JIM CLARK - Interviewed in Mountain View CA. June 12, 1995.

Clark is the chairman of Netscape Communications. Netscape's Navigator software is used by more than 75% of computers on the World Wide Web. As of December '96, the company's market value was at $5 billion. Clark was previously the founder of Silicon Graphics.

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Q: How much of the market do you have for web browsers?

JC: From 75 to 95% depending on who you talk to and what site you look at on the web. It's pretty easy to tell. You go to any given site and if they have a certain feature turned on they can record which browser came to their site and if it's Netscape's, then that accumulates a higher percentage and that number was 75% according to the New York Times. Other estimates put it higher.

Starting from first release of our product last December we allowed it to be downloaded over the net for evaluation purposes and in a period of six months it's achieved about 8 million users and, and still growing very rapidly.

Q: And you did this by giving away the product.

JC: Giving away is a pretty strong word. We don't really give away the product. We allow people to download it for free for evaluation but we do have mechanisms that allow us to police who's using it. We can tell you who's using the product and if we wanted to, we could turn off the product so to speak so that people would have to pay if they wanted to continue using it. But it's not our philosophy to do that. We're doing quite well from a business point of view without doing that. Right now, we consider it more important to build market share.

Q: Is this the way business will operate in the future? --giving it away for free?

JC: Let me make something clear. The Internet is not free, the Internet is paid for by a variety of different people. For example, my company Netscape pays for our access to the Internet to the tune of almost $20,000 a month and that's because we want to be able to support a lot of traffic conserving lots of things from our site. But we're paying for our part of the Internet and everyone who's connected to the Internet is in turn paying for their part. A company like Silicon Graphics or Sun Microsystems pays for their connections to the Internet. The Internet is just a different system from a conventional phone system, it's a data communication system.

Q: Some think the Internet is more of a fad.

JC: The Internet isn't what I think of as a fad. It's 40 million people plus right now, growing at 8% a month. You know if it's a fad, also bear in mind that data communications is going to be the essence of what we do in the future so why would something that's giving you low cost data communications be a fad. I think it's here to stay just as the phone system was.

Q: What does it mean for business?

JC: Every business in the world has a computer practically. This allows all those businesses to be interconnected not only to other businesses that might supply them with information or, digital forms of ordering and payment, but it also allows these businesses to be connected to all of their users, to all of their customers over the Internet. So the Internet is one large data communications network. When you add security and encryption technology to the Internet, you then make it a very secure system, where not only can you communicate ordinary ordering information but you can even have digitally signed documents. You can have money transactions all accountable and all certifiable and authenticatable. So the Internet is fundamentally a business phenomenon as it's exploding now.

The Internet started out as purely an academic thing. An academic research thing. It then became an academic mechanism where students at universities were sharing data with each other and sending e-mail around. These students then moved into the workplace and began to create a demand for it in companies, and so companies along about ten years ago began to get connected to the Internet for e-mail purposes and then other new things began to happen like the worldwide web running on top of the Internet. But the worldwide web is the true applicatoin that's going to cause the Internet to explode.

Q: And you guys are right at the front.

JC: But really Marc Andreesen who wrote a program called Mosaic when he was in the computer science department at the University of Illinois. He conceived this idea of having a mixed multi-media viewer or browser and, along with a couple of his buddies, implemented this. I ran into him a little over a year ago and said why don't we start a company in this area. And he said yeah that'd be great. So we recruited all of the students that helped him and founded Netscape and got underway.

Q: You put this company together in about a week?

JC: Yeah. It took us about four days to get this company put together. I just put some of my own money into it to get it started, and within two months we had probably twenty-five people working writing programs. I think a lot of people don't realize that that's how companies are created. There's no other magic other than say hey let's create this thing. And you gotta have good instincts about what the market are. You gotta know something about the technology. And you gotta put the business sense around it to make an actual business operations -- administration and finance and various types of management. But when you put all of those things together in a hot market, that's how good companies are born.

Q: What are some of the other ingredients?

JC: A bunch of people who really work because it's a very competitive business. There's always someone out there who's bigger than you, that wants to keep you from getting any bigger and especially once they see you're on to something, they want to get it instead of you. When you're a hot company in a hot growing market you know you have a lot of attention focused on you and a lot of people want to disable you and try to understand what that magic stuff is that's making you grow and understand a market that they don't quite get because they've got all this money. They should be able to do this. If they've got all the money in the world they should be able to own a market. But they don't have the creative young guys who are in there, you know, creating this stuff. It's the creative part.

Q: What is going to drive this shift to online commerce?

JC: You know people often ask me,how are you going to make money on the Internet, and my response is how do you make money on the phone system? I don't know anybody that makes money on the phone system except the phone companies. Yet we all use it and we use it for business. It isn't essential to make money from the Internet itself. You're going to use the Internet as a tool to reach your customer.

The way to think of this is that there's several categories of product--what I think of as sort of hard goods and soft goods. The hard goods are those that you physically get. And the soft goods are those that are intellectual property -- an image, a movie, a piece of audio, a computer program, a book, an on-line book. The soft goods, this kind of Internet type system is ideal for distributing that. And when you put the appropriate protection mechanisms around preventing people from illicitly copying this kind of data, then you've got a pretty good commercial system for distributing soft goods. Soft goods meaning non-physical things. For physical things it's an interesting thing to look at.

The catalog business in the U.S. is a fifty billion dollar a year business and that's by printing these catalogs and mailing them out. And, it's pretty wasteful because you may never look at a single page of a catalog and you get it and it takes up the mail system. It takes up a few trees, and you know, you get this thing and you might once a year buy something out of it. I believe that the on-line catalog business will be quite big eventually. It'll be some synthesis of interactive television shopping combined with conventional catalogs. I think that's going to be a big commercial use of the Internet.

Q: If I can communicate directly with the company, what happens to the middleman? Why go to Circuit City when I can buy direct from Sony?

JC: I don't think the middle man necessarily goes out of business. We have catalogs today through which you can order various kinds of products and yet there's still distributors who sell those products. The distributor has to offer some value added, though. They've got to either get more of the product in front of people by advertising, or something of that nature. If they can't add value, they shouldn't be in the distribution chain. So if their only purpose is just a local store for you to go to buy this product and you can get it just as easily over the computer, then maybe they'll go out of business. I tend to believe that the people most vulnerable are the those who distribute software.

Ten years from now, I can't imagine why you would go into a store for any software product. If you're a software business or in any way related to computing, magazines or whatever and you're not on line, you're probably in trouble. You'd better get on-line. If you're a ordinary consumer products company for the moment, it's not terribly important.

It's not so important to be on-line if you're in a consumer product company. Although Proctor and Gamble as an example is quite interested in figuring out ways of creating some compelling reason for people to come on line because they believe in the medium. It's not essential. Technical products, especially computer related products, they'll be the first that are important to come on-line.

Q: Why would anyone invest in a company like Yahoo?

JC: What's going on with companies like Yahoo is like the beginning of any new business era. There's lots of experiments happening. The Internet needs directories. When you've got maybe forty thousand sights in the world serving information to forty million users, you've got to have some organization. So directories are essential. Now what Yahoo represents is a particular approach in how to make a directory. And since they've been doing it for the last year, collecting information about various sights and putting them under one umbrella with some cohesive organization, they've created some value there.

I'm not sure they won't sell out to some of the bigger suitors. Ultimately the phone companies and the network operators have to offer these kinds of value added services. And merchants who want to be on the Internet want to be found in the yellow pages or be found in some of these directories. And there will be people who operate those as businesses. Maybe Yahoo will be one of them. Maybe not. Not if it's just two guys, because you're going to have to have a lot more people than that putting a business together.

Q: Couldn't a company like Netscape do what they do better and faster?

JC: We have to have a directory. And that directory has to be richer and richer and better and better. For the moment, Yahoo supplies that. In the end I can't predict what we will do with regard to directories. We do have to have a very good comprehensive directory because people look to us for that.

It wouldn't be hard to do it better. It's just that it's got to be a point of focus and right now that's not our point of focus. Our point of focus is building better software to allow people to browse the web and to allow information providers to sell them a complete solution that allows them to serve their information on the web. We're not in the directory business right now.

Q: Where do you see the Revolution heading?

JC: I think the biggest change that's going to occur is the availability of connections to anywhere. The Internet, but evolved to be a full broad band system. In addition to that every computer will be a television. The same technology will be used for communications, video conferencing, delivery of digital video. It'll all be done digitally. Current broadcast systems will be gone. The entire system will be completely two-way interactive digital telecommunications system for audio, video, voice, data of any type. Pretty comprehensive sweeping changes in twenty years. Ask me over the next two years, it's a little harder to predict.

Q: Why are the next two harder?

JC: Cause we're at a really high rate of change right now. I think there's going to be a lot of new availability of stuff in a two to three year time frame, but it could slide a year or two either way.

In other words, I wouldn't bank on having full digital video for at least another three years. But having ordinary web access of the type that you have today is pretty straight forward expectation. It's going to get faster. But there will be some time in the next three to six years where video, two-way video and interactive video becomes very common. In twenty years it will be a fait accompli. It'll be done.

I will be able to twenty years from now, without a doubt, switch to some channel in Africa to find out what's going on right there, as opposed to waiting until the six o'clock news to figure out what occurred. Accessibility in all parts of the world will be varied because not all parts of the world are as progressive. But certainly throughout the United States and western Europe and, and Asia this will be true.

Q: Is the Microsoft Network a threat to the Netscape Navigator?

JC: Microsoft is a threat to everybody who is in the software business, because Microsoft can leverage the monopoly that they have in the operating system to their own advantage. So long as that's the case, you got to always look out for Microsoft.

Q: Well you've got a pretty huge market share...

JC: Well true. But we're a very young company. And there's got to be a lot of revenues and a lot of organization. We're only two hundred and twenty people. Microsoft is ten thousand. This is astounding that people think of us as the Microsoft of the Internet. We will get to be a nice healthy company. But I don't have even the slightest ambition of being as big as Microsoft.

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