The value was obvious almost immediately, but it was obscured by flashy get rich quick attempts. Google chose not to make money at first but that was a business decision, not a necessity: people were paying tons of money for ads and referrals years before they were founded.
That’s part of the difference with AI now: the internet immediately generated significant value almost instantly for relatively modest investments, so there were a ton of small and mid-sized companies who saw almost immediate profits from moving catalog sales or support online, switching software distribution from mailing diskettes to downloads, etc. and some people were able to cut into established markets where the existing companies were slow to change.
AI is different in two key ways: the first is the extremely high cost, which prevents a lot of the bottom-up growth we saw on the web, but the second is that it’s not a reliable technology like the web was so you can’t safely use it in the most valuable contexts. In the 90s, some people screwed up form validation badly but most people didn’t. Right now, companies would love to replace things like customer service or sales with chatbots but nobody on the market can make a system which is both safe and useful because things like prompt injection require theoretical breakdowns, not just attention to detail.
> The value was obvious almost immediately, but it was obscured by flashy get rich quick attempts. Google chose not to make money at first but that was a business decision, not a necessity: people were paying tons of money for ads and referrals years before they were founded.
All I can say is, that was the opposite of what I've heard. Did you participate?
Also, Google was many years after Netscape's IPO, seen as the first SV boom. And what about Windows 95, if the Internet's ROI was so obvious?
There's a lot of variety in the quality of writing from that period. At the time, a lot of “analysts” were doing lazy number-go-up stories rather than the harder work of actually looking at business fundamentals—I remember so many stories which were basically trying to rationalize the greater fool theory—and there was also a tendency to lump all of the internet companies together. Amazon.com was an interesting example of the latter phenomenon where people would talk about them being unprofitable because they were just looking at the total numbers but completely missing the distinction between the dotcoms which were losing money on every sale with no way to close the gap and Amazon, which was expanding rapidly but was profitable in each business segment within a couple years (e.g. books were cash-positive circa 1995) and could go from reporting losses to profits any time they wanted simply by slowing their expansion plans.
In Google's case, the key thing was that they were out-competing in what was already an established market. Search companies were making money from ads and sales referrals, so the questions were things like marketshare and efficiency rather than the ability to make revenue at all, whereas Netscape struggled with that once Microsoft used their Windows monopoly to set the price for browsers at $0. They tried to sell server software but that was a different market with limited synergy for browsers and there was a ton of competition even if they'd been better at writing software.
I mention all of that because one thing to remember is that the dotcoms weren't the only game in town. A lot of people focused on them because the IPOs and market valuations were wild by traditional standards but most of the real money and energy was in established businesses moving online since there were clear and immediate benefits from doing so. When the bubble popped, that stuff didn't really change and a ton of people moved from dotcom jobs to traditional companies.
I worked for a web development company at the time and we were turning away business for years because there were so many companies looking to add a web presence to their existing business. It made quite an interesting contrast to our startup clients who tended to be a lot more focused on stock prices rather than business fundamentals. I remember being on a call with pets.com people who were basically openly stating that they were basically frittering time away waiting for the IPO to make them rich, whereas our customers who were in manufacturing, banking, insurance, etc. were a lot more realistic about working within a budget to do something they would actually turn a profit from.
Re: Windows 95, the web drove a lot of its success. That was around the time normal people could see a lot of immediate personal benefit from being online–shopping, recipes, stock trading, research, forums, games, dating, porn—and Win95 was the first version of Windows to ship with built-in TCP/IP and a web browser, not to mention being a lot closer to the competition on usability. For a lot of PC users, especially in business, the web was what sold them on the need to pay more to have a GUI, mouse, etc. and while that was possible with Windows 3.1 it really went mainstream around the time Windows 95 came out (Windows NT was too demanding on hardware for most budgets outside of engineering/development).
Thanks for all the detail from someone who was there.
> completely missing the distinction between the dotcoms which were losing money on every sale with no way to close the gap and Amazon, which was expanding rapidly but was profitable in each business segment within a couple years (e.g. books were cash-positive circa 1995) and could go from reporting losses to profits any time they wanted simply by slowing their expansion plans.
Great insight. And of course Amazon would raise any funds possible to expand into this new frontier.
> Win95 was the first version of Windows to ship with built-in TCP/IP and a web browser, not to mention being a lot closer to the competition on usability.
Per Wikipedia:
"Windows 95 originally shipped without Internet Explorer, and the default network installation did not include TCP/IP .... At the release date of Windows 95, Internet Explorer 1.0 was available,[48] but only in the Plus! add-on pack for Windows 95, which was a separate product. ...
Windows 95 OEM Service Release 1 was the first release of Windows to include Internet Explorer (version 2.0) with the OS."
My point is not to nitpick, but that the Internet's value wasn't obvious to Microsoft at that point.
That’s part of the difference with AI now: the internet immediately generated significant value almost instantly for relatively modest investments, so there were a ton of small and mid-sized companies who saw almost immediate profits from moving catalog sales or support online, switching software distribution from mailing diskettes to downloads, etc. and some people were able to cut into established markets where the existing companies were slow to change.
AI is different in two key ways: the first is the extremely high cost, which prevents a lot of the bottom-up growth we saw on the web, but the second is that it’s not a reliable technology like the web was so you can’t safely use it in the most valuable contexts. In the 90s, some people screwed up form validation badly but most people didn’t. Right now, companies would love to replace things like customer service or sales with chatbots but nobody on the market can make a system which is both safe and useful because things like prompt injection require theoretical breakdowns, not just attention to detail.