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Microsoft: 1995 redux?

Posted by: Steve Hamm on November 1, 2005

Today’s San Francisco briefing by Bill Gates and Ray Ozzie bears an eerie resemblance to a fateful day almost exactly a decade ago: Dec. 7, 1995. That was the day that Microsoft invited an army of analysts and reporters to Seattle to roll out its plans for mastering the World Wide Web and browsing. At today’s briefing, Gates and Ozzie announced a handful of initiatives aimed at bringing Microsoft up-to-date with the Web 2.0 crowd—most notably Google and Yahoo. It included an online offshoot of Office, Office Live, and a new Web service called Windows Live that allows you to keep your e-mail, news feeds, blog feeds, document files, etc. all in one place. This is just the beginning, Microsoft promises. Much more is yet to come. Will Microsoft eventually dominate the Web 2.0 world as thoroughly as it did the browser sphere? I think not (see my reasoning below), but that doesn’t mean it won’t do some interesting things while trying.

Bear with me while I take a trip down memory lane. Microsoft was under intense pressure in late 1995. Netscape had just gone public that August, and Microsoft looked slow and vulnerable. Things came to head at Comdex, the annual computer industry wing-ding in Las Vegas. At the Chili Cookoff at the Mack Center, Goldman Sachs analyst Rick Sherlund contronted Bill Gates in a hallway (Back in those days industry giants mixed with the masses)and asked him what he was doing about the Internet. Roger McNamee, then of Integral Capital Partners, also piped up. Gates assured them that Microsoft was fully aware of the challenges and was working on a response.

The rest is history. Just a few weeks later, Microsoft announced its Internet strategy. It was "embrace and extend." The company would license Sun's Java programming language and ship Java runtime software with each version of Windows. It would add HTML to all of its applications and create links from them to the Web. Its Internet Explorer browser would remain free.

Here's Rick's e-mail recollection of thse fateful days:

"I did express concerns to Bill and his response was that he understood the concerns and that it would take about 6 months for MSFT's plans to be more evident to the world. He was basically saying that he understood that we did not see MSFT strategy yet, but they were very aware of the issues. MSFT had been very radio silent on their Internet strategy, and at the Dec 7th meeting they disclosed support for Java, but told us that XML was of greater strategic significance, which I viewed as MSFT's effort to push into Web services as a way to pull standard setting back away from Sun. Gates gave no details to us at Comdex, just a wait and see. Roger was very pumped up on the Netscape vision. I had taken MSFT off our recommended list for about 6 months until after the Dec 7 meeting when they finally articulated an Internet strategy. Their stock began to benefit shortly after when it became clear that the Internet was driving broader PC adoption, from people that were more interested in communicating and searching out information rather than person productivity."

Here's Doc Searls' take on the turn of events.

Things started to happen fast after that. Netscape's stock went into a tailspin. Then, a couple of weeks later, I recall seeing Netscape CEO Jim Barksdale at a briefing in Santa Clara. He laid out Netscape's strategy to a bunch of analysts, reporters, and industry folks. During the Q&A somebody asked him how he could continue to build a business on selling browsers when Microsoft was clearly going to keep giving them away for free. He said, innovation.

We now know that innovation wasn't enough. Microsoft was able to leverage its immense wealth and its desktop monopolies and crush Netscape. Which, of course, led to the government anti-trust case and Microsoft's settlement.

Here's Sherlund, again, comparing then and now.

"There are certainly similarities between Netscape and Google. Netscape wanted to co-opt the desktop, making Windows just the lower level systems calls under the browser, with the browser being the user interface and the API's developers would write their Java apps to. Thin client computing would have replaced the need for Windows then. But thin client never took off. Ultimately the view of Oracle and MSFT competitors was fine, go ahead and run Windows, but just architect your applications to run on the server and use the desktop as the UI. This is similar to the Google strategy it would appear. Rather than trying to replace Windows or for that matter even Explorer, just put your tool bar on every machine and get users to direct their traffic over to Google where free software and data hosting is available, all of which can be monetized by search/advertising. Since the Web now offers higher bandwidth and Ajax provides a richer user experience with higher performance, this really is another run at fat client computing and MSFT. This time there is a better chance for hosted applications, free, updated continuously, accessible anywhere. Problem is, apps may not be as rich as desktop apps, what about disconected (on an airplane), will companies trust their data and reliability to Google or Yahoo. Consumers are light weight users of some of these apps, so they could be a good initial market, not a market MSFT really addresses. Consumers use of Office represent only about 5% of MSFT's revenue, but this would be foolish for MSFT to let Google or Yahoo host Office-like capabilities before they do. I understand MSFT has brought back the Net Docs team for hosted version of Office, this time the corporate antibodies are not attacking it as a risk to Office, rather it is part of the Office group. MSFT has a great new version of Hot Mail (Kahuna) that uses Ajax. The MSFT Atlas tool (beta) I hear great things about for Ajax development. MSFT has been playing down the meeting on Tuesday, no Web cast either. I will be there given the gravity of thee issues. MSFT needs to cycle faster, the pace of innovation on Web 2.0 is mind blowing."

I think the most important thing to focus on when you compare 1995 to 2005 is: back then, Microsoft was taking on a software company. It could kill Netscape by giving away what Netscape had to charge for. Google et al are different animals. They make money from ads. And, as long as Google and Yahoo are compelling places that attract zillions of people/viewers, they're going to be able to charge a premium for their ads. Microsoft's monopolies can't change that.

But I've been wrong before. An acquaintence recently reminded me that back in 1995, I predicted that Microsoft was headed for a long decline. I was wrong.

On a personal-user note: I went to Windows Live shortly after the beta was posted. Turns out I'm already a member, since I have a Hotmail and Passport account. It took only a few seconds after I opened the URL for my e-mails to pop onto the screen. Cool stuff!

I don't know where this all leads, but, but one thing is sure: The tech industry is shifting into overdrive again.

Reader Comments


November 2, 2005 2:21 AM

Windows Live isn't even anything like Windows!

They've been trounced by - which is the REAL windows live.

Arbitrage Player

November 2, 2005 2:33 AM

MSFT will De-Monetize Paid Search.

Gates, Balmer & Co. have ordered the construction of a golden casket with "Netscape 2.0" engraved on a tombstone... But it's not Netscape that'll be laid to rest - they were done 10 years ago.

Mr. Softy made web browsing free... It'll do the same for pay-per-click, pay-per-call, and any other fraud related online advertising form. Then the "dead has-been" MSFT will buy up GOOG when it trades in the single digits (also getting AOL in the bargain).

Other than Brin and Page, the rest of GOOG's "Ph D's" wont be able to find more revenue streams.

When so many "learned" people are working under one roof with so much money, something is BOUND to go wrong.


November 3, 2005 5:25 AM

Windows Live>Categories>News>GOOGLE NEWS

Thats the power of Google's penetration and growth..totally indispensible in the WWW. Microsoft couldn't omit this link like it omitted the address of the Apple HQ on Virtual Earth!! Google is BIGGER than any rival Microsoft has ever seen..innovative like Apple with 'Microsoft' characteristics!! So MS basically looks like its fighting itself..

John Elder

March 21, 2008 8:37 PM

LIKE many people, I get about a dozen emails a day bearing news good and bad. The bad is that mypenis is too small, too soft and lacking the endurance to satisfy a fruit fly. The good is I can build a longer, stronger and everlasting erection for a few hundred dollars — by taking miracle pills.
Example: "Get ready to be stopped by women in the street. Your entire image will emanate increased size! This is what you always needed to lead a happier, more fulfilling life."
What's being promised is akin to Jack's magic beans, except penis-enlargement pills don't work so spectacularly. To get the extra inches requires at least a six-month commitment. But the pills need to be taken with an exercise program — "jelq" — including drills similar to stretching hamstrings before jogging. To see what it takes to become a Mr Big, go to You'll find a nude man, a fairly happy man one imagines, pretending to be a clock, with what appears to be a baby's arm grafted to his pubic bone as the minute hand.
By the time I found this impressive fellow, I'd already paid $106 for a month's supply of SizePro (chosen because of its professional-sounding name) and followed these instructions: "Type your name, the number of inches you want to gain, and the reason(s) you want to gain those inches in the blanks below. And read the completed statement out loud to reinforce the commitment that will lead to your ultimate success."
And so my colleagues heard me pledge earnestly: "I, John Elder, have decided I want to gain two inches in length and one inch in girth (I felt modest ambition would minimise disappointment). My reasons are vanity. And I'm committed to a good penis-pill system until I reach my desired gains."
If I hadn't made this pledge, I could have abandoned the project — particularly after spotting Mr Baby Arm, whom I presume is also trying to improve himself. And that's the rub. If you're born with one of these ridiculous organs, there are times when just about every man feels short-changed.
The average size of an erect penis is about 15.24 centimetres — six inches in the old money. (When talking about penis size, it's traditional to use inches.) The sad thing is it seems there are many men living fretfully with a ruler in one hand and a world of hope in the other. To meet some of these people, return to — and log on to the "progress reports" forum. You'll find men apparently taking the pills, diligently jelqing (stretching a flaccid penis) and sharing how it's hanging. Like Nicky: "I'm 21, and, measured from the pelvic bone, the length of my penis is around 7.5 inches, but I've always wanted to be large like a porn star. I've been doing the exercise a few days now …"
Occasionally, someone claims spectacular results. The simple reason is that the pills — herbal aphrodisiacs, not muscle-building proteins — give little more than an illusion of growth by concentrating blood in the otherwise shrivelled underbelly. But the real joke is that the more anxious one becomes about penis size, the more it is likely to shrink.
"The curious thing about our society, most of the time we pretend that the penis doesn't shrink," says David Mitchell, a doctor and a medical anthropologist. "In fact, the penis doesn't have a set flaccid size. It's actually meaningless to measure the size of the penis because it varies from minute to minute according to the temperature and one's state of mind. The trouble is, if you get anxious, it only makes it smaller, to the point where it can disappear … in cases where anxiety spirals into a panic attack."
Dr Mitchell has researched a recent outbreak of these attacks — known as "shrinking penis disease" — on the Indonesian island of Flores, where black magic is widely practised. In these instances, the sufferer believes he will die if his penis disappears. The last outbreak in a modern society occurred in Singapore in 1962, following a rumour that eating pork vaccinated against swine fever would cause shrinking penis disease.
"There were people rushing through the streets holding their penises … some of them using chopsticks," Dr Mitchell says. "As soon as they hit the hospital and started to relax, they came back to normal."
Dr Mitchell says the disease could re-emerge in the Western world. "It could come back again in our society if someone spread the right stories around," he says.
Chris Fox, of La Trobe University, is doing a PhD on penis size and its role in body image. So far, he has interviewed 15 men aged 20 to 75. "The short answer is that every man at some point in his life worries about the size of his penis," Mr Fox says. "If we don't like our penis we won't enjoy sex. For people with a pathological issue with penis size, it will affect their sex life.
"In some cases it will affect how they behave around other men. And one has to remember that most people make their comparison with a flaccid penis — at the urinal or in a change room. The only erections we tend to see are the very big penises on porn stars … and my interview subjects didn't feel threatened by these giant penises because they felt they weren't real. It's in the real world that anxiety takes root.”

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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