#7: Internet born with Netscape
BY DAVID PLOTNIKOFF
Mercury News Staff Writer
TECHNICALLY speaking, the Internet
has been a part
of Silicon Valley for more
than 30 years. The
Net's first spark of life happened
here in 1969 when an
experimental Defense Department-funded
network called ARPAnet
linked computers at UCLA and
Stanford Research
Institute in Menlo Park.
But the valley's Internet era
began in earnest on
April 11, 1994, with the birth
of Netscape Communications. Like
the transistor, the integrated
circuit and
microprocessor before it, Netscape's
first Web browser was a
technological watershed, one
crystallizing event that
changed the course of valley's
economy and,
ultimately, the world.
Before Netscape there was no
Internet industry per
se. The idea that there might
be a commercial future in
developing software for a network
born of university labs and
government grants was largely
conjecture. Netscape
proved there was money to be
made opening the Net to
businesses large and small.
And the company's
explosively successful initial
stock offering was the
financial thunderclap that
signaled the beginning
of the dot-com gold rush.
Today, an estimated 98 million
American adults --
about half the adult population
-- have access to the
Internet -- up from just 28.8
million in 1996. The average
American Net user now logs
on almost once a day and spends in total
almost three hours a
month online. The Web is now
a bona fide mass medium, a
development that would have been
unthinkable without consumer-friendly
accesss software
such as the Netscape browser.
Netscape didn't invent the subset
of the Internet
called the World Wide Web --
but a casual bystander can be
forgiven that impression. The
seminal Web that existed
prior to Netscape was almost
exclusively the
province of a few thousand
students and
researchers in a handful of
well-connected facilities. The
true democratization of the
Web -- the first step
in transforming the entire
Internet into a mass
medium -- began in 1993 when
grad student Marc
Andreessen and others at the
National Center
for Supercomputing Applications
(NCSA) at
University of Illinois created
Mosaic, the first
widely distributed graphical
Web browser. The
Mosaic browser meant the Web
could be a
seamless experience accessible
to anyone who could
point and click a mouse.
Andreessen graduated in December
1993, left the
Mosaic project and came to
Palo Alto where he took a job with a
small computer security firm.
In a matter of weeks the
22-year-old programmer was
tracked down by Jim Clark, a former Stanford
professor who'd made a not-so-small
fortune founding Silicon
Graphics in 1982. Clark, who'd
recently resigned from Silicon
Graphics, was looking for a
new challenge, one more at-bat in
the entreprenurial ballgame.
Andreessen convinced Clark that
the true ``Information
Superhighway'' already existed
-- in the form of
the Internet. A beefed-up,
polished version of Mosaic could put
millions of ordinary people
on that road. Mosaic
Communications Corp. was
born. (After some legal wrangling
with the NCSA
over the Mosaic name, the company
was re-christened Netscape
Communications in November
1994.)
The first Netscape browser,
called ``Mosaic
Netscape,'' was released over
the Net in October 1994 and almost
instantly became the de facto
standard for
viewing the Web. Netscape gave
away millions of
copies of the browser with
the expectation that
a large base of users would
in turn fuel sales for
server software needed to run
the first
generation of e-commerce sites.
The fact that all this happened
here, in Mountain
View -- rather than in Redmond,
Wash., in the
shadow of Microsoft or Champaign-Urbana,
Ill.,
where the original Mosaic project
began -- is of
critical importance. Like other
bellwether valley
companies such as Fairchild
Semiconductor and
Intel, Netscape was a platform
for like-minded
entrepreneurs to build off
of, the coral reef
underpinning the Web's many
nascent life forms.
Netscape's initial public offering
in August 1995
set the scene for the speculative
Internet stock
frenzy that continues to this
day. Prior to the
IPO, the intense buzz around
the stock saw the
original number of shares go
from 3.5 million to 5
million and the offering price
go from
$12-$14 to $21-$24 -- and finally
to $28. On the
first morning of trading, the
stock opened at
$71. It closed the day at $58.25
-- about double
what the most optimistic experts
had expected.
On Wall Street and in Silicon
Valley the news was
tantamount to a messenger riding
at a full
gallop through San Francisco
in 1849 shouting
``Gold! There's gold on the
American River!''
The IPO made Clark and Andreessen
into celebrities
-- famous as much for their
instant wealth as
for their business achievements.
After one day of
trading, Clark's 9.7 million
shares were worth
about $566 million. Andreessen's
take was a mere
$59 million -- still not bad
for someone who'd
been paid $6.85 an hour as
a student researcher
building the original NCSA
Mosaic.
While doubters saw an unproven
company with no
profits, fans in the financial
community saw a
company that had a controlling
share of a rapidly
emerging market. The prevailing
wisdom held
that Netscape's browser could
be the standard for
connecting corporate America
to the Internet.
Andreessen was already being
heralded as ``the
next Bill Gates'' and Netscape
as ``the next
Microsoft.''
The old Microsoft didn't get
to be a computing
colossus by ceding emerging
markets to brash
young start-ups. Although Microsoft
was late to
the browser market, by the
time of Netscape's
IPO it was already understood
that the company
intended to aggressively market
its own
browser, Explorer. In November
1995, Microsoft
Explorer had three percent
of the browser
market to Netscape Navigator's
78 percent. Over
the next two years Microsoft
heavily promoted
Explorer, and the product
gained ground on
Navigator. Microsoft had 20
percent in the
beginning of '97, 40 percent
in the beginning of
'98. By November 1998 the two
competing
products were locked
in a dead heat.
The celebrated ``browser wars''
were not all that
troubled Netscape. The company
suffered from
a lack of direction, trying
to be simultaneously a
browser company, an Internet
portal and a
software company serving the
corporate market. By
January 1998 industry observers
were
speculating how long Netscape
could continue as an
independent entity. Ten months
later,
America Online acquired Netscape
for $4.3 billion,
bringing to a close one of
the most critical
chapters in the modern history
of Silicon Valley.
Knight Ridder, parent company
to the Mercury News,
was an early pre-IPO investor
in
Netscape. Mercury Center, the
online arm of the
Mercury News, was Netscape's
first
customer. Knight Ridder presently
holds a stake in
America Online.
Contact David Plotnikoff at plotnikoff@sjmercury.com.
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