Microsoft is one the biggest tech giants on this planet. Today we will go through a very interesting and famous Microsoft Monopoly Case Study.
On 18th of May in 1998, the US Department of Justice and the Attorney General’s of 20 US states sued Microsoft for being a monopoly and illegally killing its competition in the computer market.
And what followed next was one of the most historic cases in tech history, which lasted for two decades.
The statements from the US Justice Department were as stated,
“The Justice Department has charged Microsoft with engaging in anti-competitive and exclusionary practices designed to maintain its monopoly in personal computer operating systems and attempting to extend that monopoly to internet browser software.”
The Catching Up of Personal Computer Revolution
This is a story that dates back to 1994 America, when the computer revolution was just catching fire. This was a time when multinational Corporations had accepted that computer was a powerful tool.
The MNCs already started having hundreds of computers in the offices, which was being used by the employees.
The computers had already skyrocketed the productivity of these companies. So practically, computer has already become an integral part of the American business ecosystem.
Let me just quickly tell you about the most important events that happened in the computer revolution of America.
Timeline of Most Important Events in PC Revolution America
- 12th of August 1981 – IBM introduced its personal computer with Microsoft’s 16 bit operating system, which was MS DOS 1.0, and this made Microsoft a tonne of revenue through licencing.
- By 1985 – Microsoft was already clocking in a revenue of 140 million dollars.
- 13th Of March 1986 – Microsoft Stock goes public breaking all records and turn Bill Gates into the youngest billionaire ever.
- August 1989 – Microsoft introduces the earliest version of Office suit applications, which then became the industry standard for businesses all across America.
- May 1990 – Microsoft launched windows 3.0, which was a big leap into graphical user interface. The GUI made computers accessible to the common man, which was back then used only by the techies through code.
Nearly 90% of all PCs in the world ran on Microsoft operating system.
The Introduction of Internet and The Netscape Browser
So guys as discussed above by the time in 1993, 90% of all PCs ran on Microsoft Windows Operating System. There was another important event that that was catching up fire in the early 1990s.
The another dimension of the computer industry opened up and that was the internet. Therefore, in the early 1990s, we saw the rise of internet browser market.
One of the most revolutionary browsers at that time was a browser called Netscape Navigator, which was launched in 1994.
Netscape at that time was loaded with features which were far ahead of its competition, they had the option of documents streaming, which allowed users to view the documents while it was being downloaded.
They have the feature of multiple downloads simultaneously and they also supported JPEG image format.
The Netscape Browser was such a revolutionary product that even with a $49 subscription cost, they were able to capture up to 80% of the browser market share.
Now the point to be noted over here is that, just like today, without the internet, your computer is mostly useless.
Back then in 1995, people started using computer just to use web browsers to connect to the internet and the operating system was just a bridge that connected the users to the web browsers.
So practically, browsers were becoming more important than the operating system itself.
Netscape Browser Goes Public
Building upon its phenomenal success. Netscape went public on December 5th, 1995. Within a day, the company had hit a market cap of $2.2 billion.
Now Like many others Netscape too thought of becoming another legendary internet company, but something happened in the exact same year that marked the beginning of Netscape’s fall and within the next six years, the same billion dollar company was almost reduced to nothing.
The question is, how is it even possible that such a big and innovative company went down so quickly?
Well, the answer to this question lies in an accurate phrase coming from the Department of Justice itself, which summaries how Microsoft kills its competition.
And it says, embrace, extend and exterminate.
How Microsoft Killed Netscape Browser - Microsoft Monopoly
So guys pay attention as main part of our Microsoft Monopoly Case Study starts from here…
In 1994, Microsoft realized that they were too late to the internet boom, and the browsers are becoming more important than the operating system.
So in August 1995, when Microsoft launched Windows 95, they also included their own web browser called the Internet Explorer, and they made it the default browser for every PC sold. So when you start your computer, you could see the Internet Explorer right on your home screen.
On top of that, Microsoft directly attacked the most important features of Netscape by launching something called ActiveX controls.
This update made it impossible to easily download files on the internet, especially the Microsoft Office files. It was a direct attack on Netscape prime features.
Since 90% of the computers used MS Office, it became more and more difficult for them to use Netscape and other browsers.
Further Microsoft also removed the Internet Explorer from the add and remove tab, because of which neither the consumers nor the manufacturers could delete the Internet Explorer from the computers, and cherry on the cake, they made it available for free of cost.
So this is how they first embraced the concept of internet browsers. Then they extended their products with features that do not support the competing products.
Lastly, Microsoft used their dominance over the platform to promote their own product over its competition, eventually, to exterminate the need to use rival products.
Not so surprisingly, this led to the downfall of Netscape Navigator. By 2000, Internet Explorer had 95% market share, making it the most dominating web browser in the market.
This is how Microsoft established an industry standard, which meant that if you wanted to make a living from software development, you had to make sure that your product worked in Internet Explorer.
But if Microsoft thinks you are making a lot of money, maybe the story could be over for you.
Similarly, Microsoft’s instant messaging platform, MSN Messenger, also tried to kill one of the most popular instant messaging platforms during that time, that was AIM, which was made by a company called America Online.
And the way they did that was that the first embrace the concept of instant messaging by launching MSN Messenger. This was obviously installed in your PC by default.
Then they extended the standard with Microsoft add-on, which added new features, proprietary but broke the compatibility with AOL software. Then they gained dominance by providing MSN Messenger for free.
This is how Microsoft kills its competition – The Microsoft Monopoly.
Learnings From The Microsoft vs Netscape Case Study
There are three very important lessons to learn from Microsoft Monopoly Iconic Case Study
The first thing I want you to do is take a step back and look at the story very, very carefully.
Did you see that in spite of Microsoft sabotaging Netscape, Chrome was very easily able to beat the Internet Explorer to become the most used browser in the world.
In spite of Microsoft killing AOL(America Online), using the MSN Messenger, But Facebook and WhatsApp have turned out to be the winner of the social media revolution.
It almost looks like Microsoft was so obsessed with killing its competition, that it completely lost sight of the evolving trends in the internet services like search engine, social media, and even mobile revolution.
This tells us three very, very important lessons :
- While good companies focus on their competition, great companies focus on their customers and the needs of the market.
- Number two, regardless of how powerful you are, if you don’t build great products, the success you’re going to achieve is always going to be short lived.
- And lastly, while Microsoft always wanted to be the richest kid in the block, and tried to keep all the wealth to itself, Apple and Google built a platform for developers to empower them and build wealth for a large number of people. In this process, Apple and Google ended up making more money than MIcrosoft.
Some Additional Resources/References
- If you wish to go in depth in the Microsoft Lawsuit Case, then you can check it out on the official website of US Justice Department
- A report by Tech Crunch about how Microsoft is slowly killing Zoom. If you read this report carefully you will figure out that MICROSOFT is using the same tactics it used for Netscape, MSN Messenger and America Online.
- Another resource I found was Bill Gates – Microsoft Antitrust Deposition (Highlights), Gates had to give hours of recorded deposition to the Justice Department.
- Lastly, you can always checkout Wikipedia.