What Happened To Dot-Com Pioneer Netscape?

Executive Summary:

Netscape Communications Corporation (originally launched as Mosaic Communications Corporation) is a former American technology company.

The company developed the world’s dominating browser but ultimately lost out to Microsoft’s Internet Explorer due to a set of anticompetitive practices.

AOL eventually acquired Netscape in 1998 for $10 billion. After a series of missteps, Netscape eventually shut down its browser in March 2008.

What Is Netscape?

Netscape Communications Corporation (originally launched as Mosaic Communications Corporation) is a former American technology company.

The company is primarily known for its Navigator product, one of the world’s very first browsers that allowed people to access the internet.

Later on, the company released dozens of other products, such as:

  • Netscape Certificate Server to create SSL certificates
  • Netcenter, an internet portal that allowed people to consume different content
  • A dial-up internet service called Netscape ISP
  • Netscape Composer, which enabled developers to create HTML-based documents for the web
  • An email messaging service dubbed Netscape Mail

… and many, many more. Netscape is, furthermore, responsible for the creation of the Mozilla Foundation, which ultimately led to the creation of the Firefox browser.

Unfortunately, the company ultimately fizzled out in the late 2000s after a series of missteps. How it came to be, who was behind it, and what ultimately led to its demise will be covered in the next few chapters.

What Happened To Netscape?

Netscape, formerly headquartered in Mountain View, California, was founded in 1994 by Marc Andreessen and Jim Clark.

In 1992, a then-21-year-old Marc Andreessen was working at the National Center for Supercomputing Applications (NCSA) at the University of Illinois while pursuing a degree in computer science.

Back in the early days of the world wide web, consuming media files, such as pictures and videos, was extremely cumbersome. Files were hidden behind links, so if you wanted to look at a picture, you had to open that link, and a new window would open.

These browsers emerged as a result of the work conducted by Tim Berners-Lee who is now considered to be the inventor of the world wide web.

In order to get his creation into as many hands as possible, Berners-Lee was holding dozens of talks at universities around the world. His goal was to get computer science researchers motivated in developing browsers, which would then act as the onramp into the www.

His strategy of finding volunteers ultimately paid off. The first browser creations coming out of academia, such as Erwise, Lynx, or ViolaWWW, were, however, suffering from the user experience problems stated above.

Despite their shortcomings, more and more researchers began taking an interest in browser development. One of those researchers was David Thompson who was working for the NCSA at the time.

Amazed by the vast opportunities, he began playing around with ViolaWWW and ended up showing the browser to the NCSA’s Software Design Group by connecting to the webserver at CERN over the internet.

The department’s head Dr. Ping Fu consequently decided to assign Marc Andreessen and Unix specialist Eric Bina to work on a browser for X-Windows on Unix computers. On April 22nd, 1993, the first version of what would be called the Mosaic-X browser was finally released.

Adoption, in part because Burner-Lee himself promoted the browser, quickly accelerated across the academic community. Over the next few weeks, separate versions for the Mac and Windows were released, which enabled Mosaic to penetrate home computers.

The long-lasting innovation that came out of Mosaic was seriously mindboggling. The team was responsible for the introduction of the finger cursor (when navigating over a link), the ability to stop a page from loading (prior to that, pages would simply freeze), blue and underlined links, being able to put pictures and texts on the same web page, and so much more.

And it was Andreessen who eventually became synonymous with the success of Mosaic. In fact, many researchers advocated against opening up the world wide web to preserve their elitist experience. Andreessen, on the other end, felt that the www belonged to everyone.

Within months, Mosaic had been installed on almost any computer that’s been sold at that point. Soon after, representatives at the NCSA began to take an interest in the project. Up to that point, Andreessen and a time of five other developers had managed the project by themselves.

Meetings would now contain up to 40 people. Features would take longer and longer to be approved. In December 1993, the New York Times even ran a cover on Mosaic in its business section – without even questioning Andreessen.

That same month, Andreessen graduated and ultimately decided it was best to abandon the project. Instead, he moved out west and decided to join Enterprise Integration Technologies, a producer of Internet security-enhancement products, not long after his graduation.

This, however, would turn out to be the first and only normal job he ever held in his life. Not long after taking the job, he wound up meeting his future co-founder Jim Clark who himself had a stellar reputation in the Valley.

After dropping out of high school at 16 and joining the Navy for the next four years, Clark eventually managed to complete a bachelor’s and master’s degree in physics as well as receive his doctorate in computer science.

His academic work eventually led to the development of computer-aided design (CAD), which he was at the helm of. In 1982, he co-founded Silicon Valley Graphics (SGI), a producer of visual workstations that have revolutionized everything from industrial design to filmmaking, which quickly grew to become one of the Valley’s most successful companies.

In 1986, the company was able to go public, which ultimately made him a multi-millionaire. Unfortunately, internal tensions were rising. Clark wasn’t getting along with SGI’s leadership, disagreeing about the firm’s strategic direction, and was forced to sell more and more of his shares as time passed.

Frustrated with the way things were looking, Clark eventually decided to leave the company he helped incubate in 1994 (SGI itself filed for bankruptcy in 2009). Armed with around $20 million in proceeds from his time at SGI, Clark was yet again looking for the next best thing.

His search eventually led him to Marc Andreessen who had just moved out to Silicon Valley. In April 1994, after some back and forth (Clark himself wanted to go after the interactive television industry while Andreessen remained hard-pressed on the browsing market), he invested $3 million of his own money to launch the Mosaic Communications Corporation.

The two even flew out to Chicago and recruited five of Andreessen’s former colleagues at the NCSA, including Mosaic co-author Bina, to join their fledgling startup (alongside some SGI employees). Keep in mind that, at the time, Mosaic had over four million downloads (equal to about 60 percent of the web’s traffic) and was growing by about 600,000 users every month – an amazing feat in the still-nascent www.

The young team worked tirelessly on getting their browser product out. They even named the code base Mozilla (a combination of the names ‘Mosaic’ and ‘Godzilla’), the monster that would slay Mosaic’s dominance. Just keep that name in mind for later.

In order to keep the company going, they raised another $4 million round from Kleiner Perkins in September 1994. The next month, on October 13th, 1994, they released version 0.9 of the Mosaic Netscape browser.

In November, they renamed the company to Netscape Communications Corporation after being threatened by the NCSA and facing potential legal ramifications. Finally, on December 15th, 1994, they released version 1.0 of the Netscape Navigator browser.

Within a matter of four months, Netscape had flipped the browsing industry on its head. Without any marketing or public promotion, the browser managed to cross four million downloads and become the de-facto industry leader.

Months prior, in January, Netscape managed to recruit James Barksdale, who was previously COO of FedEx and AT&T CEO, as its first chief executive. Barksdale then went on to recruit Peter Currie, an ex-Morgan Stanley banker, as Netscape’s CFO.

Together with the founding team, they manage to grow Netscape’s sales from $5 million in the first quarter of 1995 to $12 million in the second one. They did so by offering corporate licenses to other businesses.

In order to capitalize on the firm’s explosive growth and attract even more corporate customers, Clark mints a plan in June of trying to get Netscape to IPO. Additionally, Microsoft was prepping to release its own browser as early as September, which would greatly accelerate competition – and require Netscape to beef up its balance sheet.

Eventually, on August 9th, 1995, Netscape goes public on the Nasdaq stock exchange. Demand for the stock was so high that trading was initially delayed by two hours. Furthermore, the share price skyrockets from $28 at the start (they initially priced t at $14 a share) to $75 on the first day of trading.

Many believe that the Netscape IPO unofficially rang in the dot-com era that led to the creation of thousands of internet-based companies. It, furthermore, made Clark a billionaire and Andreessen a multi-millionaire (alongside dozens of Netscape employees).

Over the coming months, Netscape continued to fire on all cylinders. Its founder Marc Andreessen was even put on the cover of Time Magazine in what is now considered one of the internet’s most iconic cover stories (take a look at it here).

Meanwhile, Netscape continued to innovate. The same month Andreessen landed on the Time cover, the company released version 2.0 of its Navigator browser. The new version entailed JavaScript, which is now the dominant language used in creating many functions such as tables, forms, and more. Additionally, it included a full email reader dubbed Netscape Mail, which transformed Netscape from a single-purpose web browser (only allowing you to read) to an Internet suite with many different products.

Moreover, the company’s homepage, at Netscape.com, became the epicenter of the world wide web. By the summer of 1996, the website received a whopping 85 million hits per day. This was because Netscape made it the browser’s default page.

However, Netscape would soon face competition from one of the world’s biggest tech conglomerates: Microsoft. The Redmond-headquartered company, up until 1995, had largely ignored the internet and relied on sales for its Windows operating system to drive revenue.

All of that changed in May 1995 when Bill Gates sent out an internal memo dubbed “The Internet Tidal Wave” during which he outlined that Microsoft, going forward, would build its company around the world wide web. He even mentioned Netscape in the document, stating that Microsoft would need to “match and beat” it.

The two companies even held talks in which Microsoft tried to purchase Netscape’s Navigator code base but they ultimately fell through. Instead, Microsoft decided to create its own browser dubbed the Internet Explorer (IE).

Its first version was released just two weeks after the Netscape IPO without much fanfare. After all, Navigator was still a substantially better product, offering a richer feature set as well as a faster browsing experience.

While version 2.0 of Internet Explorer, released in December 1995, was considered a substantial improvement, Netscape’s Navigator was still able to remain in the driver’s seat. Microsoft also substantially upped their investment into the browser, for instance by lowering the price for Windows users or by paying large web portals like AOL to advertise it.

All of this changed with the release of Internet Explorer 3.0 on August 13th, 1996. Not only did IE reach feature parity with Navigator but Microsoft managed to change the perception we as modern consumers have about browsers forever.

Instead of charging customers to use its browser, Microsoft decided to hand it out for free together with Windows ’95. Customers would not need to walk into their local electronics shops and pick from an array of costly options but benefit from the convenience of having a pre-installed browser that, frankly, was just as good as Netscape’s Navigator (and the many other options out there). The move initiated what many now call the browser wars.

On the outside, Netscape seemed to not be phased by those developments. The company continued to charge customers for its browser and used the revenue to heavily invest into other divisions, such as licensing eCommerce software for corporate clients that would allow them to sell over the internet.

Netscape also made some hefty acquisitions to get those business units off the ground. In May 1997, for example, it purchased DigitalStyle Corp., a design tool, and Portola Communications Inc., a messaging technology company for a combined $60 million. Later that year, in November, it also purchased application system server maker Kiva Software Corp. for a whopping $180 million.

In order to combat the increasing pressure it faced from Microsoft, Netscape also introduced Netscape Communicator, a bundled version that contained the Navigator 4.0 release, in June 1997. Communicator entailed a variety of tools such as an email client, an HTML editor, calendar functions, and many more.

Interestingly enough, Netscape and Microsoft also battled in other domains than just browsing. In the summer of 1997, Netscape introduced Visual JavaScript, a scripting tool that was supposed to break the dominance of Microsoft’s Visual Basic, which was the most successful developer tool ever created up to that point (hosting more than two million developers).

In August 1997, Netscape also released a stripped-down version of its Navigator browser for $39 in hopes to accelerate sales. Instead, customers began to complain as the browser was missing what they thought were essential features such as email.

The browser wars fully escalated with the release of Internet Explorer 4.0 in October. After its release party, a few drunken Microsoft employees dumbed a life-sized IE logo in front of Netscape’s headquarters.

Later in the day, Netscape’s employees placed the Mozilla logo onto the big E and added a sign that read “Netscape: 72, Microsoft: 18” in reference to its current share in the browser market. Ten days after the release of IE 4.0, Netscape also announced that Marc Andreessen would be replaced as CTO in favor of Eric Hahn.

Over the coming months, IE continued to gain market share. In January 1998, after much deliberation, Netscape finally decided to give away its browser for free in order to be able to compete with Microsoft.

At that point, browser sales were making up only around 13 percent of the company’s revenues. Instead, enterprise software, services, as well as the company’s website (which it renamed to Netcenter just a few months prior) were bringing in the majority of the revenue.

In February 1998, Netscape also released the mozilla.org site as well as the browser suite’s source code. At first, this was used to invite open-source developers to make code improvements to Netscape’s existing array of products.

Netscape also continued to double down on its Netcenter portal by providing users with free email services. At the time, Yahoo was considered the biggest competitor in the web portal space with over 30 million monthly visitors in April 1998. Ironically enough, it was Netscape that initially helped Yahoo to get off the ground by promoting the portal within its browser. Nevertheless, Netcenter was also a formidable player, bringing in close to $100 million in revenue in 1997.

Meanwhile, the browser wars began to escalate into the highest of ranks. On May 18th, 1998, the U.S. Department of Justice (DOJ) filed an antitrust lawsuit against Microsoft over its monopolistic practices. The DOJ argued that Microsoft, by bundling IE together with their operating system, forced customers into using their browser and made thus made it impossible for other companies to stay competitive.

Over the coming months and years, dozens of Microsoft and Netscape employees would be put on trial and testify in front of the government’s representatives. In the meantime, Netscape continued to focus on expanding Netcenter. In July, for example, it struck a $10 million deal with Warner Bros. Online, Paramount Digital, and Hollywood Online to promote Netcenter.

Then, in November, after previous speculations arose, another news bomb dropped: America Online (AOL) announced that it had come to an agreement with Netscape to acquire the company in an all-stock deal. The transaction was ultimately worth $10 billion after it settled months later.

The news reignited the hope that the combination of AOL of Netscape would be able to fend off the likes of Microsoft ad Yahoo. In theory, the companies did possess some synergies. While AOL’s portal was focused on consumer topics, Netcenter was targeting business-oriented users. AOL had also shown that it was able to utilize and accelerate the growth of other internet services it previously acquired, such as the ICQ Messenger which it bought back in June.

To that extent, Netscape also committed to spending $30 million on various marketing campaigns to promote Netcenter. Unfortunately, its biggest source of traffic was slowly eroding. By the end of 1998, Netscape’s share of the browser market had shrunk to about 40 percent as a result of IE’s distribution advantage. Just 1.5 years ago, it had commanded 90 percent of the browser market.

Unfortunately, it was all downhill from there. While Marc Andreessen was named AOL’s newest CTO, many of his former colleagues, such as CEO Jim Barksdale, who were responsible for getting Netscape off the ground began to leave the company. Their stock options simply expired, making many of them millionaires and thus not wanting to stick around any longer. On top of that, AOL laid off about 425 additional people right after the takeover was completed.

By the end of 1999, Microsoft’s Internet Explorer had officially surpassed Navigator – and never looked back. Co-founder Marc Andreessen stepped down from his role as CTO a few months prior in September. Andreessen went on to co-found Opsware (initially named Loudcloud) with Ben Horowitz, Tim Howes, and In Sik Rhee. In 2007, they sold the company to HP for $1.6 billion and, together with Horowitz, went on to start the now legendary venture capital firm Andreessen Horowitz.

Meanwhile, at Netscape, the company continued to grapple with the effects of departures. As a result, version 5.0 of the Communicator suite was delayed multiple times and eventually abandoned altogether.

In October 2000, Netscape released version 6.0 after canceling 5.0 altogether. Reviews were extremely mixed, with many not seeing a reason to switch over from IE. Subsequent updates of the browser never even received much public attention, indicating that it was on its last breath.

After AOL merged with Time Warner in January 2000 for $165 billion, making it the largest merger in history, the former also began promoting Warner’s content on Netcenter at the start of 2001.

While Netscape continued to struggle, Microsoft also began to face the consequences of its actions. In April 2000, the court ruled that Microsoft had violated the Sherman Act and later ordered it to be broken up into two separate companies.

Microsoft successfully appealed and, by June 2001, a federal appeals court reversed the breakup order. In November the DOJ and Microsoft settled, which imposed a variety of restrictions on the Redmond-based company.

In August 2002, Netscape launched version 7.0 of its browser. By that point, its share of the browsing market was in the single digits. The browser, apart from offering fewer features and performing much slower, also had severe bugs such as accidentally leaking a user’s web surfing data.

Netscape’s fate was finally sealed in May 2003 when AOL Time Warner and Microsoft settled their private antitrust suit. Microsoft agreed to pay $750 million in fines, which many considered pocket change given its $40 billion balance sheet. It also granted AOL a seven-year royalty-free license to its internet browsing software as well as greater access to the Windows OS.

Two months after the settlement, in July, AOL announced that it laid off about 50 employees that worked on the Netscape browser. Others were shifted to other departments within AOL. On the other side, AOL also made a $2 million donation to the Mozilla Foundation. Mozilla eventually released its now-famous Firefox browser in 2004, which quickly overtook Microsoft’s IE and became the dominating browser of the later 2000s.

Meanwhile, Netscape’s browser division was basically a shell organization that only had a handful of employees. Instead, AOL used Netscape’s brand name to launch other services. In January 2004, for example, it introduced a $9.95 a month dial-up service simply dubbed Netscape.

That same month, Netscape also settled a 5-year-old lawsuit with Playboy for its unauthorized use of trademarks in search engine ads. More and more began to abandon the browser. In July, for example, HP issued a statement urging its users to delete the browser due to severe security concerns.

In order to combat those concerns, future Netscape browser releases were based on the open-source Mozilla code. In March 2005, after multiple delays, AOL released version 8.0 of the Netscape browser. Even HP came full circle and signed an agreement with AOL in October to have Netscape’s browser preinstalled on all new HP desktop PCs and laptops.

Alongside the browser, Netscape’s internet portal Netcenter also was a former shell of itself. In June 2006, the team behind the portal decided to relaunch the portal as a user-driven news aggregation site. The move was inspired by the success of similar platforms like Digg and Reddit, which started the era of web 2.0.

However, major red flags would soon mark the service. First, Jason Calacanis, the blogging aficionado who was hired by AOL to get the site off the ground, allegedly offered Digg moderators $1,000 a month to join Netscape.

Digg fans then hacked the Netscape platform to send an expletive flying over the AOL social media site and bombard it with pro-Digg messages. Months later, in November, Calacanis left AOL and abandoned the project.

AOL also continued to release new versions of its Netscape browser. In June 2007, version 9.0 was released. Three months after, it closed down its Digg clone, which it later relaunched as a news portal called Propeller.

Finally, after more than 12 years, AOL announced that it would discontinue development on the Netscape browser in December 2007. All support was ended on March 1st, 2008. While users could still technically download the browser, it wouldn’t be updated anymore.

The last news of Netscape came in April 2012 when AOL agreed to sell more than 800 patents for $1.1 billion in cash. The buyer? Microsoft.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.