Where would we be without them? Apple has sold more than 220m iPods since its release in 2001; 300m searches are made via Google every day; 1.7bn people worldwide are now online; Microsoft founder Bill Gates. Photographs: Monica Davey/EPA; Brendan Beirne/Rex Features; AFP/Getty; Achim Sass/Rex Features
The past decade has been the story of three companies, and one increasingly powerful idea. When the decade dawned in 2000, Microsoft was a colossus, with 1999 sales of $19bn and net income of $7.8bn bestriding the online and offline world. It had the best-selling operating system; but in April 2000 it was ordered to split itself into two – an “operating systems” company and an “applications” company – by Judge Thomas Penfield Jackson, who found it guilty of antitrust violations after a trial that revealed much about the company’s vicious, no-holds-barred approach to competition. Jackson’s ruling – which could have created a fascinating pair of companies – was overturned on appeal in 2001 after comments he made during the trial to a reporter, Ken Auletta, were published in a book.
That left Microsoft free to push on further. But the antitrust trial had broken a little of its spirit; from then on it was always looking over its shoulder for the US justice department (and then in front at the European Commission’s antitrust department, which perked up when it saw its transatlantic cousin’s success).
Apple Computer, meanwhile, was struggling: despite the return of Steve Jobs to its top position in 1997, it was having little impact in sales terms with its computers (which was all it had; the iPod was not released until October 2001). Although the original iMac had been a hit in fashion terms the company was making little headway financially. Its $6bn of sales (up 3%) and $601m profits (up 94%) for fiscal 1999 were at least growth, after three years when it shrank and made horrendous losses (though it still had $3bn in the bank).
But in late 2000, it made a fateful – and game-changing – decision: it bought Soundjam MP, a popular MP3-playing program for the Mac, and the services of its head programmer, Jeff Robbin. Steve Jobs would later insist that his team had seen the future, seen the coming of miniature hard drives able to store gigabytes of data, had positioned Apple to take advantage of it. Either way, the gamble was to pay off.
Meanwhile the internet had everyone excited – though it was still a world reached by dialup. A survey in October 1999 by Continental Research reckoned that 18.6m Britons had internet access, spending an average of 17 minutes a day (8.5 hours per month) online. AOL and Time Warner leapt into what they hoped would be a synergistic $109bn merger, where people would lap up mass-media content via a walled garden internet connection. It turned out to be monumental hubris, one of the greatest destructions of shareholder value ever seen. Why? Because as the decade progressed, and particularly from 2001 onwards – when Wikipedia was set up by Jimmy Wales (below) and Larry Sanger, using the “wiki” software that had come of age – the power of the crowd, and people’s ability to use the internet to their own ends, not those of content generators, became central to the internet experience.
Allied to the growth of the crowd was the rise of Google – which uses the power of the crowd to determine where sites should be placed in its ranking. At the start of the decade Google was a good idea struggling to find a business model. During 2000 it introduced text adverts though they were, it admits, “rather primitive”. Crucially, though, that year it won a contract to become Yahoo‘s default search provider. Having ended 1999 serving 7m search queries daily (compared to AltaVista’s 50m), by the end of 2000 it was handling 100m. Nowadays, it makes more than 300m every day – 109bn a year.
But Google was still a minnow in revenue terms; for 2000 its revenues were just $19m, but its costs were $34m – a loss of $17m. It moved narrowly into profit in 2001 ($86m revenues, $10.9m profit) but only truly motored in 2003 with the introduction of Google Mail, when it worked out how to generate ads against any text. That meant it could offer ads on any website, not just against searches, and its revenues – and profits – burgeoned.
Then, in the middle of the decade, came broadband. Imperfect, frustrating, but such a relief compared to dialup that we stampeded online: Britons now spend roughly 120 hours every month using the net.
And what are we doing? The decade saw an explosion in content generation by people who had previously had little opportunity to. Website building (such as the now defunct GeoCities), forums, and then blogs gave people a medium they’d never had before. Wikipedia benefited as people lent it their expertise: “crowdsourcing” became more and more powerful, breaking through to the public consciousness when the grainy pictures from the London bombings in July 2005 told the story the normal media couldn’t.
As the decade wore on, that creative outpouring migrated to the new “social networks” such as MySpace and Facebook, where longer blogposts were replaced by bite-sized remarks; this reached its apotheosis with Twitter, limiting remarks to text-message length. Google and Microsoft’s (struggling, but reborn) web search integrated Twitter feeds; and so the thoughts of the crowd became available to itself. AOL and Time Warner, meanwhile, were left in the cold, unable to compete for content creation with millions of individuals, and unable to corral them in high-profit internet walled gardens. This month the merger was in effect dissolved: AOL was refloated, valued at $2.4bn; Time Warner, at $35bn. Where did the other $72bn go? It vanished into the crowd.
But another form of silent crowd also emerged in the decade: botnets – hundreds or thousands of compromised Windows machines, used for sending spam, hosting phishing sites, and attacking specific sites. Windows XP’s general lack of security meant botnets were the first instance of “cloud computing“, available for hire by the hour by miscreants and spam artists. Botnets are the surest sign of the failure of the decade to cope with the downside of a crowd – that nobody takes responsibility. (It will be interesting to see whether Google’s Chrome OS can roll back the tide of malware.)
Apple went from strength to strength as the iPod gave individuals the power to choose the soundtrack to their lives. Its annus mirabilis began in Christmas 2003, when the popularity of the new iPod mini saw 733,000 sold in a quarter – nearly as many as in the previous two years. The iPod and the new iTunes Store drove Apple’s reputation. It followed it in 2007 with the long-rumoured iPhone (and sibling non-phone iPod touch), cannibalising its own successful product while reaching into a new market. (It also sold more computers than ever before.) It ended its fiscal 2009 in September with revenues totalling $36.54bn – each quarter bigger than the whole of 2000 – and profits of $5.72bn. Dell, the premier PC maker at the start of the decade, scrabbled around, lost in a commoditised battle. Apple could now buy it outright using just the cash it has in the bank.
But Microsoft has seen its profits eroded. Though 2009 revenues were $58bn, and net income $14bn, it has looked under threat as the internet has become a greater part of our lives. If you have storage and computing in the “cloud” (as Amazon and Google offer), and if open source programs such as OpenOffice can do many of the jobs that Microsoft Office can, why upgrade? Google in particular is undermining Microsoft by offering what it does, but for less: first, with Google Mail, which offered 1GByte of storage for free, when Hotmail and Yahoo charged for more than 10MB. Then with its online word processing and spreadsheets. Then with its Android phone OS, undercutting Windows Mobile. And next with Chrome OS, undercutting Windows on notebooks. Most recently, Google has started offering DNS lookup services, something nobody would trust to Microsoft. Which is in itself telling as the decade ends: Google, though dominant in a technology we rely on, doesn’t worry us as Microsoft did – and still does.
But, as Nick Carr has observed, Google has realised that its future is on the internet, where it makes its money (through advertising and other services); thus every effort it makes is to get more people online. Microsoft’s aim was to get a computer on every desk. The internet wasn’t part of it. The question for the next decade, as the crowd discovers itself, is whether Microsoft will vanish in the cloud – or if it will manage to redefine and reinvent its reason for existing. In retrospect, Thomas Jackson’s suggestion of a split may have been a good one.
Update June 2010:
This post was part of a research project into social media and online communication that I undertook in 2008 and was originally published on my own personal blog Ffynnonweb which continues to undertake a journey across the changing online landscape, observing and chronicling developments in social technology and noting how they impact upon online communities – with a particular focus on opportunities in education known as ‘technology enhanced learning’ (TEL).
A full list of all the posts in the social media research project can now be found on this page Social Media Research: JA
Our online journey moves on to the Web…
Microsoft launched its own Microsoft Network (MSN) in 1995 offering ISP and online services to complement the Windows 95 Operating System. The service was included with the operating system and was originally conceived as a dial-up online content provider similar to AOL offering product support, basic email, MSNBC news, chat rooms and newsgroups. The Internet Explorer Web browser offering open access to the Internet was available initially as a download and was later included in the Windows 95 Plus! Package. In 1996, the MSN 2.0 package was released, providing Internet access plus web-based proprietary content which used interactive multi-media applications such as Visual Basic Scripting, embryonic Macromedia Shockwave Flash for animations and MSN Shows which were presented in a TV- like format and it could be argued that they were the forerunner of YouTube videos.
This highly innovative multi-media content proved to be very much ahead of its time however, purely because it was not easily accessible to users on slower dial-up connections (which constituted the majority of subscribers at that time) and therefore slow speeds and unreliable software generated a large volume of complaints and general user dissatisfaction with MSN and Microsoft. By 1998, all these rich features had been abandoned and the now-familiar Internet Explorer interface was being used instead.
In 1998-99, MSN began to develop online services for other users of the Internet (previously it had confined online content and services to subscribers to the MSN Internet Access Service – in other words – those people who used MSN as their ISP). Hotmail and MSN Messenger provided webmail and instant messenging services to all. MSN.com became a web portal offering proprietary Search, News, Webmail, Messenging and the new ‘People and Chat’ section all under one easily accessible roof. In fact, new installations of Windows Operating Systems have the home page of the integrated Internet Explorer browser set to MSN.com by default, ensuring that the user’s first experience of the Internet is provide by Microsoft itself.
Whilst one could argue that this does not offer the user much choice initially, it did have the advantage from a social perspective that MSN Communities and MSN Chat were not difficult for the novice web surfer to find, thus enabling them to quickly meet and interact with other Internet users, perhaps for the very first time.
MSN Communities offered message boards, chat rooms, document storage, photo albums and customisable html pages to anyone who obtained a free Hotmail or MSN email address and signed up. All this was available in your web browser (typically Internet Explorer that was integrated into your operating system) without the need to install or configure any other software. This very simplicity was its USP (unique selling point) and millions of users around the globe created and joined communities and began talking to and learning from one another.
Indeed my own first experience of the social web was through MSN Communities and a great deal of informal learning took place within a specific Community of Practice over a six month period, during which seasoned computer users patiently took the time to impart the basics of the web and computing to an eager but unskilled novice. This proved to be so successful that it initiated a keen interest in web development, graphics and the internet and thus began the ongoing quest for knowledge of the web and all its facets that has led to this research study.
I therefore owe a debt of gratitude to the members and owners of this specific community. Communities have now been renamed MSN Groups but this particular Community of Practice continues to teach and guide Internet and computer ‘newbies’ at the time of writing, nine years after its initial creation and is still visited by me from time to time to catch up with old friends.
In fact, one could almost argue that this community is now a victim of its own success; members become so comfortable in the knowledgeable, but friendly atmosphere that they do not wish to leave and are most reluctant to move on to newer technologies. The technical facilities offered by these communities are now somewhat out-dated and limited in their scope.
When some of the more adventurous members do begin to feel it is time to move on and sample some of the other delights that the web has to offer – in the early days it was individual web sites and forums, obtaining web hosting and domain names which afforded the putative webmasters considerably more freedom than MSN was able or willing to provide – there is a feeling of fear and loneliness mixed in with the excitement of the new challenge, because such pioneers know that they will be striking out on their own and leaving behind their friends and their comfort zone.
Very few other members are willing to join the pioneer in the new venture because, as will be discussed in more depth in forthcoming articles, change can be exciting but it can also be rather daunting and frightening. People tend to prefer the tried and trusted methods of ‘doing things’ and will only accept change if there is no viable alternative or if they can be persuaded that they will be ‘better off’ in some appreciable and measurable way after the change has taken place.
Microsoft themselves know this only too well, because there is always a great deal of resistance to accepting a new operating system for example and it is sometimes only when technical support for the old product is finally withdrawn that the remaining recalcitrant users are forced to upgrade, however unwillingly.
MSN have been rolling out their new Windows Live suite of applications for the Web 2.0 era, which currently comprise Windows Mail, Messenger, Hotmail, Photo Gallery and Windows Live Spaces.
These Spaces provide users with a blog and a photo gallery and were intended to replace the old Communities and provide competition for newer rivals such as Myspace, Blogger and others – which will be discussed in Part 3.
However, Windows Live Spaces have not been without their critics and the further integration within the Windows Live family is designed to offer a more modern complete experience for the user, with planned future developments of Events, Calendar and Windows Live Groups – which will be an add-on to Windows Live Spaces rather than a separate entity like the current MSN Groups.
It is expected that this will then allow MSN to close Groups completely and move their users across to the Windows Live Suite. Groups are already being allowed to ‘wither on the vine’ so to speak, with the closure of MSN and Groups Chat and the lack of advertising of groups on the main MSN pages. They are now quite difficult to locate by chance and users need to know where to look or have the pages bookmarked to obtain entry to the groups section of MSN. By contrast, Windows Live products are prominently advertised on MSN portals.
Yahoo! began life at the same time as MSN in 1995, originally as an internet search engine and has diversified into many areas of internet service provision over the years through a policy of acquisition of smaller companies and incorporating their products into their portfolio. These included web portals, webmail, messenger and egroups which evolved into Yahoo Groups. Yahoo Groups differed from MSN Groups in that they were more of an email mailing list with a limited web interface.
As with all of the larger Web 1.0 content providers, Yahoo! is currently attempting to provide Web 2.0 content for its users and has already added Flickr (image sharing and storage) MyBlogLog (blog tracking and analytics) and Del.icio.us (social bookmarking) to its list of acquisitions.
Yahoo! has also recently announced plans to open up the social network that is
Yahoo! (their terminology). They call it the Yahoo! Open Strategy: Y!OS. The intention is not to create a new Online Social Network but to turn the massive Yahoo! network into a social one. All this comes at a time when Microsoft have recently withdrawn their takeover bid for Yahoo and the company is looking for new directions. At one point, a merger with Google was mentioned but anti-trust regulations make this perhaps unlikely. The Yahoo blog is a good source of information on the company’s latest thoughts.
Speaking of Google, this is a company which has been going from strength to strength since its own early beginnings (also as a search engine) in 1998. The concept of ‘Page Ranking’ however, differentiated Google from all the other search engines that were around at the time and has allowed it to grow into the most used search engine on the web. In fact, the verb to ‘google’ – meaning to conduct an Internet search – officially entered the Oxford English dictionary in 2006.
Although Google Search is the most successful service, Google also provides Gmail ( a web and pop based email service with virtually unlimited storage), and Google Groups (which incidentally now houses a large Usenet posting archive going back to 1981) among many other services.
Google Groups are more like Yahoo Groups than MSN Communities in nature, bearing more of a resemblance to email newsgroups than web-based forums.
Google’s philosophy has always been that its services are freely available to the general public and these are funded through business users paying for advertising within search listings or paid placements in the rankings. The majority of its revenue stream is through advertising – $10 billion in total advertising revenues reported for 2006.
Yahoo, Google and Myspace have recently announced the creation of a new non-profit OpenSocial Foundation which will allow third party applications to be created that may be integrated into the emerging social networks that characterise Web 2.0 and will be discussed later in the series.
The press release announcing the OpenSocial Foundation described it in this way:
“OpenSocial addresses an emerging problem for developers who are eagerly building applications people can enjoy with their friends: before OpenSocial, if a developer built a “favourite photos” application to work on one social network, it would have to be built all over again to work on another site. OpenSocial tackles this problem at its technology roots, providing common “plumbing” that lets social applications run on many different websites without requiring duplicate work from either developers or the websites. The result is a vast distribution platform for social applications, whether they are for sharing photos or playing games or arranging real-world meetings or any number of other activities – everything is more fun, interesting, and useful when users can involve their friends and contacts”
Read the next article in the series:
Web 2.0 Inception
Update June 2010: A full list of all the posts in the social media research project can now be found on this page Social Media Research: JA