Microsoft’s attempt to capture the internet.
If anyone had made a fortune by cornering the market for nuts and bolts and sticking to it, it was Microsoft.1 It was a surprise, therefore, when on January 3, 1996, its chief executive, Bill Gates, wearing his large, dark-framed glasses that were not yet a hipster affectation but still the sign of the true nerd, posted an essay on Microsoft’s website, with a counterintuitive title: “Content Is King.”
At the time of that coronation, Internet “content” consisted mainly of homemade web pages with flashing words and the text forums where geeks discussed the pluses and minuses of object-oriented programming languages. Nevertheless, Gates prophesied an explosion of new creativity that would dominate the Internet’s future.
“Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting,” he wrote, adding, “The television revolution that began half a century ago spawned a number of industries…but the longterm winners were those who used the medium to deliver information and entertainment.” But his prediction also came with a warning that to succeed, Internet content would have to be good: If people are to be expected to put up with turning on a computer to read a screen, they must be rewarded with deep and extremely up-to-date information that they can explore at will. They need to have audio, and possibly video.
They need an opportunity for personal involvement that goes far beyond that offered through the letters-to-the-editor pages of print magazines. And so, at the command of its great leader, the world’s most profitable company would spring to action, beginning a massive, multibillion-dollar effort to seize the emerging market being created by “convergence,” a world called “Internet-television.” A new breed of attention merchant was being born, and Microsoft planned to rule them all. Unfortunately, as Gates had warned, anyone who would rule the Internet had better make his content good.
For Microsoft, that turned out to be the sticking point. It was not for want of effort or resources. Microsoft opened an entire new complex in Redmond, California, at some distance from its main offices, which it staffed with “content people” specially imported from New York and Los Angeles. The team was comprised of “black-clad creative types,” reported The New York Times, tasked with “building a new, chic kind of media business.”
In reality, the new hires were given an impossible task: that of inventing both a new platform and an entirely new form of content—one that was not television, film, or a computer game but instead “interactive” and that capitalized on “convergence” via a new portal named “MSN 2.0.” That was the name of the interface being preinstalled on every new Windows machine and designed to make the Internet feel more like a television. Reviews of MSN 2.0—which had launched with the slogan “Every new universe begins with a big bang”—were unkind.
When it finally launched, MSNBC elected to make itself a copy of CNN, with one exception: it featured a show named The Site, devoted to the Internet revolution. The synergy, whatever it was supposed to be, failed to materialize, and facing low ratings MSNBC executives turned to old-school cable thinking. Mining demographics, they noticed that left-leaning viewers lacked their own cable news network. MSNBC would therefore become the mirror image of Fox News; the “MS” in MSNBC would linger there, like an old store sign that the new owner forgot to take down.
Microsoft’s only successful investments in this period were Slate, which billed itself as the very first online magazine and ultimately proved the viability of the concept, and the Xbox gaming console, which was the kind of nutsand-bolts market entry that Microsoft had always done well. Most of the rest was a fiasco of the first order. In short, Microsoft couldn’t quite crack the nut; the idea of merging television and the Internet was just too simplistic.
In effect, Microsoft treated the Internet as if it were merely a new channel on which it could broadcast content, as if what had been invented was an extension of cable television. But the impulse was not altogether misguided, for someone was going to make money selling all of the attention the Internet was capturing. It just wasn’t going to be Microsoft. The most successful contestant would be the one that truly understood the new platform and how it would be used.
Microsoft’s main competitor, Google, emerged.
By the late 1990s, as Microsoft’s content initiative faded, word was spreading about a new company named Google, whose specialty was search. Search became a major application as the Internet got more populated, fast becoming wild and woolly, too vast to tune in to like a TV channel. There were a number of search engines running— Lycos, Magellan, AltaVista, Excite, Yahoo!, which originally launched as an Internet directory, to name a few. But it was soon clear that Google did search better than anyone else; its inventors were smart, its algorithm was wicked, and its code was tight.
Google was more like an academic project than a firm, and as it gained in popularity, it was burning through cash at a terrifying rate, with nary a business model in sight. As cofounder Sergey Brin reflected later, “I felt like a schmuck. I had an Internet start-up—so did everyone else. It was unprofitable, like everyone else’s and how hard is that?”
It is a fascinating moment to contemplate. Tech’s hottest firm stood at a fork in the road, pondering its future and, being an unusually deliberative company, tried to think through the consequences of each choice. Thanks to the growth of search, Google was capturing bushels of attention, but how to capitalize on that? As we’ve seen, there have always been two ways of converting attention into cash. The older is to charge admission, as to the spectacle, on the model of the opera or HBO or a book; for Google this would mean licensing or selling access to a premium product.
The second is to resell the attention gained, that being the model of the attention merchant.*
Before Google had come to its fork in the road, Page had strenuously insisted in a piece coauthored with Brin that “advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.” As an engineer and scientist, Page had wanted to build a clean, pure tool, free of commerce’s distortions.
Bill Gross was Google’s biggest rival.
His aversion, moreover, was not purely academic: he had seen what an advertising-driven search engine looked like, peddled by a man whom both Brin and Page found distasteful—a character, now mainly forgotten, who was for a while Google’s greatest rival. His name was Bill Gross.
He proposed a new concept for Internet search: instead of some fancy algorithm, he said, why not just sell places in search results to the highest bidder? While Gross’s presentation was engaging, the response was not friendly.
But Bill Gross was not the type to be deterred. Issuing from a rough-and-tumble 1990s dot-com culture, he was famous for turning one idea (supposedly inspired by Steven Spielberg) into a company nearly overnight at his start-up incubator Idealab. He was given to saying things like “The old rules don’t apply when you’re an Internet company.”
His NetZero was a “free” Internet service that depended on ads and similar tracking practices, at least until its collapse. Gross would turn his “highest bidder” search idea into a company named GoTo.com, which got its start seven months before Google and was, for a while, its main competitor. Unlike Google, GoTo took payment from advertisers in return for higher search rankings in the search results; “relevance” depended on dollars spent in this scheme of search payola. Or, as Gross spun it, “We’re not letting a blind algorithm decide.”
GoTo’s approach was a relative of AOL’s paid-for walled garden, and its trick of baiting users with search and delivering ads was branded misleading and unethical by critics; one complained, “If a middle school student does a search for ‘nutrition’ on GoTo, the first 221 sites listed are bidders” (mainly sites selling diets). When asked by The New York Times whether his search systematically favored commercial results, Gross answered that anyone could pony up for the same privilege. “
Google eventually beat the competition.
Google had, in fact, laid bare what had originally been so miraculous about the attention merchant model—getting something truly desirable at no apparent cost. For what really seemed like nothing, the public got the best search ever designed and, in time, other goodies as well, like free email with unlimited storage, peerless maps, the world’s libraries, and even research devoted to exciting innovations like self-driving cars. Of course, there was, as there always is, a quid pro quo: in its ripest state, the buying public was exposed to sales pitches; which might prove useful but then again might not.
Google also began to collect a lot of information about a lot of people. Nevertheless, Page, who had the most qualms about advertising, told Wired’s Steven Levy that he’d begun to feel that AdWords was a good and just innovation. “From that point on,” writes Levy, “Brin and Page saw nothing but glory in the bottom line.”
Page may have felt he’d outwitted the Devil, but so do all Faustian characters. While the safeguards in AdWords would keep Google’s core product uncompromised for the time being, corporate life is long, and shareholder demand for growth unremitting. In Wall Street’s view, even the most robust advertising revenues always have room for improvement. In time, this reality would put pressure on the original bargain that Google struck with the public. Even if AdWords was a paradigm shift, it was still advertising, and Google, however ingenious, was still an attention merchant. It would, henceforth, always be serving two masters, beauty and the beast.