Like Bill Gates before him, Mark Zuckerberg is having a ‘Pearl Harbor’ moment | John Naughton

The great thing about history is that it repeats itself often – but not necessarily as Marx envisioned it. Here’s a story about the tech industry that illustrates this point.

The first act begins in the spring of 1993, when Marc Andreessen and Eric Bina launched the first graphical browser for the emerging World Wide Web. They called it Mosaic and it was a smash hit because that’s what made ordinary people realize what this internet thing was for. In 1994, Andreessen and Jim Clark started a company that eventually became Netscape, and in October of that year launched a new and improved browser called Netscape Navigator, which within three months had 75% of the fledgling browser market. In August 1995, Netscape went public in a frenetic IPO that sparked the first internet boom.

As their business flourished, Andreessen and co began to think of an even brighter prospect. If web browsers were really the future, they reasoned, and since a PC’s operating system (OS) was really just a life support system for a browser, which needed a complex and expensive operating system such as Microsoft’s MS-DOS?

At this point Bill Gates, co-founder and CEO of Microsoft, woke up. For Microsoft’s main assets were its world-dominant operating system and the Office software suite that ran on it. As a result, on May 26, 1995, he released what came to be known as his “Pearl Harbor” memo to all staff about the “Internet tidal wave” and how the growing dominance of Netscape on it posed an existential threat to Microsoft. “A frightening possibility discussed by internet fans,” he wrote, “is whether they should come together and create something much cheaper than a PC powerful enough for web browsing. “. His conclusion: Microsoft needed a dime to deal with the threat: “We need to move all of our Internet value…to Windows 95 itself as soon as possible with a major goal of getting OEMs.” [ie PC manufacturers] ship our pre-installed browser.

The clear objective was to destroy Netscape by giving all PC owners a free built-in Microsoft browser and it succeeded. But it also nearly destroyed Microsoft, as it triggered antitrust action that nearly broke up the company.

For the second act of our cautionary tale, we must move forward to the present. Meta (born Facebook) enjoyed the same kind of global dominance in social media that Microsoft once had in the PC market. But now he seems to have realized that he could face, if not an existential threat, very serious problems.

Probably the biggest of these is TikTok, the Chinese-owned video-hosting platform that young users are flocking to from Instagram. But the list of other headaches is also daunting. They include: the fact that Apple’s decision to allow iPhone users to opt out of tracking has reduced Meta’s ability to take advantage of it; the fall in Meta’s market capitalization from $1.1 billion to $450 billion (£375 billion) in 10 months; quarterly profits are down for the second consecutive quarter; income as well; the inflated costs of Zuckerberg’s crazy bet on the Metaverse project (whose hardware division apparently lost $3 billion last quarter); the growing interest of regulators and governments in Meta’s business practices; the lingering bad smell given off by Facebook’s ongoing issues with privacy, toxic content and misinformation; and, to top it off, there’s a global recession that the company’s CEO (rightly) is obsessed with.

There are signs that some of these issues are starting to bite. Meta has drastically reduced its recruitment of engineers – from 10,000 per year to 6,000 – for example. And he made panicked changes to the commodities. Instagram is transitioning from a photo platform to one that favors short videos – just like TikTok. Older people, who increasingly seem to be Facebook’s top users, are now being offered two options for their News Feeds: one, a “discovery” tab that provides an organized feed of stories from around the world algorithmically, the other a chronological list of posts by their friends. Less dramatic (but perhaps more telling) are the small changes to employee perks: more free laundry or dry cleaning services, for example. Or the fact that the start time for free dinners has been moved from 6 p.m. to 6:30 p.m.!

But perhaps the decisive clue that Mr. Zuckerberg has reached his “Pearl Harbor” moment is the fact that he summoned Meta executives from around the world to a hastily organized meeting in San Francisco earlier this month. Before showing up, they had to read a speech from their boss. But unlike the 5,584-word memo Bill Gates used to wake up his colleagues, Zuckerberg’s executives had to work their way through a 122-page slide deck on “operating with heightened intensity.” It’s almost enough to make you feel sorry for them. Almost.

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