DAVID AUERBACH
`
`Chat Wars
`
`Microsoft vs. AOL
`
`
`
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`Chat Wars
`
`Microsoft vs. AOL
`
`
`
ÿ
` ÿ
`
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`Published in: Issue 19: Real Estate
`
`Publication date: Spring 2014
`
`Essays
`
`APMT 1071
`
`APMT 1071
`
`1
`
`
` ÿ
`
`
`Published in: Issue 19: Real Estate
`
`Publication date: Spring 2014
`
`Essays
`
`APMT 1071
`
`APMT 1071
`
`1
`
`
`
`
`
`2
`
`
`
`
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`Adam Ferris, CA1. 2013.
`
`IN TH E SU M M ER OF 1998 I graduated from college and went to work as a
`
`programmer at Microsoft in Redmond, Washington. I was put on the group that
`
`was building MSN Messenger Service, Microsoft's instant messaging app. The
`
`terrible name came from Marketing, which had become something of a joke for
`
`always picking the clunkiest and least imaginative product names. Buddy List? C
`
`U C Me? MSN Messenger? No, MSN Messenger Service. I’ll call it Messenger for
`
`short.
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`program that would do everything the other chat programs could, then add a few
`
`At the time the big players in instant messaging were AOL Instant Messenger
`
`(AIM), Yahoo, and ICQ. AIM had tens of millions of users; AOL had become the
`
`country’s biggest dial-up provider in the mid-'90s by blitzing everyone’s
`
`mailboxes with CD-ROMs, and all AOL users instantly became AIM users. Yahoo
`
`and ICQ each had millions of users. Those were big numbers for the 1990s.
`
`It was a large project: on the desktop program (“client"), we had to create a sleek
`
`user interface to let people see their buddies when they came online, allow them
`
`to change the color of the font in a cool way, and so on. That is, we had to create a
`
`wrinkles of our own. The server-side team had to notify users about the comings
`
`and goings of other users, so that if your buddy Gordon logged on, the server
`
`would tell your client that he was there (we, on the client side, had to take the
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`notification and display it to the user properly). The server side also had to
`
`integrate our functionality with Hotmail, which had tens of millions of users and
`
`which Microsoft had acquired in 1997. It was imperative that every Hotmail user
`
`be able to log on to Messenger with a Hotmail address and password as
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`seamlessly as possible. This was not simple.
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`program that would do everything the other chat programs could, then add a few
`
`At the time the big players in instant messaging were AOL Instant Messenger
`
`(AIM), Yahoo, and ICQ. AIM had tens of millions of users; AOL had become the
`
`country’s biggest dial-up provider in the mid-'90s by blitzing everyone’s
`
`mailboxes with CD-ROMs, and all AOL users instantly became AIM users. Yahoo
`
`and ICQ each had millions of users. Those were big numbers for the 1990s.
`
`It was a large project: on the desktop program (“client"), we had to create a sleek
`
`user interface to let people see their buddies when they came online, allow them
`
`to change the color of the font in a cool way, and so on. That is, we had to create a
`
`wrinkles of our own. The server-side team had to notify users about the comings
`
`and goings of other users, so that if your buddy Gordon logged on, the server
`
`would tell your client that he was there (we, on the client side, had to take the
`
`notification and display it to the user properly). The server side also had to
`
`integrate our functionality with Hotmail, which had tens of millions of users and
`
`which Microsoft had acquired in 1997. It was imperative that every Hotmail user
`
`be able to log on to Messenger with a Hotmail address and password as
`
`seamlessly as possible. This was not simple.
`
`3
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`
`The initial team consisted of about ten people, though it gradually expanded to
`
`several times that size. On the client side we’d meet to discuss what needed to be
`
`done, what kinds of features we wanted, what we could do and couldn’t do. Then
`
`we’d go and do it. I was 20 years old, the youngest person on the team, and very
`
`I worked on the instant messaging windows: the “type your message here"
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`window and the “transcript" window above it. I added better font control and
`
`helped make the client work with non-Latin character sets like
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`Chinese/Japanese/Korean, Indic, Hebrew/Arabic (right-to-left, a particular pain). I
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`managed when the windows would pop up, how they could be moved around,
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`and how scrolling worked in them (scroll bars were very buggy in Windows!).
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`Handling shutdown was a pain, making sure the windows closed down neatly
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`and all the program’s resources were cleaned up properly without the program
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`crashing.
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`green. I was given little chunks of the project to work on at first, then bigger ones.
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`After we finished the user part of the program, we had some downtime while
`
`waiting for the server team to finish the Hotmail integration. We fixed every bug
`
`we could find, and then I added another little feature just for fun. One of the
`
`problems Microsoft foresaw was getting new users to join Messenger when so
`
`many people already used the other chat programs. The trouble was that the
`
`programs, then as now, didn't talk to one another; AOL didn’t talk to Yahoo, which
`
`didn't talk to ICO, and none of them, of course, would talk to Messenger. AOL had
`
`the largest user base, so we discussed the possibility of adding code to allow
`
`Messenger to log in to two servers simultaneously, Microsoft's and AOL’s, so that
`
`you could see your Messenger and AIM buddies on a single list and talk to AIM
`
`buddies via Messenger. We called it “interop.”
`
`This wasn’t elegant, but it wasn’t that complicated, either. A program talks to a
`
`server using a well-defined protocol, which is a set of coded instructions sent to
`
`and from the server. HTTP (hypertext transfer protocol), used to request and
`
`transmit web pages, is one of the most common protocols in existence. It is built
`
`on top of TCP/IP (transmission control protocol/internet protocol), the
`
`underlying protocol of the internet itself. Internet companies run servers that
`
`speak these and other protocols. Some protocols, like HTTP and TCP/IP, are
`
`public, documented, and spoken by everyone, but some are private/proprietary
`
`and undocumented. AIM's protocol, known as OSCAR (for Open System for
`
`CommunicAtion in Realtime), was in the latter group. I didn't have the “key" to
`
`decode it. But what my boss and I could do was sign up for an AIM account and
`
`4
`
`
`
` ÿ
`
`After we finished the user part of the program, we had some downtime while
`
`waiting for the server team to finish the Hotmail integration. We fixed every bug
`
`we could find, and then I added another little feature just for fun. One of the
`
`problems Microsoft foresaw was getting new users to join Messenger when so
`
`many people already used the other chat programs. The trouble was that the
`
`programs, then as now, didn't talk to one another; AOL didn’t talk to Yahoo, which
`
`didn't talk to ICO, and none of them, of course, would talk to Messenger. AOL had
`
`the largest user base, so we discussed the possibility of adding code to allow
`
`Messenger to log in to two servers simultaneously, Microsoft's and AOL’s, so that
`
`you could see your Messenger and AIM buddies on a single list and talk to AIM
`
`buddies via Messenger. We called it “interop.”
`
`This wasn’t elegant, but it wasn’t that complicated, either. A program talks to a
`
`server using a well-defined protocol, which is a set of coded instructions sent to
`
`and from the server. HTTP (hypertext transfer protocol), used to request and
`
`transmit web pages, is one of the most common protocols in existence. It is built
`
`on top of TCP/IP (transmission control protocol/internet protocol), the
`
`underlying protocol of the internet itself. Internet companies run servers that
`
`speak these and other protocols. Some protocols, like HTTP and TCP/IP, are
`
`public, documented, and spoken by everyone, but some are private/proprietary
`
`and undocumented. AIM's protocol, known as OSCAR (for Open System for
`
`CommunicAtion in Realtime), was in the latter group. I didn't have the “key" to
`
`decode it. But what my boss and I could do was sign up for an AIM account and
`
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`differences in what it was sending, then changed our client to mimic it once
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`again. They'd switch it up again; they knew their client, and they knew what it
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`was coded to do and what obscure messages it would respond to in what ways.
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`Every day it’d be something new At one point they threw in a new protocol
`
`wrinkle but cleverly excepted users logging on from Microsoft headquarters, so
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`that while all other Messenger users were getting an error message, we were
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`sitting at Microsoft and not getting it. After an hour or two of scratching our
`
`heads, we figured it out.
`
`Microsoft and AOL were both, obviously, giant companies, and soon the press got
`
`hold of the story On July 24, the New York Times put it on the front page: “In
`
`Cyberspace, Rivals Skirmish Over Messaging." It was like reading about a boxing
`
`match that you yourself were in. AOL kept blocking us, wrote the paper of record.
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`“But Microsoft refused to roll over. Late Friday the software giant said it had
`
`revised its MSN Messenger program to circumvent America Online’s roadblock.
`
`Within hours, America Online answered that challenge with a new block."
`
`I framed the article. My name wasn’t in it, but it didn't matter. That was me!
`
`THIS WAS, AS I SAY, 1999. Just two decades after launching MS—DOS, its first
`
`operating system, Microsoft was one of the biggest companies in the world. We
`
`had 30,000 employees worldwide, about 10,000 of them in Redmond. The campus
`
`was about the same size as Yale.
`
`What was Microsoft’s secret? They were, and are, essentially a software company
`
`While hobbyists in the 1970s were trying to figure out how to build a computer
`
`small enough to fit in your home, Bill Gates and his partner Paul Allen were
`
`figuring out how to write software for when the hobbyists finally figured it out.
`
`In 1980, they partnered with IBM to make an operating system, MS—DOS (for
`
`Microsoft Disk Operating System), for the first mass-manufactured personal
`
`computer. A few years later they partnered with Apple to give early Apple PC
`
`6
`
`
`
`“But Microsoft refused to roll over. Late Friday the software giant said it had
`
`revised its MSN Messenger program to circumvent America Online’s roadblock.
`
`Within hours, America Online answered that challenge with a new block."
`
`I framed the article. My name wasn’t in it, but it didn't matter. That was me!
`
`THIS WAS, AS I SAY, 1999. Just two decades after launching MS—DOS, its first
`
`operating system, Microsoft was one of the biggest companies in the world. We
`
`had 30,000 employees worldwide, about 10,000 of them in Redmond. The campus
`
`was about the same size as Yale.
`
`What was Microsoft’s secret? They were, and are, essentially a software company
`
`While hobbyists in the 1970s were trying to figure out how to build a computer
`
`small enough to fit in your home, Bill Gates and his partner Paul Allen were
`
`figuring out how to write software for when the hobbyists finally figured it out.
`
`In 1980, they partnered with IBM to make an operating system, MS—DOS (for
`
`Microsoft Disk Operating System), for the first mass-manufactured personal
`
`computer. A few years later they partnered with Apple to give early Apple PC
`
`6
`
`
`
`users functioning programs, including Microsoft Word. Gates and Allen’s insight
`
`was simply that PCs were going to be a big deal, and people would want software
`
`for the new machines.
`
`By licensing Microsoft to provide the operating system for PCs, IBM essentially
`
`handed them a license to print money The margins on software were far greater
`
`than on hardware, because the physical manufacturing process was negligible—
`
`producing disks was cheap and trivial next to microprocessors and peripherals.
`
`And since Microsoft was the only company producing the operating system
`
`needed to run, ultimately, all software on PCs in the 1980s, it had a lock on
`
`guaranteed sales of the ballooning PC industry IBM wasn’t the only hardware
`
`maker in town—far from it—but Microsoft was the only MS—DOS maker.
`
`Microsoft’s rise did not go unnoticed or uncontested. In 1984, Apple debuted the
`
`Macintosh. After the Lisa, which came out the year before and cost $10,000, the
`
`Mac was the first PC to use an operating system with a graphical user interface
`
`(GUI), building on research done at Xerox PARC and elsewhere. The company
`
`bought ad time during the Super Bowl to trumpet this revolution in computing,
`
`and in truth they weren’t exaggerating. Until the Macintosh, almost everything
`
`had been text; now you could see a visual representation of the inside of the
`
`computer—a “metaphorical desktop," as it was called. When I saw it at age 7, I
`
`found it dazzling, but at the time computers weren't quite powerful enough to
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`make the GUI necessary. I used PCs myself back then and was perfectly fine with
`
`typing at the MS—DOS command prompt. But toward the end of the ’80s, home
`
`computers became fast enough to make multitasking (running more than one
`
`program simultaneously) increasingly valuable, and it was clear that GUIs
`
`promised far more user-friendliness than text command lines.
`
`Microsoft thought so too, and in 1985 they released the first iteration of Windows
`
`(with, importantly, some elements licensed from Apple). It was basically a
`
`clickable list version of the files on the computer, resembling today’s Windows
`
`Explorer, plus some other “windows" displaying executable files (a calculator, for
`
`example). It was an improvement over the MS—DOS command prompt, but a far
`
`cry from the different folders displayed so elegantly on the Macintosh. In 1987,
`
`Microsoft released Windows 2.0. This was still clunky, but already better, with
`
`overlapping windows and some other useful functions. Apple could see which
`
`way things were headed, and in 1988 they sued Microsoft for copyright
`
`infringement.
`
`7
`
`
`
`The suit failed. Windows was similar to the Mac operating system, but hardly
`
`identical. The appeals court wrote, “Almost all the similarities spring either from
`
`the license [for the initial Windows] or from basic ideas and their obvious
`
`expression. .
`
`.
`
`. Illicit copying could occur only if the works as a whole are
`
`virtually identical."
`
`The initial decision came down in 1992 and was affirmed on appeal in 1994. It was
`
`a serious blow to Apple during its Steve Jobs—less slump. Hampered by poor
`
`management, overpriced computers, and a protectionist attitude toward the
`
`Macintosh brand, maintaining that only Apple could make Macintosh hardware,
`
`the company saw its market share decline throughout the decade, eventually
`
`prompting the return of the exiled Jobs and setting the stage for Apple’s
`
`resurgence. Windows, of course, conquered the world, never attaining the
`
`elegance or unification of Mac OS, but working well enough that the Macintosh
`
`premium was more than most wanted to pay. In Windows 95, the first post-
`
`lawsuit release of the operating system, Microsoft went ahead and incorporated
`
`Apple's famous trash can, impishly refashioned as a “recycle bin." For a good long
`
`while, Windows could not be stopped.
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`over the market. So the quality of Microsoft's offerings closely tracked the quality
`
`Gates and Allen were skilled coders, but the history of software is littered with
`
`people just as smart or smarter who did not end up as billionaires. Their strength
`
`was on the business side. For years they remained a small company, but you
`
`didn't need to be big to make software back then. The programs were simple, and
`
`they were all that was available, so you could charge a premium for them. The
`
`amount of person-hours that goes into a $50 piece of software today dwarfs that
`
`of a $50 item of software thirty years ago. In 1983, a word processor so primitive it
`
`advised users to put little stickers on their keyboards so they’d know which
`
`functions correlated to which keys retailed for $289. For this price it offered a tiny
`
`fraction of what most freeware can do today. It was a different world.
`
`In this world, Microsoft stood out. They worked fast, they were aggressive, and
`
`they were very cagey. Their strength was never in innovation per se, but in
`
`appropriation, improvement, and integration. One slogan that you would hear at
`
`the company was that Microsoft made “best-in-class" products. A less charitable
`
`way to put this would be to say that upon entering a market, Microsoft would
`
`make a product that was better enough than the best out there, and then take
`
`of existing offerings.
`
`8
`
`
`
`Lotus’s spreadsheet software 1-2-3 was a good product in the 1980s and early
`
`1990s; consequently Microsoft Excel, which debuted in 1985, became the standout
`
`of Microsoft’s nascent Office suite. Word processors like WordPerfect and
`
`WordStar were less formidable; as a result, Microsoft Word was considerably less
`
`stellar than Excel. And in the absence of any dominant email programs,
`
`Microsoft Outlook was buggy and slow, and remained that way well into the
`
`early 2000s. Microsoft was far too efficient to waste time improving a project
`
`beyond what was needed to defeat their competitors. In the late ’90s I got a
`
`chance to tour the legendary Massachusetts computer company Digital
`
`Equipment Corporation (DEC, later bought by Compaq), and the difference in
`
`culture was remarkable. There were people at DEC who had been working on
`
`threading (the manner in which operating systems manage concurrent sets of
`
`linear processor instructions) for twenty years. Half the people had PhDs in their
`
`areas of specialty. Corners were never cut to release something earlier.
`
`Ah, I thought. This is why Microsoft won.
`
`Microsoft certainly tried to innovate with new products from time to time.
`
`Clippy, the little paper clip that popped up occasionally in Microsoft Word, was an
`
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`innovation. Microsoft Bob, a yellow dog in dark glasses who showed up in
`
`Windows 95 to see if you needed help, was an innovation. Cairo, the
`
`“revolutionary" new operating system from the 1990s, would have been an
`
`innovation had it ever shipped. But as a whole the company was more
`
`comfortable entering existing markets and besting competitors. And in the
`
`absence of a clear target, planning could become fuzzy and tentative. You see this
`
`in the reticence to engage wholeheartedly with the internet in the 1990s: no one
`
`was making gobs of money yet, so who was Microsoft to follow? It wasn’t as if
`
`Microsoft (and everyone else) didn’t see that there was money to be made;
`
`Microsoft just wasn’t about to create the mechanism to do so on its own.
`
`1
`
`By 1999, Microsoft was poised between financial security and an obscure future.
`
`The Windows and Office behemoths ensured the company's dominance of the
`
`desktop operating system and business applications markets for as long as the
`
`PC remained a going concern. Even when the US v. Microsoft antitrust trial was
`
`at its peak, in 1999—2000, it was hard to see how a feasible antitrust remedy could
`
`actually address the problems. Sure enough, the plan to split Microsoft into two
`
`monopolies, one for Windows and one for Office, wouldn’t have helped a bit, even
`
`if it made it past the appellate court that overturned the initial judge’s ruling and
`
`9
`
`
`ÿ. ÿ ÿ
`
`
`innovation. Microsoft Bob, a yellow dog in dark glasses who showed up in
`
`Windows 95 to see if you needed help, was an innovation. Cairo, the
`
`“revolutionary" new operating system from the 1990s, would have been an
`
`innovation had it ever shipped. But as a whole the company was more
`
`comfortable entering existing markets and besting competitors. And in the
`
`absence of a clear target, planning could become fuzzy and tentative. You see this
`
`in the reticence to engage wholeheartedly with the internet in the 1990s: no one
`
`was making gobs of money yet, so who was Microsoft to follow? It wasn’t as if
`
`Microsoft (and everyone else) didn’t see that there was money to be made;
`
`Microsoft just wasn’t about to create the mechanism to do so on its own.
`
`1
`
`By 1999, Microsoft was poised between financial security and an obscure future.
`
`The Windows and Office behemoths ensured the company's dominance of the
`
`desktop operating system and business applications markets for as long as the
`
`PC remained a going concern. Even when the US v. Microsoft antitrust trial was
`
`at its peak, in 1999—2000, it was hard to see how a feasible antitrust remedy could
`
`actually address the problems. Sure enough, the plan to split Microsoft into two
`
`monopolies, one for Windows and one for Office, wouldn’t have helped a bit, even
`
`if it made it past the appellate court that overturned the initial judge’s ruling and
`
`9
`
`
`
`attacked him for trashing Microsoft to the press. The whole case ended up a
`
`bizarre and political sideshow, which I’m not sure had more than a negligible
`
`impact on the state of the tech industry—other than ensuring that future tech
`
`companies kept a far larger battery of lawyers and lobbyists close by
`
`One interesting thing did emerge (at least for me, as an employee of the
`
`company) in the antitrust discovery process: I learned that before I arrived, a war
`
`over the future took place at the highest levels of Microsoft, between the “doves"
`
`and the “hawks." The “doves" wanted to embrace other internet companies, like
`
`Netscape (which had the best early browser) and even AOL to an extent, and
`
`share power with them; the “hawks" wanted to clamp down and try to make
`
`Microsoft the provider of internet services. The real bone of contention was
`
`Windows: here was the most profitable thing in the history of computers. But a
`
`truly aggressive internet strategy would have meant thinking about a world
`
`without Windows. This was too difficult. “I don’t want to be remembered as the
`
`guy who destroyed one of the most amazing businesses in history," one senior
`
`executive wrote of Windows during th
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