The early Internet: No business model

by Mathew on June 4, 2008 · 5 comments

One of the things that often comes up when talking about Web-based startups is the debate over whether you should just launch your company or service and see whether people want it, or whether you should wait until you’ve established a sound business model first. One of the most obvious examples of a company that chose the former, of course, is Google. I remember someone telling me that the first two venture funds that invested in the company were scared to death, because Google clearly had no idea how it was going to make money.

That seemed to work out pretty well, all things considered, given Google’s $180-billion market cap. And Mike Masnick’s post at Techdirt about a Vanity Fair retrospective reminded me that it isn’t just Google: the Internet itself didn’t have a business model when it first started — and that fact, ironically, is what arguably made it so valuable that hundreds of companies are making billions of dollars from it now. As the Vanity Fair article makes fairly clear, the CERN research center came close to filing a patent on the Web and trying to control it, something that would undoubtedly have been a disaster (as one commenter at Techdirt notes, the creator of the Gopher protocol chose that path).

Whether as a result of persuasive argument from Sir Tim Berners-Lee and his colleagues, or simply because CERN couldn’t see the commercial applications of such a system — or because the research center was about research — the early building blocks of the Web remained open, and thereby helped to create a platform whose value is effectively unmeasurable, but is certainly well into the billions of dollars. The same goes for AT&T, which literally didn’t see the value of a packet-switching system, and thereby missed an opportunity to be involved at ground level in the development of the Internet. Thank God for that.

Some choice quotes:

— “I get credit for a lot of things I didn’t do. I just did a little piece on packet switching and I get blamed for the whole goddamned Internet, you know?” (Paul Baran, who developed packet switching and later invented the airport metal detector)

— “The culture was one of: You find a good scientist. Fund him. Leave him alone. Don’t over-manage.” (Leonard Kleinrock, networking pioneer)

— “I went over to Charlie Herzfeld’s office and told him about it. And he pretty much instantly made a budget change within his agency and took a million dollars away from one of his other offices and gave it to me to get started. It took about 20 minutes.” (Robert Taylor recalls when he got the idea for Arpanet)

— “The one hurdle packet switching faced was AT&T. They fought it tooth and nail at the beginning. They tried all sorts of things to stop it. They pretty much had a monopoly in all communications.” (Paul Baran)

— “They said, There’s no business there, and why should we waste our time until we can see that there’s a business opportunity?” (Bob Kahn, co-developer of the TCP and IP protocols)

— “So on October 29, 1969, at 10:30 in the evening, you will find in a log, a notebook log that I have in my office at U.C.L.A., an entry which says, “Talked to SRI host to host.” If you want to be, shall I say, poetic about it, the September event was when the infant Internet took its first breath.” (Leonard Kleinrock)

— “It became very important that the world have one protocol, so they could all talk to each other. And Bob Kahn really pushed that process. And Vint. And it wasn’t licensed. They proved to the world that making something free as a driver would make a huge difference in making it a standard.” (Larry Roberts)

— “Whether it was instant messaging or chat rooms, which we launched in 1985, or message boards, it was always the community that was front and center. Everything else—commerce and entertainment and financial services—was secondary. We thought community trumped content.” (America Online founder Steve Case)

— “I’d rather not talk about it — sorry.” (Robert Morris, who launched the first Internet “worm” in 1988 while at Cornell)

— “I didn’t want yet another one of these stupid things that doesn’t tell you anything. In the end Tim said, Why don’t we temporarily call it the World Wide Web? It just says what it is.” (Robert Cailliau remembers the invention of the Web)

— “When Al Gore says that he created the Internet, he means that he funded these four national supercomputing centers. Federal funding was critical. I tease my libertarian friends—they all think the Internet is the greatest thing. And I’m like, Yeah, thanks to government funding.” (Marc Andreessen, who developed the first Web browser)

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