key aspect: acting as a source of recommendations. So, Shel Kaphan hacked together a rudimentary rating system over a weekend and initially designed it to provide editorial content from Amazon itself. But this soon evolved into allowing reviews from anyone and everyone. User ratings and reviews were controversial, as, obviously, authors resented bad reviews getting posted prominently alongside their books on the sales page. But to its credit, Amazon stuck to its guns, believing that honest reviews, as well as a reputation for helping customers make smart purchasing decisions, would be a key differentiator compared with offline retail.
▪ 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
▪ Pets.com was losing money on every dog leash it shipped. But if you looked at the company’s bottom line at the time of the IPO, the biggest expenses, at $42.5 million—a whopping 76% of total operating costs—were for marketing and sales. Advertising
▪ We’re gonna do a phone. There’s gonna be no buttons. Just a touchscreen.”23 Apple purchased FingerWorks for the multitouch technology, and soon the phone project was split into two competing tracks. P1 (shortening the Purple designation) became the code name for the existing iPod+Phone version. P2 became this new, multitouch, shrunk-down tablet idea.
▪ Mercury Center, Slate, Pathfinder and the others were part of a larger process of journalists and professional media folk finding what worked and what didn’t in this new medium
▪ All he asked for in exchange was a seemingly reasonable $1.6 million in cash and Excite stock—a nice little payday—and then he and Brin would return to finishing their doctorate work. Excite countered with $750,000, which Page and Brin rejected.
▪ Soon after launching, Pets.com hired the ad agency TBWA\Chiat\Day to produce a reported $20 million initial ad campaign.32 TBWA had recently produced a series of ads for Taco Bell featuring a talking chihuahua, and, perhaps taking a page from that campaign’s success, the ad men proposed a talking dog–like sock puppet that would commiserate with real-life pets in a series of commercials (tagline: “Pets.com. Because pets can’t drive.”). The puppet was voiced by the comedian Michael Ian Black, but was deliberately nameless, “so consumers would always have to say ‘Pets.com’ when referring to it.”33 Soon, the puppet was airing in radio and television spots nationwide. Pets.com paid nearly $2 million for an ad on Super Bowl XXXIV and the puppet became a float in the 73rd Annual Macy’s Thanksgiving Day Parade.34 After appearances everywhere from Live with Regis and Kathie Lee and Good Morning America, to “interviews” in the pages of People and Entertainment Weekly, Pets.com began to license the puppet as a popular toy for children.
▪ On the web, you could publish something when you had something to publish, and it was instantly interactive. But the greatest lesson to learn was how to make this unruly web pay. The solution to that problem would come from another magazine dabbling in the World Wide Web, and in the process, the very business model of the larger Internet would be discovered: advertiser-supported content.
▪ Choosing to launch only at elite colleges also helped. Thefacebook had an air of exclusivity. It was the social network (at least at first) of the elite, the 1%. It further helped that Thefacebook felt classier than Myspace, which was exploding in popularity at the same time
▪ The incumbent search players’ failure to scoop up the PageRank technology has become infamous in business lore as one of the great missed opportunities of all time
▪ Wikipedia was a modern miracle and soon became one of the most trafficked websites in the world. Wales had originally intended the project to be a commercial one, supported by advertising. But when the contributors and editors revolted at the very suggestion of putting ads up on Wikipedia, Wales instead made the site into a nonprofit enterprise
▪ Portals had sprung up in the first place because they needed to be “sticky.” None of the early search sites could make money when they sent users out onto the web, so they attempted to hoard the eyeballs and keep them on-site in order to create impressions for banner ads. But now, clicking itself was finally worth something.
▪ WITHIN EIGHTEEN MONTHS, Mosaic was the biggest thing on the web, and probably the biggest thing on the Internet at large.
▪ In January of 1993, shortly after Mosaic launched, the number of websites in existence was in the hundreds. By the end of 1994, the number of websites in the world had passed tens of thousands.13 In a similar time frame, the number of web hosts had risen tenfold.
▪ In coming years, all these innovations would combine to give birth to the famous recommendation engine. Tying in with the cookies and session ID systems, the recommendation engine would parse your own browsing history, your own purchasing history, as well as the purchasing history of everyone else on Amazon, to help give users that classic prompt: if you liked x, then you will probably like y. Today, this is a key component of not just ecommerce, but of things like Netflix and music-streaming services like Spotify.
▪ But then, the iPod was the first device to prove that computers were no longer just computers. In the Internet Era, you could put a computer into any piece of consumer electronics and suddenly it became something more
▪ 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.
▪ The very first smartphone was the Simon Personal Communicator, which was developed by IBM back in 1992. On sale to consumers for just six months, from 1994 to 1995, retailing for $895, the Simon had almost all the components that we would recognize in a modern smartphone
▪ GRADUALLY, PEOPLE BEGAN to notice that there was a new energy on the web and it shared several characteristics. The long tail. The wisdom of crowds. Users creating content of and to their own design. In 2004, this new Internet energy gained the name Web 2.0, after a similarly named conference held in October 2004.
▪ It could send and receive cellular calls, of course, and it could also send and receive pages wirelessly. It could do email and fax, but those required the user to dial in via a landline.
▪ Fund managers who did not fill their holdings with technology stocks saw their returns trail those of their peers and even the market indexes.
▪ If Web 1.0 was about browsing stuff created by others, Web 2.0 was about creating stuff yourself. If Web 1.0 was about connecting all the computers in the world together, then Web 2.0 was about connecting all the people in the world together, via those interlaced computers. If the clarion call of Web 1.0 was the Netscape IPO, then the coming of age of Web 2.0 was Google’s IPO. “Web 2.0 means using the web the way it’s meant to be used,” wrote Paul Graham, a veteran entrepreneur of the Web 1.0 era who would soon become a key driver of Web 2.0 as an investor.
▪ “You either participate in this mania, or you go out of business,” Roger McNamee, one of the most famous technology investors of the era, told Fortune in June of 1999. “It’s a matter of self-preservation
▪ There was a “status update” feature taken directly from AIM. And there was the ability to “poke” other users, which meant—well, no one was exactly sure. But it was college, so if you poked someone, it could mean whatever you wanted it to mean.
▪ But under Edwards’s direction, Yahoo did something that was completely radical for the time: advertise on TV and radio. Yahoo was the first Internet company to market itself via mass media. With zippy, hip ads, matching the slick name and the brash image of the site overall, Americans found themselves being asked “Do You Yahoo?”
▪ It is safe to say that by that point the vast majority of people surfing the web did so via a Mosaic web browser.
▪ There were the features inherent to multitouch, of course, like pinching or widening your fingers to zoom in and out on pictures or graphics. And scrolling through items was a simple as flicking one’s finger up or down the screen.
▪ Sales were slow. Early on, a dozen purchases constituted a good day. But that was a good thing because everything was being done by hand. When an order came in, Amazon turned around and ordered the book from the distributor, who shipped the book to Amazon’s meager offices. Then, the handful of Amazon employees, Bezos and Kaphan included, reboxed the books and shipped them to customers. The company had one public-facing email address and all the employees would take turns responding to customer inquiries.
▪ On February 25, 1993, mere weeks after Mosaic’s initial beta launch, Andreessen was on the WWW-Talk message boards making a proposed addition to HTML of an “inline” image tag that would allow for images to be coded directly into web pages
▪ Unfortunately, the Simon never got there. IBM sold only 50,000 Simons before discontinuing the product. “It’s all about time frames,” says Frank Canova Jr., who led the device’s development at IBM.22 “The Simon was ahead of its time in so many different ways.”23 All the features of a modern, communicating, mobile computer were already there, but the world just wasn’t ready for it.
▪ Prior browsers opened images—and really any non-HTML file type—as a separate window. Inline images would make web page design more akin to the page layout of a magazine or newspaper.
▪ Little, squarish, chiclet-like icons seemed to make the most sense for fingers to target. “It’s funny, the look of smartphone icons for a decade to come was hashed out in a few hours,” says Imran Chaudhri, a senior Apple designer.26
▪ But even the web’s creator was among those who felt that Andreessen’s penchant for multimedia was a little much. Andreessen later admitted, “Tim [Berners-Lee] bawled me out in the summer of ’93 for adding images to the thing.”16
▪ They named the service Google, a play on the word “googol,” which is a 1 followed by 100 zeros. The idea was to suggest they were capturing the whole web, everything in existence. “The name reflected the scale of what we were doing,” Brin said later.13 Googol.com was not available, so Google.com became the URL of the public service.
▪ “HE ONLY WANTED TEXT,” Andreessen has said of Berners-Lee’s objections when they finally met face-to-face at the World Wide Web Wizards Workshop in Cambridge, Massachusetts, the first true developer conference
▪ Thefacebook up with Y2M, a company that sold ads for college newspaper websites. Cannily pitching Thefacebook as a new way to reach the coveted college demographic, Y2M began brokering ads on the site. One of the first advertisers was MasterCard.
▪ “He specifically didn’t want magazines. He had a very pure vision. He basically wanted it [the web] used for scientific papers. His view was that images are the first step on the road to hell. And the road to hell is multimedia content and magazines, garishness and games and consumer stuff. I’m a Midwestern tinkerer type. If people want images, they get images. Bring it on.
▪ If it sounds like they were feeling around in the dark, it’s because they were. Nothing like this had been attempted before
▪ That was the early money cashing out, selling their shares to the investing public, who would now be holding the bag, waiting to see if that fancy new business model would ever work out. The dot-com bubble was a fantasy period when a lot of VCs actually didn’t care if a business model made sense, because it didn’t need to. “We’re in an environment where the company doesn’t have to be successful for us to make money,” a venture capitalist at Benchmark admitted when mulling over a pre-IPO investment in Priceline
▪ Unsure of Thefacebook’s viability as a marketing tool, MasterCard refused to pay up front, or even to pay for pageviews served. They were willing only to pay a flat fee if a user actually opened a new credit card account
▪ The first cell phone to be explicitly called a “smartphone” was the Ericsson R380, released in 2000. Its lid flipped open to reveal a full touchscreen for web browsing, email, apps and games. Other manufacturers soon followed Nokia and Ericsson’s lead, releasing a wide range of devices, all of which married PDA and messaging function to phones, some going the Palm route, with touchscreens, and some the BlackBerry route, with thumb-friendly keyboards
▪ The first genuine advertisement on the World Wide Web was published by Global Network Navigator, which, in 1993, sold an ad to a Silicon Valley law firm, Heller, Ehrman, White & McAuliffe. It was text only, a glorified classified listing.
▪ AOL was worth more than Disney, Philip Morris, or even IBM; it was worth more than General Motors and Boeing combined.
▪ For his part, Berners-Lee has denied that images discomfited him. “Of course we did approve of images, in fact we had images on the Web before anybody else,” he has said. But then he adds, “Like diagrams in talks for example.”
▪ AuctionWeb/eBay had made just $350,000 in all of 1996. They were on track for an astounding annual growth rate of 1,200%.8
▪ Within a day of launching the ads on Thefacebook, there were twice the applications MasterCard had anticipated for the entire four-month campaign that had been planned
▪ Later, GNN sold the first sponsored hyperlink, pointing to a children’s catalog retailer called Hand in Hand. Clicking sent a user to the company’s rudimentary web page to learn more about Hand in Hand’s strollers and cribs.
▪ Years later, even Mosaic cocreator Eric Bina would admit that he had reservations about adding images and multimedia to the web
▪ The record companies had been right all along: selling songs individually wasn’t as lucrative as selling entire albums. Selling two or three good songs at 99 cents apiece could never hold a candle to selling one good song and eleven crap songs for $17.99
▪ At the time, he was mainly concerned about bandwidth issues (this was the era of dial-up modems; images could take entire minutes to load onscreen) but he was also worried that he and Andreessen were opening the floodgates to frivolity and junk. “And I was right! People abused it horribly,” Bina said later. “But Marc was also right. As a result of the glitz and glitter, thousands of people wasted time to put in pretty pictures and valuable information on the Web, and millions of people use it.”19
▪ Then, a whole slew of manufacturers jumped into the smartphone game. In order to stand out from the crowd, every imaginable feature started getting crammed into phone handsets. The first phone with integrated GPS was released in 1999. Japanese consumers were buying phones with integrated digital cameras as early as 2000. Many phones began to offer rudimentary web browsers and even streaming video by the middle of the decade.
Too soon.
▪ This prevented deep-pocketed but ultimately irrelevant advertisers from dominating every keyword. You could no longer guarantee to rank high just by being willing to pay the most. Your ad also had to be clicked on the most in order to rise up the rankings. Successful advertisers paid less per click, but ranked higher. If your ad was of good quality, and tended to get clicked on more often, AdWords trusted that it was more relevant for that search phrase and would therefore rank you higher even if you didn’t increase your bid.
▪ AOL’s bread and butter—being America’s ISP of choice—was careening rapidly toward extinction, and everyone inside the company knew it. By doing deals with almost every player in the space, the gorilla had access to everyone’s financials, and could see (even before the press caught on) that many dot-coms were close to running out of money.
▪ Joe McCambley was a creative executive at Modem Media. “I remember having a big debate—and we probably argued for an hour or so—about whether or not it should even be a color ad,” McCambley says. “We knew we could make it smaller [in terms of bytes] if it were black and white. We knew there was a large percentage of people out there that only had black and white monitors anyway.”
▪ In August 1994, Slivka began “cataloging” key Mosaic interface features as a way of determining the basics Microsoft would need to master in order to launch a competitive browser.
▪ Page and Brin would raise an additional $1 million when David Cheriton kicked in some money, as well as a few others, including former Netscape executive Ram Shriram and Jeff Bezos of Amazon.
▪ In technology parlance, dogfooding is when you test your beta product yourself, eating your own dogfood, as it were, in order to work out the bugs. Apple engineers were instructed to live on their iPhones exclusively, to catch bugs in every possible use case.
▪ Fortune magazine named the Mosaic browser one of its products of the year (alongside the Wonderbra and Mighty Morphin Power Rangers), writing, “This software is transforming the Internet into a workable web . . . instead of an intimidating domain of nerds.”20
▪ The lesson of commerce in the Internet Era—from Amazon through Napster through the iTunes store—has been that consumer habits and expectations have changed radically. The general public has intuited that the Internet and digital technology enable a world of unlimited selection and instant gratification. If your business model stands in the way of that, well, consumers will just go around you. It’s a lesson that the music industry failed to learn from Napster, and it’s a lesson that media companies are having to re-confront again and again, even down to the present day.
▪ Moving to plan B, Microsoft tentatively reached out to Netscape to learn about their Navigator browser; maybe that could be licensed for Windows 95. Here Microsoft received another shock. Netscape rebuffed Microsoft’s overtures completely, and somewhat rudely. Netscape did not have any intention of doing business with Microsoft
▪ VC investment didn’t roar back in huge numbers because it didn’t have to. In the Web 2.0 era, you could create a service used by millions in a matter of months, and you could do so for pennies on the dollar—at least, compared to the dot-com era. The hangover from the bubble fallout meant that talented programmers could be hired on the cheap; the infrastructure glut leftover from the global fiber buildout meant that bandwidth, storage and data costs were lower; and the tools developed during the bubble meant that you didn’t have to build a company from scratch anymore—you could cobble one together using free and open-source tools to assemble the building blocks of a minimum-viable product for next to nothing.
▪ But there was an even deeper philosophical problem to solve. With magazine, radio, television, even billboard advertising, the ad merely made an “impression” on the audience. It was a passive thing. The web was decidedly not passive; the web was about links, about clicking. So, what should these new banner ads do? What would happen if users clicked on them?
▪ “Not only were there not a lot of really big corporate websites, at the time there was really a debate whether a corporate website would actually be the thing that people wanted,” says Kanarick. “Like, who would want to go to a website like Pampers, where they’re just going to talk about diapers all the time?”20
▪ Furthermore, lots of people inside and outside of Netscape were already seeing what Marc Andreessen had seen: the browser could be a software platform capable of supplanting traditional operating systems like Windows. If, in the future, people could live their lives and do their work entirely online, then what would be the need for a desktop OS?
▪ In retrospect, however, the advertising industry likes to think of the AT&T ad as the default “first” because the copy of the ad was certainly prescient. It read: “Have you ever clicked your mouse right here? YOU WILL.”
▪ Frugality and efficiency were not just virtues, they were also philosophical and aesthetic differentiators. Google’s home page was simply the Google logo, a text field to enter a search query, a search button to execute that query and a button that said I’M FEELING LUCKY, which automatically took you to the first result returned. If you went to the search results page, you only got a list of links. And that was it. No ads, no banners, no weather, no stock quotes, no horoscopes. All the rest of the page was just copious white space. In an age of portals where every other search site was a sea of distractions meant to keep you from, you know, getting to the page you were looking for, Google stood out from the crowd with its single-minded purpose and simplicity.
▪ On May 26, 1995, Gates wrote his own memo to senior Microsoft executives, entitled “The Internet Tidal Wave.” It would become one of the most famous documents of the Internet Era. In it Gates announced that the number-one priority for Microsoft, in every facet of its business, was now the Internet. Every product manager should stop what they were previously doing and start considering how the Internet could affect their products, or how their products could make an impact on the Internet.
▪ The problem of the phone accidentally turning on in a user’s pocket was solved when a UI designer noticed the sliding lock and unlock mechanism on airplane bathroom doors. Thus, “slide to unlock” was born. Small but meaningful details were added as a result of the dogfooding feedback; details like a ringer switch to silence phone calls that came at inopportune times.
▪ Netflix also benefited from being essentially the only game in town for a while. The incumbent rental behemoths—Blockbuster, Hollywood Video and Movie Gallery—were reluctant to embrace the new format. They had been burned by the earlier LaserDisc technology, which had only proven popular to a niche audience
▪ In retrospect, going into advertising played into Google’s deepest strengths. For a company full of data-obsessed nerds, Google looked at advertising as just another problem smart algorithms could solve
▪ In November of 1996, Amazon moved again, into new digs in South Seattle, across the street from a pawn shop and a strip club that advertised “12 beautiful women and one ugly one.”22
▪ At the time, GeoCities had 19 million unique monthly visitors, making it the third-most-trafficked site in the world behind AOL and Yahoo itself.
▪ Fortune estimated that Internet fever was adding $301 billion to the U.S. economy by 1998, and another study estimated that 37% of all new jobs being created were thanks to the Internet.
▪ When, in the summer of 2000, Netflix even offered to sell itself to Blockbuster for about $50 million with the express idea that Netflix would become the DVD channel for Blockbuster, thereby saving it from the costly transition of its inventory from VHS, Blockbuster said no.31 It still didn’t believe DVDs would catch on.
▪ The first person to actually receive a phone call on an iPhone was Andy Grignon. He was in a meeting and didn’t recognize the caller’s number, so he hit the ringer switch to ignore the call. “Instead of being this awesome Alexander Graham Bell moment,” Grignon recalled that the first iPhone call was anticlimactic, “it was just like, ‘Yeah, fuck it, go to voicemail.’ ”
▪ All told, approximately 50,000 companies would be founded between 1996 and 2000 aiming to commercialize the Internet, backed by more than $256 billion in venture capital
▪ The first banner ads got click-through rates in astronomical percentages. “People just clicked on anything to see what might lead them somewhere,” Joe McCambley says. “It bordered between the high 70s and low 80s* [in terms of click-through percentages] for about 2–3 weeks.”22 Andrew Anker concurs: “People were clicking on every single page. And ads were just as interesting content as our content.”23 In no time, the other media sites—Pathfinder, Slate, etc.—were following HotWired’s lead. Pathfinder would, in fact, launch with only one advertiser, AT&T, running some of the same “you will . . .” ads.
▪ But then, Google’s entire infrastructure was devoted to crunching numbers and organizing vast amounts of data, so it was uniquely positioned to get this sort of thing exactly right. Just as with web search, when Google turned on its new advertising algorithms, it found that the ads got better over time; so much so that Google’s computers could eventually predict with stone-cold accuracy which ads would work and which wouldn’t.
▪ Netflix was originally launched as a hybrid service. You could rent DVDs à la carte for $4 a piece plus $2 for shipping the disc to you in those little red envelopes.32 But you could also buy the DVDs to own, just as a dot-com named Reel.com was offering at the time. The problem was, neither option proved very profitable; as other ecommerce companies had learned, for such small-dollar items, the shipping costs really ate into margins. When Reed Hastings moved from being merely Netflix’s biggest investor and advisor to becoming its full-time CEO in 1999, he discontinued the retail sales, and the company began experimenting with different rental schemes in an effort to find profitability
▪ If you tried to type, say, the letter “e,” your finger might trigger a range of other letters instead. The solution, as ever, came from clever design. Apple engineers used artificial intelligence techniques to create an algorithm that would predict which letter a user might want to type next. For example, if someone types the letter “t,” there is a very high probability that they will want to type “h” next. So, the letter “h” would, to the naked eye, look like it stayed the same size on the keyboard when, in fact, the “hit area” for the letter h would get bigger.
▪ Google can be thought of as a company born from two miracle inventions, one of which it came up with itself, and the other of which was cribbed from Overture
▪ In 1997, the first of the real “dot-coms” came to market, totaling 19. In 1998, there were 29. But in 1999, there were 249 Internet IPOs.
▪ AOL shareholders would control 56% of the company and Time Warner shareholders, 44%.38 The reality was, AOL had bought Time Warner. An Internet upstart had taken over a decades-old media giant with five times its revenue.
▪ Perhaps the most incredible deal of the time was Excite@Home’s acquisition of Blue Mountain Arts for $740 million dollars in cash and stock. Excite@Home was a company formed when the broadband ISP @Home merged with the search portal Excite.com. Blue Mountain Arts operated the website Bluemountain.com, where users could send each other electronic greeting cards by email. That’s right. Bluemountain did nothing but send Grandma electronic “get-well-soon” greetings. But Bluemountain.com was getting 9 million unique users a month to do this, and at the time, traffic was the sine qua non for a Yahoo-chasing portal player like the Excite half of Excite@Home.
▪ Functionally, the first banner ads were an introduction to the way the future was going to work, at least on the web. To this day, most of what we do online, with the exception of ecommerce and the rare subscription service, is all advertising-supported.
▪ Definitively solving the problem of web search is obviously the miracle that has made the largest impact on our society. The web and the Internet itself are now so big that without decent search, it’s easy to imagine that the whole edifice would have collapsed under its own complexity by now
▪ And those were just the Internet companies that debuted on the stock market. There were untold others that got acquired or went nowhere.
▪ The overwhelming mood in the Valley when I arrived was that it was done. The PC was done, and by the way, the Valley was probably done because there was nothing else to do.
▪ It’s conceptually jarring to realize that a medium and an industry that we think of as being so futuristic and technological is sustained by a business model that is centuries old.
▪ The model Netflix settled on in September of 1999 was originally called the “Marquee” plan. Subscribers paid $15.95 per month for the privilege of renting four (later, just three) movies per month. If you finished one movie, you simply mailed it back and Netflix would send you another. There were no other fees—especially no dreaded late fees.
▪ But by improving on Overture’s pioneering work with paid links, Google was able to achieve something just as amazing: it made the Internet profitable at scale and for the first time. Paid search would prove to be the greatest advertising engine yet devised by man
▪ After that, the “e” would likely be huge as a hit region. “The,” after all, is a common word. This predictive typing algorithm saved the iPhone from repeating the failures of the Newton
▪ We like school and want to go back to school and at some point somebody’s gonna offer us a lot of money and we’ll probably take it, you know?” Zuckerberg told the Crimson.21 Until that happened, they were just living the Silicon Valley startup fantasy. Zuckerberg even seemed to be hedging his bets, concentrating a lot of his time on a Napster-like file-sharing program called Wirehog, which he intended to integrate into Thefacebook’s feature set so that users could trade MP3s, videos, files, what have you. It seems that, despite Thefacebook’s success, even Mark Zuckerberg wasn’t exactly sure that this social-networking thing was much more than that almost dismissive word he used to describe it: a utility.
▪ But then, one of the very first things that the web disrupted was advertising itself, because the Internet and the web promised to revolutionize advertising in ways that marketers had only dreamed of previously.
▪ The question was, if Barnes & Noble created a website, could it do so better than Amazon? Bezos calculated that they could not. In short, he would lure the offline retailers onto a battlefield of his choosing, which was the web. He trusted that the web offered Amazon an advantage in skill sets that would prove decisive. While the offline retailers would spend millions to copy Amazon’s operations online, Amazon would meanwhile be outflanking them by moving into new markets.
▪ IT HAS ALWAYS BEEN devilishly hard to measure the actual effectiveness of advertising. John Wanamaker, the department store mogul, famously said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
▪ But with this browser project, Microsoft would have to confront, both culturally and structurally, the ways that Netscape and “Internet Time” had changed the rules of the game
▪ The merest association with the word “Internet” could suddenly make a company seem more valuable, as when K-Tel, the “as seen on TV” music retailer of such music series as Hooked on Classics, announced that it was launching a website to market its CDs over the Internet. K-Tel stock went from $3.31 to $7.46 in a single day. Less than a month later, it was trading at $33.93.52 Nothing fundamental had changed in K-Tel’s business. It had merely launched a website.
▪ Barnes & Noble launched its own website on May 12, 1997, and locked up an exclusive agreement with AOL to become that service’s exclusive bookseller.25 This was back when accessing AOL’s 8 million early online subscribers was invaluable for young web companies hoping to compete. And of course, Barnes & Noble attempted to leverage customer familiarity with those 600-odd physical stores scattered around the country. Very smart people looked at the competitive situation and declared that Amazon was doomed.
▪ Certainly, fining your customers for using your service is never a popular business model, but late fees accounted for as much as 13.4% of revenues for a rental chain like Blockbuster
▪ A similar thing happened with Active Apparel, owner of the boxing and activewear brand Everlast. When it announced an ecommerce website, its stock exploded by more than 1,000% in the following two trading days.
▪ Scandinavians Niklas Zennström and Janus Friis created the second-generation peer-to-peer networking platform Kazaa before turning to that same P2P technology in order to make phone calls over the web. They founded Skype, enabled hundreds of millions of users worldwide to call and chat with each other for free, and sold the company to eBay for $2.6 billion in September 2005.
▪ Online advertising promised to make this vague science obsolete. Because a computer serves up webpages, on the web it is possible to know the exact number of times a web page—and with it, a given advertisement—is delivered to an audience. No more guesswork. An advertiser can know to the second, and often in real time, when their given block of 1,000 ads has been served up.
▪ Compare that to the experience at a typical Blockbuster, where limited inventory meant one in five shoppers went home empty-handed. New releases were often rented out by other customers, so typical Blockbuster customers had to visit a store five consecutive weekends before they could actually take home the movie they wanted.37 Blockbuster even had an internal term for this experience: “managed dissatisfaction.”
▪ In these moments, Jobs’s notorious temper blazed to life. “It quickly got very uncomfortable,” Andy Grignon said. “Very rarely did I see him become completely unglued. It happened. But mostly he just looked at you and very directly said in a very loud and stern voice, ‘You are fucking up my company,’ or, ‘If we fail, it will be because of you.”32
▪ Irony of ironies, the code that would be the basis for Microsoft’s web browser (and the weapon Microsoft would soon wield against Netscape) was a descendant of the same code written by Marc Andreessen and Eric Bina a few years before at the NCSA.
▪ Parker was the one who had initiated that New York dinner with Zuckerberg after watching Thefacebook take over Stanford’s campus, where his then-girlfriend was matriculating
▪ Furthermore, the web allows an advertiser a better gauge of how many people ignore a given ad. Because each ad is clickable, often leading to the advertiser’s own website or another traceable property, the web allows an advertiser to measure how many people interact with an advertisement. They can know how much of an impression the advertisement makes on an audience. In the language of the advertising business, this is called “engagement.”
▪ Now that Thefacebook was, at least temporarily, carpetbagging in his Silicon Valley stomping grounds, when he and Zuckerberg crossed paths in Palo Alto (that same girlfriend lived down the street from Thefacebook house), Sean Parker jumped on board as Thefacebook’s most committed true believer.
▪ Yahoo was bigger than Netscape. But unlike Netscape, which remained a traditional software and business services company, Yahoo was a web-only company, a web-native company, a company that would never have existed if the web had never been invented
▪ Though, if push came to shove, the founders could outvote the CEO. Page and Brin’s dream candidate for the job had been Steve Jobs, but it’s hard to imagine the Apple founder being willing to take a back seat to two twenty-seven-year-olds, as Schmidt eventually agreed to do.
▪ Just as Bezos had anticipated, he, not the Riggios, was the incumbent on the web. Barnes & Noble had to spend tens of millions of dollars to create a website, and even after doing so, it never drew significant numbers of shoppers back from Amazon.
▪ Bill Gates had one more favorite trick up his sleeve to level the playing field quickly. On its release in August 1995, Microsoft announced that Internet Explorer would be free. Not kinda-sorta free, wink-wink free, like Navigator was. But 100% free to anyone and everyone, even corporate users.
▪ Cookies were originally intended to add “memory” to the web, allowing users to remain logged in to sites and to refresh content so that they wouldn’t be served the same thing every time they returned.
▪ In the summer of 2002, only a few months after the new version of AdWords debuted, Yahoo made a $3 billion bid to buy Google outright. Google, with Schmidt newly at the helm, turned down the offer.
▪ Copying Amazon’s Recommendation Engine, as well as DVD retail competitor Reel.com’s pioneering Movie Match technology, Netflix developed its CineMatch movie recommendation system. Users were prompted to check out movies they might like based on previous titles delivered from their queue. Netflix invested heavily in this technology, hiring mathematicians and computer scientists to tweak the algorithm to include recommendations based on the habits of subscribers with similar taste.
▪ As Gates himself admitted, “One thing to remember about Microsoft, we don’t need to make any revenue from Internet software
▪ The first video posted to YouTube exemplified this attitude. Me at the Zoo is a nineteen-second video of Jawed Karim at the San Diego Zoo in front of the elephant exhibit.
▪ Pets.com had the ignominious distinction of liquidating a mere 268 days after its February 2000 IPO
▪ Uploaded on April 23, 2005, Karim offered the following pithy narration:
Alright, so here we are in front of the, uh, elephants. Uh. The cool thing about these guys is that they have really, really, really long, um, trunks, and that’s, that’s cool. And that’s pretty much all there is to say.
▪ Had Google waited a further year to raise money, it might not have been able to. And by virtue of being flush with cash when the rest of Silicon Valley was seemingly going belly-up, Google was able to have its pick of talent when the dot-com layoffs began.
▪ Not exactly “one small step for man” stuff, but credit to the YouTube guys for understanding that that was exactly the sort of video that YouTube was good for.
▪ Disruption is the word that has come into common parlance to describe the nature of these encounters and the Barnes & Noble/Amazon battle would be the first of the great contests between online disrupter and offline incumbent
▪ But what the advertiser was really after were the “clicks.” Measuring the “click-through rate” provided a greater measurement of advertising engagement. Forget mere passive impressions, it was now possible to measure how often a user interacted with an ad.
▪ But if there was one idea Parker seemed hell-bent on drilling into Zuckerberg’s head, it was that Thefacebook was the thing. Zuck should just stick to his instincts and keep with the original game plan: build out Thefacebook school by school and see how big it could get.
▪ In the age of ecommerce, advertisers could even measure clicks that led directly to a sale. This made it easier for advertisers to calculate their return on investment by orders of magnitude.
▪ AS HAD HAPPENED WHEN Amazon first began to challenge the big-box retailers, most people assumed that once Blockbuster turned its attention to online video rentals, Netflix would be crushed
▪ For the first time it was possible to know which half of the advertising spend was wasted.
▪ There are various ways to measure the amount of wealth that was annihilated when the bubble burst. As early as November 2000, CNNFN.com pegged the losses at $1.7 trillion.49 But of course, that would only count public companies. The amount of money lost to dot-coms that went bankrupt before IPOing or getting acquired would push the calculation of losses higher still. Beyond the public companies, it’s estimated that 7,000 to 10,000 new online enterprises were launched in the late 1990s, and by mid-2003, around 4,800 of those had either been sold or gone under.5
▪ The first versions of Internet Explorer were not very well reviewed, and compared poorly to Netscape Navigator when it came to features and performance. But Internet Explorer was right there automatically on every Windows machine. To get a copy of Navigator, conversely, you had to search it out and download and install it yourself—not an easy feat for Internet newbies.
▪ It also unveiled a “no late fees” program in 2005, which shut Netflix up about that feature, but had the simultaneous effect of costing the company about $600 million in lost revenue.
▪ Many trillions of dollars in wealth vanished almost overnight.
▪ Google’s mission, which was eventually formalized as an attempt “to organize the world’s information and make it universally accessible and useful.”
▪ In 1995, around $50 million was spent on banner advertising on the web.25 By 1997, online advertising passed $1 billion for the first time.26 That was a mere rounding error compared to the $60 billion corporations spent on advertising across all mediums that year. But everyone anticipated that online ads would grab an ever-growing slice of that lucrative advertising pie.
▪ Blockbuster had more than 10,000 stores and 50 million members.44 At one time, more people had Blockbuster cards than American Express cards.45 But by 2010, Blockbuster had only 25 million customers and 4,000 remaining stores.46 That same year, Netflix announced that it had attracted 13 million members and was mailing 2 million discs daily in the United States.47 Blockbuster filed for bankruptcy protection on September 23, 2010.
▪ The iPhone, of course, solved the threat to Apple’s iPod franchise by basically obsoleting the stand-alone MP3 player, just as it was designed to do
▪ There was little Netscape could do in the face of the Microsoft onslaught. Sentiment in the industry and on Wall Street began to turn. “Microsoft may still be No. 2 in the Internet race, but it’s rapidly closing the gap,” PC Week declared.
▪ And when Google came up with its famous motto (Don’t Be Evil) everyone in technology read between the lines and believed that Google was staking a claim to be the anti-Microsoft.
▪ In 2015, digital advertising hit $59.6 billion.27
▪ This entrepreneurial “scene” acquired the nickname Silicon Alley, a sobriquet that many people claim credit for but which owes its popularization primarily to New York–based advertising startup DoubleClick.
▪ In the modern web era, a click-through rate of 0.5% is considered a blockbuster
▪ DoubleClick, founded by Kevin O’Connor and Dwight Merriman, would create the first large-scale advertising network and marketplace on the web, brokering and delivering the banner ads that would generate revenue for many of the advertising-supported websites in the late 1990s. By 1998, DoubleClick was serving up more than 1.5 billion ads a month and had one of the first significant Silicon Alley IPOs in February of 1998.19
▪ The only instruction Thiel gave the twenty-year-old was: “Just don’t fuck it up.”
▪ And Netflix deserves credit for continuing to move in that direction even after it had conquered DVD rentals. As early as 2002, Reed Hastings was telling Wired magazine, “The dream 20 years from now is to have a global entertainment distribution company that provides a unique channel for film producers and studios. . . . In five to ten years, we’ll have some downloadables as well as DVDs. By having both, we’ll offer a full service.”
▪ Steve Jobs told Wired in 1996, “If you don’t cross the finish line [if competitors couldn’t outmaneuver Microsoft] in the next two years, Microsoft will own the Web. And that will be the end of it.”
▪ YouTube achieved this success on a shockingly small amount of money. The company only ever raised $11.5 million, in two investment rounds. The fact that YouTube could serve video to the world from just a handful of servers (and some helpful content delivery networks in the background) was a powerful testament to the infrastructure the dot-com bubble had bequeathed to this new generation of startups.
▪ THE BIGGEST REASON the first iPhone is not the iPhone of popular memory is that it didn’t have the App Store. The first iPhone had the usual suite of PDA-like apps, a calendar, a notepad, a calculator, a clock, a stock ticker and a weather app, all designed by Apple. The only outside apps were the maps provided by Google and YouTube. There was no second screen to swipe to beyond the homescreen—because there were no other apps to put on the homescreen
▪ For several months after the iPhone’s launch, Jobs was actually vocally opposed to the very idea of an app store, refusing to let outside developers infect his perfect creation.
▪ The service outage came on the same day that NASA announced the discovery of indications of water on Mars, but AOL was the lead story on CNN.
▪ And yet, Zuckerberg still did not seem convinced that Thefacebook was his meal ticket. “What was so bizarre about the way Facebook was unfolding at that point,” Sean Parker has said, “is that Mark just didn’t totally believe in it and wanted to go and do all these other things.”
▪ In the year 2000, the hot search term was “MP3.” This was because, across the country, a teenager just barely into his first year of college had dreamed up a program that would break the Internet wide open just as definitively as Google’s algorithms were doing.
▪ He told the New York Times: “You don’t want your phone to be like a PC. The last thing you want is to have loaded three apps on your phone and then you go to make a call and it doesn’t work anymore. These are more like iPods than they are like computers.”
▪ But that was the issue: how was YouTube anything but Napster 2.0, with all the inevitable liability headaches that would imply? That was why people were obsessed with the who-will-buy-YouTube guessing game in 2006. Even though YouTube was exploding in popularity, it wasn’t making any money, and in the postbubble era, an IPO was out of the question without meaningful revenue on the bottom line. So, unless YouTube was able to sell out to a deep-pocketed patron before the lawsuits started flying, it ran the very real risk of being pushed into an early grave.
▪ Today, recent college graduates from around the world dream of heading to Silicon Valley and finding their fortune. The original Mosaic crew was the first to make this journey. They didn’t know they were the vanguard of a newfangled gold rush. They were, literally, corn-fed midwesterners. They were used to making six bucks an hour for their coding and had little inkling that software development could pay much more than that. When Jim Clark dangled a high-five-figure salary in front of them, they almost thought he was joking.
▪ Sometime in 1997 or 1998, Shawn was invited to join the private IRC channel called w00w00, which was the main online meeting place for a hacking collective of the same name. Members of w00w00 would go on to have a hand in the formation of dozens of technology companies ranging from WhatsApp to Arbor Networks, but at the time, they were just a bunch of kids trading hacks.
▪ It was around this time that Zuckerberg infamously showed up late to a meeting with the venture firm Sequoia Capital, still dressed in pajamas and pitching from a PowerPoint presentation that included a slide with the title “The Top Ten Reasons You Should Not Invest.”33 This incident was a prank instigated by Parker, who had a grudge against Sequoia, blaming them for his exile from Plaxo. Any entrepreneur who was even halfway serious about his reputation in Silicon Valley would never be so openly contemptuous of one of the most successful VC firms in the tech universe. Zuckerberg later apologized for the stunt.
▪ The biggest lesson to learn about online media was the 24/7 nature of the beast. The tragic 1997 death of Britain’s Princess Diana was the media sensation of its day, and not just for traditional outlets like the Times. Online news sites like Pathfinder saw their traffic numbers spike as distraught readers went online to absorb any and all details they could find. Furthermore, web users found online forums and message boards the perfect venues to express their feelings and share their collective grief.
▪ The iPhone App Store was launched in July 2008, alongside the second-generation iPhone 3G. As the former Apple employee Jean-Louis Gassée has said, “It was only then that the iPhone was truly finished, that it had all its basics, all its organs. It needed to grow, to muscle up, but it was complete as a child is complete.”
▪ On October 9, 2006, Google announced that it was purchasing YouTube for $1.65 billion in stock
▪ In the quarter after the App Store launched, Apple sold 6.89 million, exceeding 10 million total iPhone sales for the first time, and surpassing RIM’s BlackBerry to become the bestselling smartphone in the United States
▪ FROM THE EARLIEST DAYS, people had dreamed of turning the web into a medium for music. As early as 1993, two students at UC Santa Cruz launched a website called the Internet Underground Music Archive so that artists and musicians could upload and distribute digitized recordings for others to download and listen to. This proved popular, but largely unwieldy for most users, since the size of the music files was too large for the dial-up Internet connections of the day; downloading a single song could take half a day to complete. This changed in the mid-nineties, when a new type of music file was introduced. ISO-MPEG Audio Layer-3, or MP3, was developed at the Fraunhofer Society for the Advancement of Applied Research in Germany and used audio and file compression to create music files that were much smaller in size, but without sacrificing too much in the way of sound quality.
▪ This time they would do it better and get it right. All hands were tasked with speedily producing what the team of young coders had dubbed “Mozilla,” suggesting that the new browser was a monster set to devour their previous brainchild, Mosaic.
▪ IT WAS THE APP STORE that inspired users to adopt smartphones and make them mainstream. Smartphone ownership in America went from 3% in 2007 when the iPhone was announced, to more than 80% a decade later
▪ THE COMPANY THAT WOULD BECOME Netscape was the first web company, the first true dot-com. In so many ways, it blazed a trail and set a template for what we think of as a modern technology startup
▪ Google swooping in and rescuing Blogger seemed odd. Pyra Labs was a failed (failing?) company. Blogging was a new phenomenon that smelled very much like a fad to a lot of people
▪ Lawsuits from aggrieved rights holders did eventually come, especially a billion-dollar lawsuit from Viacom. But because Google could prove that it was effective in policing content, in 2010 the judge in the Viacom case ruled in Google/YouTube’s favor, saying that Google’s takedown system was efficient enough that it complied with the Digital Millennium Copyright Act.
▪ With Mosaic, the NCSA kids had stumbled upon something that truly represented a new method of software development, a new ethos for product development. Software, at the time, meant floppy discs or CDs sold in cardboard boxes at retail. Jim Clark came from the world of machines and hardware, where development schedules were measured in years—even decades—and where “doing a startup” meant factories, manufacturing, inventory, shipping schedules and the like.
▪ Google was the savior Napster never had. It had the infrastructure to allow YouTube to scale up; it had the technical sophistication to keep YouTube on the right side of the law; it had the money to contest the legal battles; and—most important—it provided YouTube with the business model that would allow it to thrive
▪ But the Mosaic team had stumbled upon something simpler. They had discovered that you could dream up a product, code it, release it to the ether and change the world overnight. Thanks to the Internet, users could download your product, give you feedback on it, and you could release an update, all in the same day. In the web world, development schedules could be measured in weeks.
▪ Credit for coining the term “weblog” is generally given to the site Robot Wisdom WebLog, launched on December 17, 1997, by Jorn Barger. Shortening the term to “blog” is often attributed to Peter Merholz, who ran a personal website at Peterme.com.
▪ It was this new paradigm for product development, more than anything else, that was Netscape’s first contribution to the modern idea of “a startup.”
▪ But if we’re being entirely honest, there’s one specific category of app that was crucial to the iPhone taking off when previous smartphones didn’t.
One of the key launch apps on the first day the App Store went live? Facebook.
▪ Marc Andreessen described it this way: “You keep kicking versions out the door, making them better. Any individual product is less important than the basic idea. If a beta turns people off, you put out a beta that turns them back on.”
▪ The movie and television studios had watched the Napster debacle with dread. They knew their industries were next in line for disruption from the Internet. When that disruption arrived, in the form of YouTube, Hollywood was at least willing to weigh its options this time. Going scorched earth against Napster had not saved the music industry. And so, once Google came to the table with a willingness to share advertising revenue with rights holders, a lot of them (Viacom notwithstanding) were willing to play ball.
▪ It all tied into the original utopian ideal of the web: anyone with an opinion or an insight could broadcast their truth to the entire planet, free from the oversight of the traditional gatekeepers who told you what you could and could not say
▪ What we can say definitively is that we know who ended up holding the bag as the bubble exploded: average investors
▪ Jim Clark eagerly embraced this new way of doing things. “You didn’t build some physical thing, move it down an assembly line, box and shrink-wrap it, and stick it on a store shelf,” Clark wrote in his autobiography. “You conceived of it in your head, produced it in a computer, and tossed it up for grabs on the Net.”38
▪ And if not for the iPhone kick-starting the smartphone revolution, whither Snapchat? Or Twitter? Much less, Uber?
▪ For the better part of two years, the dot-com mania had been fueled by the This Time It’s Different™ mass faith that Americans had in the promise of the Internet. That sort of new-economy mumbo-jumbo worked for the dot-com companies—until it didn’t.
▪ The argument could be made that social media finally broke through to the mainstream because smartphones went mainstream at the same time.
▪ And a complementary argument could be made in reverse: that the iPhone took off when other smartphones hadn’t because it arrived on the scene just when Facebook was going parabolic.
▪ Rather than too soon, the smartphone+social media represented a moment when two world-changing technologies arrived at just the right moment.
▪ One by one, the weakest of the dot-coms, those with the flimsiest business plans, or those that were the most blatant copycats of other flimsy ideas, began to underperform the market. Dot-coms ceased being sure stock market winners—at first in a trickle, and then all at once. Falling stock prices turned into stock market delistings and then became actual bankruptcies. Like any good game of musical chairs, when the music stopped, there simply weren’t enough seats for everyone.
▪ Thefacebook’s sudden high profile in Silicon Valley, along with its Accel connections, allowed the company to start hiring superstar talent. Steven Chen was such a superstar that he only worked at Facebook for a few months before going on to found YouTube.
▪ The bursting of the dot-com bubble was the opening act of our current economic era, and the repercussions from that bubble’s aftermath are still with us today, economically, socially, and especially politically
▪ But in 1997, the company did something completely out of character: it released the messenger program online as a stand-alone web client. It was known as AOL Instant Messenger, or AIM, and it allowed people to stay in touch with their AOL friends when they were away from AOL. It proved especially popular for people who were at work, where they couldn’t log on to AOL, and among teenagers, allowing them to keep up with all of their friends, whether they were AOL users or not.
▪ Oh, and one of Parker’s last acts was to secure the domain Facebook.com. Sean had long argued that the “the” in the site’s title was superfluous. The company officially became Facebook on September 20, 2005.
▪ Like eBay had done, a growing crop of community-based sites realized that their most valuable asset was their users. Today, we take for granted that social-networking sites like Facebook are merely platforms for user activity. Facebook doesn’t actually generate anything itself. We do. The users generate content for Facebook to advertise against
▪ And that was the problem, of course. AOL had no idea what it was sitting on. AIM was a fully fleshed-out social network
▪ Marc Andreessen would later say of the bubble and its aftermath: “A lot of big companies in 2000, 2001, 2002, breathed a massive sigh of relief, and said ‘Oh! Thank God that Internet thing didn’t work! Stick a fork in it, it’s done. Everybody knows the dot-com thing was a bubble. That was a joke. It’s over. So, now we don’t have to worry about it.’ ”
▪ The early social sites stumbled upon this miraculous business model almost a decade before Mark Zuckerberg did.
▪ A Los Angeles–based entrepreneur named David Bohnett started a small firm that designed and hosted websites for local businesses. In order to drum up more clientele, he hit upon the idea of giving away limited homepages to individuals for free
▪ This was thanks to the precocious Parker, who took it upon himself to raise money for the project, running through a chain of connections that eventually landed Napster a $250,000 investment from a California angel investor on Labor Day 1999.
▪ The social graph was actually the great prize of Web 2.0. Others were only able to seize this prize because AOL dropped the ball. AIM eventually lost its relevance through benign neglect. “If AOL had 20/20 hindsight, maybe the story [of social networking] would have had a different ending,” says Barry Appelman, one of the AOL engineers who invented AIM.
▪ Drudge gained his notoriety in January 1998 when, after Newsweek had determined the story too dubious to publish itself, he released the first rumors about Bill Clinton’s affair with a White House intern on the Drudge Report. One man’s digital soapbox nearly brought down the President of the United States
▪ Bohnett provided templates and plug-and-play tools that allowed a user to create a rudimentary homepage without having to know HTML or how to find a host or a server. Bohnett’s brainstorm was to group the homepages into groups of similar interest using a virtual real estate model. So, you could homestead your website in a “neighborhood.” For example, Nashville for country music sites, Area 51 for science and technology, or West Hollywood for LGBT sites.
▪ SOCIAL NETWORKING MIGHT SEEM like a dead-obvious concept in retrospect, but that’s only because we’ve gone through the looking glass into a modern world where the boundaries between our online lives and “real life” have been broken down almost completely
▪ Toward the end of 1994, People named Andreessen one of its “Most Intriguing People,” alongside a young golfer named Tiger Woods.46
▪ Millions of GeoCities homepages were created, often by individuals, with most being nothing more than simple personal pages with variations of a “Hello World” message. Similar plug-and-play homepage hosts sprang up called Tripod and Angelfire, both allowing users to express themselves directly by producing rudimentary “profiles.” GeoCities and the like were “social media,” or at least, an early form of it. What they weren’t, precisely, was “social networking” because despite the fact that GeoCities grouped like interests together, the focus was not exactly on mapping social connections. Not yet.
▪ On some campuses, Napster was consuming nearly 85% of available bandwidth.
▪ Feeding off the newness of blogging, and referencing the Fleet Street–style tabloids from his native Britain, as well as satirical publications like Private Eye and Spy, Denton launched a series of blogs under the umbrella company named after the first one to debut: Gawker.
▪ MANY OBSERVERS of the dot-com bubble have found it instructive to compare it to earlier bubbles like the tulip mania in seventeenth-century Holland or the South Sea Company’s collapse in eighteenth-century London. But it’s the example of the railroads in Britain in the 1840s that’s the most analagous.
▪ Andreessen and Clark began to think of the web browser as a sort of platform for the web. Why couldn’t the web browser be the DOS/Windows for the Internet? The key was to become the market standard, which meant being first. But becoming a platform also meant enticing developers to develop for your platform.
▪ Railways were cutting-edge in the 1840s. As with the dot-coms, there was a period of about three or four years when Britons experienced a mad rush to invest in business schemes surrounding this new technology
▪ Almost from the very beginning, Andreessen and Clark wanted their web browser to enable an ecosystem that other programs, and even other companies, could be built off of. Throughout its life, Netscape would embrace open-source culture and practices. If they were the first browser to introduce support for an innovation, they didn’t make that advance proprietary. They allowed the new feature to be used by others, hoping it would become standard, and hoping they would get credit for the innovation and for being first.
▪ It was the right idea, but as Weinreich would ruefully admit, “We were early. Timing is everything.”27 The site was expensive to operate in the dot-com days, and of course, there were no photos on the profiles. “We had board meetings where we would discuss how to get people to send in their pictures and scan them in,” Weinreich says.28 After the dot-com crash, the site was shuttered.
▪ A good example of this was the Secure Sockets Layer (SSL) technology, which Netscape would pioneer. This is the encrypting technology that makes secure interactions on the web possible. Netscape’s browser would be the first to feature this technology, but Netscape left the underlying standard free for others to use and support.
▪ In his book Fire and Steam: A New History of the Railways in Britain, historian Christian Wolmar describes a frenzy that sounds eerily familiar:
As the supply of finance appeared almost endless, with more and more people eager to jump on the “get rich quick” bandwagon, unscrupulous fraudsters entered the fray, pushing schemes whose only aim was to deprive investors of their savings. For example, investors were being sought for schemes whose sole purpose was to pay the bills on previous projects drawn up by the same promoters. While such utterly fraudulent schemes were few, there were many more in which investors lost their money because the economics were as shaky as their prospectuses were woolly.
▪ This open attitude toward the technology is what allowed the first ecommerce activities to begin flowering across the web. Netscape benefited as the underlying platform that was the most trusted and valued by users. Netscape also eagerly supported and incorporated the advances of others—for instance, the Java programming language when it emerged. Netscape would even encourage others to build add-ons and plugins that would interact with Netscape’s own software, adding features and functions that Netscape itself couldn’t dream up.
▪ Soon, Denton had his portfolio of blog publications covering a universe of topics from personal productivity (Lifehacker) to Silicon Valley (Valleywag) to video games (Kotaku) to sports (Deadspin).
▪ In an age of computer networks, how did it make sense to blame a technology itself for how its users employed that technology? Ever since the advent of the CD, music was nothing more than ones and zeros, digital lines of computer code. When you bought a physical album, you had always been allowed to give it to your friend or make them a mix tape from it. Because you could now do the same thing digitally, because you could now store your entire music collection on your hard drive instead of on shelves—how did that suddenly make it wrong to do with your music what you wanted?
▪ In the mid-nineties, your email address was something that was assigned to you by your Internet service provider, by your employer at work or by your university if you were at school. And you could access your email through that provider only. Today we are used to free, almost disposable email addresses; but in the early days of the Internet, email addresses were actually something of a scarce commodity. Bhatia and Smith’s idea would change all that, allowing people to check their email anywhere—at work, at home, on the road—anywhere there was a web browser and Internet access. They wanted to let users pick their own email address. They wanted to enable people to separate their personal lives from their professional lives, at least in the realm of email.
▪ In 2003, Google offered to buy Friendster for $30 million in pre-IPO Google stock, but the venture capitalists encouraged Abrams to spurn the offer and instead shoot for the moon.
▪ The aftermath of the bubble feels similar to the aftermath of the dot-com fiasco, albeit with a Victorian tinge:
A contemporary chronicler reckoned “no other panic was ever so fatal to the middle class. . . . There was scarcely an important town in England what [sic] beheld some wretched suicide. It reached every hearth, it saddened every heart in the metropolis. . . . Daughters delicately nurtured went out to seek their bread. Sons were recalled from academies. Households were separated; homes were desecrated by the emissaries of the law.”
▪ But what Wolmar’s account also points out is to what degree the bubble, and the railroads constructed because of it, ultimately created the infrastructure that would enable the high Industrial Revolution in Victorian Britain. The mileage of rail schemes authorized during the bubble years came to represent 90% of the total route mileage on Britain’s rail system. “The vast majority of the railways constructed in these years survive today as the backbone of the [UK rail] network,” Wolmar writes.
▪ “When it grew as fast as it did, we absolutely weren’t prepared for it,” Abrams said later. “Throughout 2004, 2005, Friendster barely worked. The site was really slow; it was buggy. That, unsurprisingly, caused an exodus of users to leave.”30 When Friendster users grew frustrated waiting thirty or more seconds for pages to load, they had a throng of Friendster copycat sites to turn to instead.
▪ The bubble made possible the British Empire at its economic height. People never stopped riding trains. Businesses never stopped shipping goods over them. The railways never went away, even after the investment mania did. The lesson of the dot-com bubble is similar. Of course, the dot-coms went away. Of course, AOL—for one brief shining moment, the embodiment of the Internet in American life—went away. But the Internet itself didn’t go away. And that’s why the railway example is so pertinent.
▪ Like any good idea, the rebirth of social networks inspired dozens of people to try their hand at the concept. Many of the Friendster copycats tried to create social networks that targeted specific niches: college students, high school students, even, in the case of Dogster.com, pet owners.
▪ Hotmail.com launched on the web on July 4, 1996. In little more than a year and a half, Hotmail would claim 25 million users.32 At the time, this meant that Hotmail was actually the fastest-growing web thing in history
▪ The final question was an important one: how to make money? Andreessen and Clark eventually settled on a seemingly radical strategy: the product would be free. Well, in a winking, knowing sort of way. Upon release, the web browser would be available for anyone to download so-called beta versions (“beta” means an early version of the software; a work in progress). However, if you wanted to own the standard version of the software—the final one, with all the bells and whistles and customer support—it would cost $39. (Even this was fungible. Anyone would be able to download the full version of the software on a trial basis for ninety days. After that, you were supposed to pay up.)
▪ One of the copycat sites that rushed in to tempt away disillusioned Friendster users was called Myspace. Myspace was owned by eUniverse, a dot-com survivor that made a lot of money peddling wrinkle cream (“Better than Botox”) via online ads that purported to offer the cream for free despite built-in expensive automatic refills, and that made advertising claims that the FDA asserted “were not supported by reliable scientific evidence.”
▪ All of the money poured into technology companies in the first half decade of the Internet Era created an infrastructure and economic foundation that would allow the Internet to mature
▪ An eUniverse employee named Tom Anderson became obsessed with Friendster and convinced his boss, Chris DeWolfe, that creating a Friendster clone might be a cheap and easy way to amass more people for eUniverse’s marketing lists.
▪ “At the time, it was a crazy idea, to build this software but just give it away,” says Rob McCool. “They were going to give away the browser and charge a lot of money for the server.”
▪ Napster also played up the by now well-worn angle of a young company founded by a bunch of kids who just wanted to change the world. Shawn Fanning and Sean Parker were paraded regularly on MTV and other television outlets. Napster made the cover of magazines from Rolling Stone to Time. Shawn Fanning introduced Britney Spears at the 2000 MTV Video Music Awards and hobnobbed publicly with famous artists such as Billy Corgan and Courtney Love. Fanning even testified before Congress alongside Metallica’s Ulrich.
▪ HOTMAIL’S TIMING WAS impeccable. By late 1997, and especially through the whole of 1998, there was a big new watchword among Internet players: portal
▪ What did this mean, ultimately? Well, it meant that for the coming years, the literal infrastructure that would allow for the maturation of the Internet was in place. And because of a resulting glut of fiber (the telecoms had overextended themselves just as disastrously as the dot-coms, thus the bankruptcies) in the years after the dot-com bubble burst, there was a severe overcapacity in bandwidth for Internet usage that allowed the next wave of companies to deliver sophisticated new Internet services on the cheap.
▪ By 2004, the cost of bandwidth had fallen by more than 90%, despite Internet usage continuing to double every few years.83 As late as 2005, as much as 85% of broadband capacity in the United States was still going unused.84 That meant as soon as new “killer apps” were developed, apps like social media and streaming video, there was plenty of cheap capacity allowing them to roll out to the masses.
▪ And people didn’t suddenly stop surfing the web. Many have made the case that the dot-com era was doomed to failure simply because there were too many companies chasing what at the time were too few users. When the bubble burst in 2000, there were only around 400 million people online worldwide. Ten years later, there would be more than 2 billion (best estimates peg the current number of Internet users at 3.4 billion).
▪ “You’re a search engine—once they’ve done the searching, why do they need you?
▪ Yahoo needed to find a way to keep users on its pages. To use a watchword that was ubiquitous at the time, Yahoo needed to get more “sticky.”
▪ In the year 2000, there were approximately 17 million websites. By 2010, there were an estimated 200 million (today, that number is over a billion).
▪ To that end, Yahoo and the other search sites began to try anything that might encourage users to return habitually
▪ That July, Yahoo offered $1 billion, all in cash. Both Accel and Peter Thiel thought the offer should be seriously considered. But when a board meeting was called to weigh options, Zuckerberg was brief.
“We’re obviously not going to sell here,” he told the group
▪ Far from being a fad, the habits Americans acquired during the bubble era ingrained themselves into the rhythms of everyday life. The dot-coms, the training wheels for the Internet, the pioneers, they all taught us to live online
▪ It also hadn’t escaped the university’s notice that Clark and Andreessen’s company had originally called itself Mosaic Communications. In a preliminary attempt to appease the university and avoid litigation, the name of the company was changed to Netscape, and the programmers submitted to what amounted to a forensic auditing of their work, despite the fact, as Jon Mittelhauser says, “We didn’t want to take any of [the old Mosaic] code, that’s the thing! We wanted to start from scratch. We wanted to do it right.”
▪ Fanning and the other Napster engineers tried gamely to implement algorithms to do just that, and they succeeded in blocking 98% to 99% of the offending material. But the judge was ultimately not satisfied unless the percentage of blocked material reached 100%, and Napster was never quite able to achieve that. When all legal options were exhausted, Napster filed for bankruptcy on May 14, 2002, and fired all seventy employees, including Shawn Fanning, who had stayed with his brainchild until the bitter end (Jordan Ritter had left in October of 2000, and Sean Parker had been quietly shown the door after his damning emails had come to light).
▪ A portal was now where you returned to again and again throughout the day, not just to search, but to manage your life
▪ As this was going on, on October 12, 1994, the marathon sessions of hard work in Mountain View paid off. A beta version of the new web browser, version 0.9 of a program eventually called Netscape Navigator, was made available on the web for anyone to download at midnight.
▪ By May of 2005, Myspace was attracting 15.6 million visitors every month
▪ Today—however uneasily—it seems we’ve accepted the notion that “free” web services make their money by whoring out our personal information to marketers and advertisers. But this practice really began in earnest with the portals, which claimed they were only interested in delivering us, say, personalized sports scores for our favorite teams
▪ Early reviews from users and from the media were rapturous. Businessweek said that Navigator could “make the Internet a mass medium for home shopping, banking and a host of other services.”
▪ All the major search sites quickly pivoted to this new portal and personalize strategy, and to say it was lucrative would be an understatement. Excite saw its revenues jump 709% in 1997 alone.36 The four biggest search sites, Yahoo, Excite, Lycos and Infoseek, all saw their share prices increase an average of 390% over the course of 1998.3
▪ Surely the record companies would see that digital distribution was more efficient. They would see that Napster could help people discover new artists and promote existing ones by creating a central hub. In retrospect, there is no shortage of people, even inside the music industry, who imagine how different the world would be if it had worked out that way—if the music companies had partnered with Napster and accepted the inevitability of technology.
▪ Facebook began to expand overseas, still following the tried and true school-by-school method. In almost every country it entered, Facebook encountered homegrown copycats. In most cases, Facebook quickly trounced the competition. The first steps were taken to expand beyond college users by opening the service up to high schoolers. Since high schools generally don’t have school-assigned email addresses, younger users were allowed in only if they were invited by someone they knew who was already in college. This proved irresistible to younger users, and though some existing members grumbled about the “kids” flooding in, the expansion was generally judged to be successful. The next logical step was to expand in the other direction. Already, 60% of members continued using Facebook after graduating and entering the workforce.60 So, plans were put in place to expand to older users by creating mini networks centered around employers and companies.
▪ It included so many web innovations that weren’t supported by existing browsers that a unique new phenomenon began. Website after website on the still immature web started posting little buttons that read “Best viewed in Netscape Navigator” with a link that sent you to the download page. Just as had happened with Mosaic, webmasters and web creators wanted to show off the cool new things that Navigator allowed them to do, so they steered their users to the new browser organically.
▪ “At the time, the idea of all the music you would want for $15 a month was an appealing thing and studies showed most users would have paid it.”
▪ But even when Myspace was at its zenith in terms of users and traffic and revenue, people couldn’t stop comparing it to another of the Friendster clones, particularly the clone that had chosen to focus exclusively on college students.
▪ Perhaps Napster’s biggest misstep was trying to leverage the record companies into a deal, given that the music business has always been known as one of the most notoriously cutthroat and aggressive in the world. This was an industry with quite literal mob ties throughout much of its existence. Napster simply picked a fight with the wrong adversary. The music industry was never interested in a deal. The music industry was only ever interested in suing Napster dead.
▪ In a November 2007 News Corp earnings conference call, Rupert Murdoch himself dismissed this competitor, Facebook, as merely a “Web utility similar to a phone book.” Myspace, by comparison, had “become so much more than a social network. It connects people, but it’s evolved into a place where people are living their lives. A social platform packed with search, video, music, telephony, games.”38 Little did Murdoch know that, even as he said those words, the battle for social networking was already over, and Myspace would join SixDegrees and Friendster as an also-ran in the history books.
▪ The RIAA would follow up its victory over Napster by attempting to sue other digital technologies out of existence, and even, eventually, suing music consumers themselves—tens of thousands of them, in fact. Of course, all this did nothing to halt the advance of file-sharing technology
▪ “Now people take for granted that they’ll put out a version of something and a million copies will be downloaded in a week,” Netscape employee John Giannandrea said. “But nothing like that had ever happened before.”
▪ As John Naughton said in his A Brief History of the Future: From Radio Days to Internet Years in a Lifetime, “Netscape had effectively launched an era when you could finish a product one day and have hundreds of thousands of users the next. The old era of two-year product cycles was over.”
▪ In Napster’s wake, first came Gnutella, from Justin Frankel, who had created Winamp. Gnutella spawned a whole ecosystem of next-generation file-sharing networks like LimeWire, BearShare, Morpheus and many more. A few years later, in 2003, a twenty-five-year-old coder named Bram Cohen released the BitTorrent protocol, which took file sharing to new frontiers like movies, TV shows, and video games.
▪ If Napster had been naïve to think it could have done a deal with the record companies, then the record companies were certainly naïve to think destroying Napster would somehow make the threat of digital technology go away
▪ A Wall Street analyst told Businessweek, “You have to look at it [Yahoo] as the new media company of the 21st century.”
▪ In retrospect, the News Feed is so obviously Facebook’s “killer application,” that it’s almost surprising social networks got as popular as they did before the News Feed was even invented. And so, it came as a shock to everyone at Facebook that users hated the News Feed.
▪ The feature was launched in the early morning of Tuesday, September 5, 2006.62 By breakfast time, Facebook staffers were deluged with messages of pure outrage. Only one in a hundred postings about the News Feed was positive.63 Ben Parr, a junior at Northwestern University, created a Facebook group called Students Against Facebook News Feed. It had 700,000 members by that Friday.64 By some estimates, fully 10% of Facebook users were actively protesting the changes.
▪ The record companies, in contrast, refused to budge as the habits and preferences of music consumers changed. It was never piracy that was the problem for the music industry (at least, not entirely). But rather, it was the stubborn refusal to adapt to a revolution in consumer expectations that has, at its root, truly bedeviled the record companies, and the television companies and the movie companies, and on and on and on over the course of the Internet Era.
▪ A few years after the News Feed brouhaha, Digg would redesign its site and change its voting algorithms in a way that so angered users that they fled, en masse, to a Digg competitor named Reddit. To this day, Reddit is known as the “front page of the Internet,” the birthplace of memes and viral culture, while Digg, though still around, is nowhere near as relevant or well trafficked.
▪ Netscape offered to pay with shares of the company in lieu of cash, but this was rebuffed. That refusal would cost the University of Illinois tens of millions of dollars when Netscape had its initial public offering.
▪ “Music will be ubiquitous and we believe you’ll be able to get it on your cell phone, you’ll be able to get it on your stereo, you’ll be able to get it on whatever the device of the future is. And . . . I think people are willing to pay for convenience.”
▪ Zuckerberg himself quickly penned a note to users, “Calm down. Breathe. We hear you.” Privacy controls were hastily coded up to give users better control over what showed up on the Feed and what didn’t. But the News Feed was never shut down, even temporarily, because, again, Zuckerberg was watching user behavior and, despite the ruckus, he could see that people were actually using the News Feed as he had intended. In August, before the News Feed, Facebook users viewed 12 billion pages. In October, après News Feed, pageviews were 22 billion
▪ People might claim to hate the feature, but Zuckerberg could see they couldn’t stop using it.
▪ About a year before it sued Napster, the RIAA sued Diamond Multimedia. Before it had even heard of Napster, the record industry knew it didn’t want MP3 as a technology to catch on. But while Napster was eventually defeated, the RIAA lost the Diamond Multimedia case. The Rio PMP300 went on to become the first commercially successful portable MP3 player.
▪ As the author Stephen Witt has noted in his book How Music Got Free: A Story of Obsession and Invention, from the perspective of history, the music industry won the wrong lawsuit
▪ When Facebook’s work networks were launched, they barely got any attention. Only on army bases, and among U.S. military users, had the workplace networks taken off. But then, military folk were generally the same college-age cohort that Facebook had always been successful with. Adults didn’t seem to be interested in the service at all.
▪ In New York, people were turned away when a 500-person ballroom was filled to capacity. Many in the crowd showed up not to ask questions about the company, but to find out more about the Internet in general.
▪ OPEN REGISTRATION WAS LAUNCHED on September 26, 2006, mere weeks after the News Feed debacle
▪ Netscape laid the groundwork for the cult of the entrepreneur that is still with us today, and an entire generation took notice.
▪ 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.