Is Microsoft the Kiss Of Death for Acquisitions?

Once upon a time, there was an internet browser called Netscape. Its direct ancestor was called Mosaic, written by Marc Andreesen and Eric Bina at the National Center for Supercomputing Applications (NCSA). Andreesen and Jim Clark then created a startup called Netscape Communications and released Netscape Navigator in 1994. 

Netscape Navigator was really the first widely-adopted Internet browser (in the old days, we actually capitalized Internet) and, while it wasn’t a direct fork of Mosaic, followed in the same spirit. Navigator dominated the browser market for some time, and Bill Gates famously suggested that the Internet wouldn’t be a big deal — that “the Internet is a contemporary fad, nothing like the television or telephone in its impact.”

Of course, Gates rethought that, and in late 1995, wrote the “Internet Tidal Wave” memo that reoriented Microsoft to go into the Internet with all its big feet.

Netscape went public on Aug. 9, 1995, and made Andreesen and others a pile of money, money that Andreesen later leveraged into being a major venture capitalist. It was one of the first of the dot-com unicorns.

The result was that Microsoft released Internet Explorer. As a browser, it honestly kind of sucked — it was slow, it had a number of extensions that made it incompatible with the existing body of web pages — and, unlike Navigator, was both free and tightly integrated with Microsoft Windows.

This was one of the first examples of what became known as Microsoft’s “embrace, extend, extinguish” philosophy — although that was never a formal statement, drawing as it did from Nathan Myhrvold’s email during the Java antitrust suit. But it stuck because it so completely encapsulated the Microsoft approach.

Today, Microsoft announced its intention to terminate Skype, the internet video phone application that it had bought for $8.5 billion in 2011.

Skype at the time was pretty revolutionary, combining a number of different protocols like VoIP (Voice over Internet Protocols) and RTP (Real-time Transport Protocol) into an application that really wasn’t feasible for a home desktop computer even a few years before.

For a while, Skype dominated the Internet video phone market, and Microsoft taking it over seemed like it would be a good thing. Skype was a successful startup, a “unicorn” that once again made its founders a pile of money.

Then, having purchased Skype and even extending it in some ways, Microsoft stopped. Instead, it let Skype fade, losing market share to Zoom and WhatsApp, which Facebook/Meta acquired in 2014 for $19.3 billion.

Skype users wondered what was going on — Skype had been really dominant in the video calling space for years, but it became harder to use, tied into the same “single sign on” protocol as Microsoft’s other products, like Office. And Skype’s market share plummeted, from something as much as 50% to as little as 2%, depending on how it’s computed. So its doom has probably been assured for some time, especially as Microsoft’s own product Teams became the Microsoft choice,

Now, Microsoft has its own communications suite of applications called Microsoft Teams. And today’s announcement shows once again that the “embrace, extend, extinguish” philosophy is strong in Redmond, Wash.