The Internet Tidal Wave Memo

Setting

It's 1995. Netscape has launched and is growing exponentially. The web is exploding. Microsoft is focused on the MSN proprietary network. Bill Gates realizes the internet is not just a feature, but a platform shift that threatens Windows. If the browser becomes the OS, Windows is irrelevant.

People

• Responsible: Bill Gates (wrote the memo)
• Approvers:
• Consulted: Nathan Myhrvold, Steven Sinofsky
• Informed: Entire Company

Alternatives

Option A: Continue with MSN (Proprietary Online Service)

Pros:

• Control the user experience.
• Subscription revenue (like AOL).

Cons:

• The open web is growing faster.
• Being on the wrong side of history.

Option B: Embrace and Extend the Internet

Pros:

• leveraging Windows dominance to distribute a browser (Internet Explorer).
• Integrating web protocols into the OS.
• Preventing Netscape from becoming the platform.

Cons:

• Requires massive internal pivot.
• Cannibalizes MSN strategy.
• Antitrust risk (bundling IE with Windows).

Decision

Chosen: Option B

Rationale: "The Internet is a tidal wave. It changes the rules. It is an incredible opportunity as well as an incredible challenge." Microsoft must pivot the entire company to be "Internet-First".

Consequences

Positive

• +Microsoft successfully caught up (Browser Wars).
• +IE became dominant.
• +Windows remained relevant.

Negative

• −The DOJ Antitrust case (United States v. Microsoft Corp) focused on the aggressive bundling of IE to kill Netscape.
• −Distracted the company for a decade (leading to missing Mobile).