1995
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The smoldering hostility between the companies turned acute on June 21, 1995, at a four-hour meeting at Netscape’s headquarters. In the run-up to the meeting, Netscape and Microsoft had tentatively explored a strategic relationship. But according to detailed notes that Andreessen took at the meeting in June, Microsoft’s representatives came on strong and proposed that the companies carve up the browser market—with Netscape Navigator confined to the older, less lucrative versions of Windows.97 Andreessen, who could be disarmingly candid, likened the conduct of Microsoft’s team to “a visit by Don Corleone” of The Godfather films. “I expected to find a bloody computer monitor in my bed the next day.”98 Microsoft disputed Andreessen’s account, saying its representatives had made no attempt to intimidate Netscape.99
In any case, the meeting ended without agreement, and Netscape moved forward with plans for its most audacious act of all: a public offering of its shares. Netscape was not quite sixteen months old and had not come close to turning a profit. Typically, as the New York Times observed, companies were expected to “show a pattern of profitability over two or more quarters before an underwriter would try to take them public, but the Internet, as with some other promising technologies, is apparently different.”100
Netscape had been contemplating an IPO—initial public offering of its shares—for several months. “I wanted us to go public because I thought it’d be good for us from a PR standpoint,” recalled Clark, the chairman, “and I did go into this thing to make money, so I was looking for a reward as well.”101 The IPO, underwritten by Morgan Stanley and Hambrecht & Quist, included five million shares of Netscape, priced at $28 per share. The shares went up for sale August 9 on the Nasdaq exchange. But for nearly two hours that morning, an order imbalance kept them from being traded. Finally, the stock opened—at $71 per share. It climbed as high as $74.75 a share before settling at day’s end to $58.25.102
It was a smashing debut by any measure—“the best opening day for a stock in Wall Street history for an issue of its size,” the New York Times said.103 The IPO demonstrated that the Web could be a place to make fortunes fast. Clark’s stake in Netscape was worth more than half a billion dollars; Andreessen’s was worth more than $58 million. The Wall Street Journal observed that it had taken General Dynamics forty-three years to become a corporation worth $2.7 billion in the stock market. It had taken Netscape “about a minute.”104 The IPO, as Robert H. Reid wrote in Architects of the Web, “put the Internet indelibly on the map with millions of people who hadn’t been there yet.”105
Fifteen days after Netscape’s IPO, Microsoft unveiled its much-anticipated Windows 95 operating system, which coincided with the release of Internet Explorer 1.0, Microsoft’s Web browser. Explorer 1.0 was a meager product106 that, ironically, was based on a licensed version of the Mosaic code that Andreessen had developed at Illinois.107 Then, on December 7, 1995, came Microsoft’s “Pearl Harbor Day” announcement and the unequivocal emergence of a mortal threat to Netscape: Gates spelled out for journalists and industry analysts a comprehensive strategy to insert and expand Microsoft’s presence online. Gates declared that Microsoft was “hard-core about the Internet.”108 Among other moves, Microsoft’s browser would be improved, made faster, and offered online for free.109
The “browser war”—the blood feud between Netscape and Microsoft—was under way. Gates, according to an internal memorandum, acknowledged that Netscape was “quite an impressive competitor.”110 Barksdale, Netscape’s chief executive, said the looming browser war promised “to be a dogfight. But we think we have God on our side.”111 Markets, though, tended to think otherwise. Two days before Gates’s “Pearl Harbor Day” announcement, Netscape’s per-share price had touched $171. It would never again reach that high. Netscape mania had crested as markets sensed the unfolding browser war could become a lopsided fight that Microsoft would win.
Even so, Netscape entered the browser war with a huge advantage in market share. Its dominance unnerved Microsoft. “Netscape is already entrenched in our markets all over the world,” a senior Microsoft executive, Brad Chase, wrote in a confidential internal memorandum in April 1996. “The situation today is scary,” Chase stated. “We have not taken the lead over Netscape in any market yet.”112 But in time, that equation would change dramatically. As Gates had promised, the Microsoft browser was improved. Internet Explorer 3.0, introduced in 1996, was seen as at least the technological equal to Netscape’s latest version, Navigator 3.0.113
What’s more, computer users, especially new users, had little incentive to download and install Navigator on the Windows platform: Internet Explorer was already there, and technically it was just as good. Moreover, Microsoft had muscled its way into the commercial online market, and the largest service providers—including America Online, CompuServe, and AT&T Worldnet—replaced Netscape Navigator with Internet Explorer as their preferred browsing software.114 According to an America Online internal email, Gates asked an AOL executive in January 1996, “How much do we need to pay you to screw Netscape?” by designating Internet Explorer as AOL’s featured browser. “This is your lucky day,” Gates was quoted as saying.115
In the months that followed, Netscape Navigator steadily lost market share to Internet Explorer. At Netscape’s encouragement, the Justice Department began investigating Microsoft’s tactics on anticompetitive grounds. But the government’s inquiry would come much too late to rescue Netscape. The company lost $88 million in the fourth quarter of 1997, and its shares shed more than 20 percent of their value, sliding to less than $20.116 By August 1998, Internet Explorer eclipsed Navigator as the most popular Web browser. The “writing was on the wall,” said Brendan Eich, the Netscape software engineer who developed Javascript. “Microsoft was driving their monster truck after us and they were about to pin us to the wall.”117
Netscape’s celebrated run as the flamboyant startup of Silicon Valley reached a bitter end in November 1998, when Barksdale announced the company’s acquisition by America Online in a stock deal valued at $4.2 billion.118 It was the first major merger of Internet companies,119 and it reduced the once-cocksure Netscape to a forlorn and mostly forgotten outpost of AOL. (In a final indignity years after the “browser war,” Microsoft in 2012 acquired from AOL the patents underlying the Netscape browser.)120
For a time, Andreessen stayed with the merged entity, as chief technology officer at America Online. He bought a house near AOL headquarters in suburban Virginia as if to underscore his commitment. But a few months later, he returned to California. Many of Netscape’s 2,200 employees also left after the merger; the clash of cultures between buttoned-up AOL and freewheeling but humbled Netscape was too pronounced.
Microsoft and the “browser war” were the major but not the exclusive reasons for Netscape’s inglorious descent. Netscape never converted its many browser users into paying customers.121 It never quite knew what to do with its much-visited home page, which, somewhat belatedly, it turned into a Web portal called Netcenter.122 The Netscape saga—from spectacular rise to near-hegemony to decline and humiliating absorption by AOL—spanned fewer than five years. In its run, Netscape helped define “Internet time,” an idiom of the late 1990s that meant everything moved more swiftly online. The compressed arc of Netscape’s meteoric trajectory was itself emblematic of Internet time.
More significantly, the rise of Netscape and the popularity of its browser signaled the centrality of the Web in the digital age. Novelist Charles Yu described it this way: “I entered college in 1993 and graduated in 1997. Halfway through, the Internet became a thing. Netscape said: ‘Here you go, here’s a door to a brand-new place in the existence of the universe. We just started letting people in. Go ahead, it’s fun. It’ll keep getting bigger for the rest of your life.’”123 Like no other single event of the early digital age, Netscape’s IPO in 1995 brought the Web into popular consciousness. “If the World Wide Web had not yet gotten the public’s full attention,” Tim Berners-Lee said, the Netscape
IPO “put it on center stage.”124
It can be forgotten how innovative Netscape really was. It developed JavaScript. It was quick to embrace the Java programming language. It introduced the Secure Sockets Layer protocol, which enabled encrypted transactions to be completed online.125 Netscape’s early browsers were marvels for their time. “Every time you go to a Web page,” technology writer Walter Mossberg wrote in late 2013, “you are seeing the legacy of Netscape in action.”126 But more than that, Netscape epitomized the swagger and flamboyance of the early Web and its exuberant promise of wealth swiftly made. Amazon.com in 1995 represented great promise of a less spectacular sort—that the Web could be a reliable, efficient, and customer-friendly source of commerce. Amazon demonstrated this potential by selling a decidedly analog product with a centuries-old past: the book.
Amazon’s online bookstore opened on July 16, 1995, and not many people took notice.127 Such obscurity seems in hindsight a bit astonishing, given how embedded Amazon has become in American life and culture. In the years after 1995, Amazon demonstrated that the Web could be an opportune venue for retailing and, in doing so, dramatically altered the businesses of selling books, music, and video. It became the Walmart of the digital world, and much more. With its line of Kindle devices, Amazon has made electronic books popular and readable. It has become a leader in Web technology services, and it rents space on its formidable computer infrastructure to startups and established businesses128 as well as government agencies such as the CIA. It is in the same-day grocery-delivery business in a few cities. The company’s founder—a geeky guy with large brown eyes and a bellowing, full-body laugh—began the company figuring it had a 70 percent chance of failing. Within a few years, he had a net worth of several billion dollars and was being proclaimed the “Internet’s ultimate cult figure.”129 He is a rare 1990s technology-entrepreneur—a founder/chief executive—who still runs the company he started. He’s Jeff Bezos, a driven and complex figure of many interests, a man of deep intelligence and a sometimes-savage temper.
The saga of Amazon.com began in 1994 when Bezos, in his telling, saw great opportunity in the Internet’s astonishingly swift growth. He quit a well-paying job at the D. E. Shaw investment management firm in New York City and, with his wife, MacKenzie, headed west for Puget Sound in Washington state. Over the next several months, Bezos made a couple of key hires, raised startup money from family and friends, and incorporated the company.
Bezos has cultivated a founding myth that Amazon began inauspiciously, in a poorly heated, unprepossessing garage in Bellevue, Washington. The company’s press releases in its early years seldom neglected to mention the humble birth.130 Bezos has said he purposely looked for a house to rent in suburban Seattle that came with a garage—“in part because we wanted some of that garage-startup legitimacy” that attaches to companies such as Apple and Hewlett Packard. “It wasn’t . . . full legitimacy because the garage was enclosed” and had been converted into a sort of work room, Bezos conceded.131 But “it wasn’t insulated,” he said, and “it was very cold, and that gave us some legitimacy.”132 That Amazon got its start humbly, in a suburban garage, has become the stuff of Internet legend; even nowadays, when it matters very little, references to Amazon’s undistinguished origins often appear in news reports about Bezos or the company.133
FIGURE 8. Few people noticed when Jeff Bezos launched Amazon.com on the Internet in mid-July 1995. The company was quick to recognize the power, versatility, and novelty of the Web—and demonstrated how it could be a secure place for commerce. (Photo credit: Brian Velenchenko/Corbis)
By July 1995, when Amazon began selling books online, Bezos had moved the fledgling company from Bellevue to an industrial neighborhood in Seattle and office space above a Color Tile store.134 Launching Amazon when he did turned out to be impeccable timing: had Amazon.com gone live a year earlier, Robert Spector wrote in his book, Amazon.com: Get Big Fast, “there barely would have been enough personal computers connected to the Internet to keep the company afloat; a year later and the competition would have had an insurmountable lead.”135
Bezos, who turned thirty-one in 1995, has said he figured it would take years and years for book-buyers to grow accustomed to making purchases online. It was neither instinctive nor intuitive in 1995 to go online and buy a book. Or anything. A report by the Times Mirror Center for the People & the Press in October 1995 said that just 1 percent of all Americans had made a recent purchase online. But the Times Mirror study also noted that “even small percentages can translate into millions of people.”136
Bezos later acknowledged that he had not anticipated the importance of those online shoppers, the early adopters who typically have a fairly high tolerance for risk and uncertainty.137 “The thing we had overlooked, at that time, was everybody on the Internet, 100 percent of the population, was what demographers called ‘early adopters,’” Bezos said. “These are the first people to use cell phones. The first people to use computers. They’re the first people to do everything. And so these guys were very facile at learning new habits, and they adopted very quickly” to buying books at Amazon.com.138
The company’s first employee, Shel Kaphan, said that it was soon after its launch when Amazon began “getting some traction” online.139 “It was an exciting time,” said Kaphan, who developed the technology that made the Amazon site interactive and responsive to individual users. In the company’s early days, he “was often the only person in the office on the weekends and [I remember] just getting phone calls from all over the country, people excited to find the site and wanting to know about us.” It was novel in 1995 to be “doing commerce on the Web,” Kaphan said, and that “caught people’s imagination in a lot of ways. They were excited about it.”140
In the week after its launch, Amazon logged $12,000 in orders, and $14,000 the week after that.141 The novelty of online commerce was such that the company’s computer terminals were programmed to ring when an order came through. At first, the ringing was entertaining and reaffirming. Bezos recalled that the computers would ring and “you would jump up and go over and look and see what it was. But then it started to be annoying.” After a couple of weeks, Amazon’s sales had reached a point where the ringing had become a frequent and irritating distraction. So the computers were programmed to silence the sound.142
Amazon was extraordinarily cost-conscious in its early days, and a strain of frugality still characterizes the company, despite its riches. Its desks, for example, were repurposed from doors and four-by-fours. Bezos built the first door-desks himself. Later, he arranged for a Seattle carpentry company to produce them for $130 apiece: $70 for materials, $60 for labor.143 They are large and functional work surfaces, and not all that ugly.
For a while after Amazon opened for business in 1995, Bezos and the first employees packed books for shipping—on hands and knees, on the cement floor of a small distribution center he had rented. “And we did this for like two weeks and it was back-breaking work and our knees would be raw,” Bezos recalled. “I said, ‘We’ve got to do something about this. . . . We’ve got to get knee pads.’” One of the employees looked at Bezos as if he were from Mars and asked, “Well, what about packing tables?” Bezos said he “thought it was the most brilliant idea I had ever heard in my life. And so we did that, which radically improved things.”144 Bezos also said he would sometimes trundle the packages of books to a post office late at night.145
Sales in 1995 topped half a million dollars, but Amazon that year lost a little more than $300,000,146 the first of many years in which the company did not turn an annual profit. Its focus has been not on earnings but on spending nearly every dollar it brought in, to establish an unrivaled presence online. To “get big fast” was Amazon’s central objective.147 And it did: in 1997, the year of its IPO, Amazon.com reported revenues of $147.8 million, an increase of 838 percent from the year before.148
From the start, Amazon sought to promote a sense of the outsize. Its website declared the
company “Earth’s largest bookstore” and said it offered one million titles. The assertions were more than slight exaggerations.149 Amazon carried little inventory, preferring to order books from wholesalers after customers had placed their orders.150 “We didn’t have a million books,” Kaphan recalled, “but we had a million titles in the sense that we could order them. We might find out that the publishers might take several months to get them to us. But in most cases, it would be a matter of weeks and we were always trying to make accurate promises about how long it was going to take to get something” in the early days.151
The Amazon.com of today was unimaginable twenty years ago. The company has become a giant of the Internet, the world’s largest online retailer—“the everything store,” as Brad Stone described Amazon in his book about the company and Bezos.152 The buildings of its headquarters complex are clustered on the edge of Seattle’s downtown. Amazon’s annual revenues were nearly $75 billion in 2013, most of it from sales of electronics and other merchandise. It has more than 115,000 full-time and part-time employees. The company’s first employee, Kaphan, has said that at the company’s creation no one had any idea how big Amazon could be if it did succeed. “We had modest ideas about what was possible at the beginning,” he said.153 Not only did Bezos expect a far more modest company, he did not intend to call it Amazon.
The company was incorporated in 1994 as Cadabra Inc., a name taken from the magician’s incantation, “Abracadabra.” But Bezos soon realized that “Cadabra” sounded too much like “cadaver.” So it was dropped.154 He eventually settled on Amazon. The name, he told an audience a few years later, “has absolutely nothing to do with single-breasted female warriors” of mythology. Rather, he said, it was meant to encourage the association of “Earth’s biggest river, [with] Earth’s biggest bookstore.”155 For a while, Bezos had thought of calling the company “Relentless,” to suggest unstinting attention to customer service. But Kaphan helped scotch that name. It was a “horrible” prospective choice, he said. “And I let that be known, and that’s one of the reasons it didn’t happen.” Kaphan said that “both Jeff and his wife looked pretty crestfallen when I objected to ‘Relentless.’ And I think maybe that was one reason when he proposed ‘Amazon,’ he did it in such a way” that made it clear he was not going to entertain “any objections to it.”156