For 20 years, the public relations machine behind Bill Gates and Microsoft has adroitly played the press to their advantage. Now, in the face of intense government scrutiny, Gates and his technology empire are fighting back with image overhauls. The machine is not working.
Last April, from his modest office at the Albequerque Police Department, Anthony Herrera sheepishly dialed the number the directory assistance operator had given him for Microsoft and asked to speak to Bill Gates's lawyer. Herrera, the police department's public information officer, was so unfamiliar with the computer industry and the world of big business that he recalls he first tried to reach Microsoft Corp. headquarters in New York, not Redmond, Washington. But he knew Microsoft chairman and chief executive William H. Gates III was the richest man in the world. And Herrera was certain Gates would want to know what Herrera was trying to tell him.
Brill's Content had been pressing the Albuquerque police for copies of Gates's arrest records since early March. (Gates cofounded Microsoft in Albuquerque in 1975; the fledgling company moved to suburban Seattle in 1979.) By late April, pressure applied using the state's open-records act was forcing the agency to release a December 1977 mug shot. The file on the arrest, kept separately from the more securely filed mug shots and FBI fingerprint cards, is nowhere to be found. No record exists to show on what charge Gates was arrested; Albuquerque Police Department (APD) officials speculate that it may have been just a stop sign violation (an "SS" appears on a small card kept with the mug shot), or that Gates was somehow detained and processed through the city's jail without any accompanying paperwork ever being prepared. However, New Mexico state law at the time held that a suspect be fingerprinted and a mug shot taken for felonies or misdemeanors that carried a jail sentence of at least six months. It is not clear how rigorously the APD followed that law at the time.
The APD wanted to alert Gates. But Herrera feared he sounded like some sort of crank as he told several Microsoft underlings he wanted to speak to Bill Gates's lawyer. He wouldn't say why. He didn't want to let just anyone know about his delicate business. Frustrated, Herrera handed the task off to APD lawyer Sharon Walton. She had more success. Chris Carletti, who does some of Gates's personal legal work as an attorney with Seattle's Preston, Gates & Ellis (where Gates's father is a partner), told Walton that he opposed the mug shot's release and asked for a copy, Walton says. Walton sent Carletti the mug shot on April 29, the day before Brill's Content received its copy.
The crimes or negligible misdemeanors of the 22-year-old Gates are of marginal interest. But it is illuminating to examine how Microsoft's lawyers, public relations experts, and Gates himself handled the surfacing of the potentially embarrassing mug shot. It shows Microsoft's PR machine in action, defusing the disclosure amid a major campaign to burnish Gates's image as the company faced the intense scrutiny of federal trustbusters.
At this level, PR is an intricate, strategic game, and for this story, here's where the players were positioned as both sides got hold of the mug shot: Brill's Content had told Microsoft that it was working on a story about the PR tactics used to shape the images of Gates and his company throughout the firm's history. But it had not yet mentioned its pursuit of Gates's arrest records in New Mexico. After Walton's call, Microsoft knew Brill's Content had the mug shot --and that the magazine couldn't publish anything until June at the earliest.
So on May 4, as Gates gave a speech to cable executives and reporters at the National Cable Television Association trade show in Atlanta, he flashed his own mug shot on the huge screen above the stage. To contort his boilerplate wonders-of-technology speech to allow for the insertion of the mug shot wasn't easy: "It is kind of amazing, all the things, how they, that are out on the Internet," Gates said somewhat awkwardly, according to CNBC's transcript of his speech. "In fact, I found this recently. This is actually a mug shot of me at age 21. And what happened here is that I was down in Albuquerque, working on personal computers. And I got a speeding ticket. And I had forgotten to take my license with me. And, sure enough, this is, this is the kind of neat stuff you can find on the Internet."
But Gates was not to telling the truth about how he had come across the photo. Instead of getting it on the Internet, he had been told about it by his top PR executive, Mich Mathews, after she got a call from the mayor's office in Albuquerque, Mathews admits. And Gates may have not owned up to what transgression had landed him in jail. Yes, Gates had been arrested for speeding without a license-in 1975. But that arrest had nothing to do with the 1977 incident that resulted in his mug shot. Again, the minor offense Gates cited wouldn't result in such treatment, assuming the legal guidelines for taking mug shots were followed. Through Mathews, Gates said he recalls being detained twice in New Mexico, once for speeding and once for driving without a license. (He was arrested a third time, in California in 1989, "on suspicion of driving under the influence as the result of some after-dinner racing" in a restaurant parking lot, says Mathews, a charge disposed of as a "speed contest.")
Brief, lighthearted mentions of Gates's mug shot show-and-tell appeared in several publications, including The Atlanta Journal-Constitution and the New York Post. None ran a copy of the mug shot; Microsoft has kept access to it tightly under its own control. In a gesture of Microsoft's characteristic openness, the company said it had made the photo available on its corporate website. But Brill's Content was unable to download this file from the website using nine different business and home computer systems running both Microsoft's browser and Netscape's. The one machine that successfully opened the file was a corporate Microsoft NT system, equipped with the 1997 version of Microsoft Office software.
This small episode is part of the larger story about the sophisticated, if sometimes flawed, public relations machine that has long served to position the images of Microsoft and of Gates-the company's chief spokesman and arguably its core brand. It is a machine that from its earliest days has embraced the press and cultivated close, long-term relationships between Gates and journalists at important publications. Microsoft has crafted a reputation for being extraordinarily open and accessible to the press, a practice it considers central to its corporate culture.
In an e-mailed statement of the company's PR principles, Mathews, 31, says that "everything we do in PR has, as its premise, a deep respect for the press, the First Amendment, and for the discussion of ideas1. Our entire business is founded on the notion that information exchange should be facilitated. This absolutely impacts the way we think about PR. We recognize that opinions are being formed rapidly and we want to be engaged in providing information, perspective, facts, and a point of view on where we are, at all times."
Adroit, aggressive PR did not create Bill Gates or Microsoft, nor does the reality of it negate Gates's accomplishments as a businessman or the appeal and supremacy of his company's products. But the story of Microsoft's ability to manage its image in the press, as well as its recent failure to do so, is a significant, if subtle and unexamined part of the larger story of how Gates and his company achieved their present dominance. At certain points in Microsoft's history, particularly as it initially fought for recognition among consumers and, later, as it slugged it out with International Business Machines Corp. for control of PC operating systems, its savvy PR tactics may have made the difference between victory and defeat.
BILL IS THE INDUSTRY
Portraying Gates as a boy wonder-turned-software genius was the first stage of Microsoft's PR effort. The goodwill and trust Gates and Microsoft had built up with the technology and business press through the 1980s paid off handsomely as the upstart Microsoft fought to establish itself as the industry's standard-setter. In doing so, it freed itself from its dependence on IBM, a crucial early partner and later a bitter rival for control of the PC desktop. Microsoft triumphed for good after the press greeted its Windows 3.0 operating system as a winner. Launched in May 1990, the new product eventually doomed IBM's OS/2. The Windows breakthrough also deeply harmed the market for Apple computers, which until then had been the consumer-friendly choice. What's more, it gave Microsoft a big boost in the booming applications-software business (such as word processing and spreadsheets) where Microsoft had struggled.
Paul Carroll remembers his first day on the tech beat at the Journal in the summer of 1986: He met Pam Edstrom. On his second day, she made sure that Carroll was having dinner with Gates at Windows on the World in New York. Carroll recalls Gates as unpolished, intense, and so wrapped up in talking about his company and the industry that he asked if the chilled mint pea soup was served cold.
What did Gates want? "He was looking for a relationship, but he and his advisers were smart enough not to say 'write about me, write about me,'" Carroll says. A couple of weeks later, Carroll dined at Smith & Wollensky, a New York steak house, with then-Microsoft president Jon Shirley. Soon, Carroll was meeting regularly with executive vice-president Ballmer, even for occasional morning jogs. "Steve tries to cajole anyone he can into jogging with him, so it makes perfect sense that when he learned Paul was a jogger, he asked him to join him on morning runs," says Mathews.
The tactic of keeping Carroll and other journalists closely apprised of Microsoft's strategy "turned out to be very valuable, especially when Microsoft's battles with IBM heated up," says Carroll, who now edits Context, a magazine on strategic uses of technology. "The ordinary tendency might have been to just sort of dismiss Microsoft and assume IBM controlled everything. By getting Gates out there, talking to reporters a lot, [Microsoft's PR operation] managed to give him a bigger image than he might have had otherwise."
As Microsoft tussled with IBM over technology leadership, its PR strategy may well have significantly determined the contest's outcome. IBM was generally closed to reporters and stingy with information. Microsoft spent substantial executive time and corporate resources briefing key reporters about its products and strategy. IBM tried to muscle then-partner Microsoft aside at one point by withholding from Microsoft details of its new PS/2 line of personal computers. Carroll notes that if it had been known then how tenuous Microsoft's relationship with IBM actually was, the resulting press coverage and reaction in the industry and on Wall Street could have been disastrous for the much smaller company.
But the press didn't catch on because Microsoft executed a PR bluff, Carroll says. Even though IBM had not yet shared product details with Microsoft, the software company scheduled meetings with reporters the morning of the PS/2 announcement in April 1987 and winged it. Microsoft "didn't know about IBM's plans," Carroll recalls, but "they appeared to know all [about those plans]. It was the clear intent of IBM to shut out Microsoft, and Microsoft managed a phenomenal job to convince everyone in the press all was business as usual."
Mathews, who joined Microsoft in 1993 after working for four years at one of its European PR agencies, notes that even though Microsoft's IBMrelationship "obviously had its ups and downs," their dealings were smoother by 1987. IBM allowed Microsoft to do advance briefings about the developments of the PS/2 operating system, she says, and Ballmer was dispatched to fly around the country to meet reporters.
Yet because reporters at that time, like Carroll, were unaware of deep strains in the relationship between Microsoft and IBM, the resulting coverage showed Microsoft occupying a strong position. "The software company that stands to benefit most is Microsoft," wrote Carroll's Journal colleagues Brenton Schlender (now at Fortune) and David Wessel of the PS/2 launch. The article also cited Gates claiming intellectual ownership of IBM's move. This "major milestone," the Journal quoted Gates as saying, "is something we've been crusading for for a long time." Years later, Schlender acknowledges he and his peers had missed much of what was really going on. "Microsoft soft-pedaled the problem, there's no question about that," Schlender says. "At that time, especially when PS/2 came out, the fact was that no one [in the press] was really aware of the tensions, and that's reflected in that no one tried to figure that out."
As he gained stature, Gates would exploit those tensions: In the summer of 1991, during one of his regular conversations with the Journal's Carroll, the idea of a book about IBM was discussed. Gates thought it would be a good thing for Carroll to write about how badly IBM was screwing up, recalls Carroll. To assist with the project, Gates offered him access to Microsoft's IBM files and promised his top executives would help Carroll if he wrote the book. Carroll's Big Blues: The Unmaking of IBM was published in 1993.
Earlier, another book-one never written-was dangled by Microsoft to journalists who covered it. In 1990, as the company released its crucial 3.0 version of Windows, Min Yee, an executive with Microsoft's publishing division, asked Fortune's Schlender if he would be interested in working with Gates on an authorized history. "Leave me alone, I'm working on a story. I'll deal with this later," Schlender recalls telling Yee. After his June 18 cover story, "How Bill Gates Keeps the Magic Going," appeared, Schlender did send a 10- or 11-page book proposal to Microsoft. He had a lot of company. The Journal's Carroll, Journal editor and former tech reporter Michael Miller, Business Week's Richard Brandt, and other reporters all had proposals into Gates as well. The contestants waited in limbo for months as Gates weighed their pitches. "It was an incredibly long process," says Brandt. "I expected an answer in a couple weeks, and figured putting Microsoft coverage on hold was no big deal."
"All the writers had expressed a desire to write a book on Microsoft, so that is why they were asked" to submit proposals by Microsoft Press, says Mathews. In the end, Gates didn't go forward with any of the book proposals. Steven Levy, then a columnist for MacWorld, had gotten an overture from Random House to do a book on Microsoft in 1991. Windows was going gangbusters by then, however, and Levy says that Gates told him he didn't want to be distracted from running his company.
THE "INFLUENCER MODEL"
Since the mid-80s and the days of Roland Hanson, Microsoft has pursued an elaborate "influencer model" in its PR and marketing strategy, according to former Microsoft vice president Lazarus, who worked there from 1985 to 1996. "We really believed in this influencer model," Lazarus explains. The strategy envisioned "a series of concentric circles where the consumer approach is very late in the process. Most people look to the influencers for what product to buy. A lot of efforts were focused on the trade press, [which was] worked from every stage," given comprehensive product previews far in advance and invited to extensive product-oriented events at Microsoft. Then there was the "secondary audience of business press covering the industry," Lazarus continues. "As we reached deeper and deeper into corporate America, the role of a Business Week or Fortune grew more important."
Consider again Microsoft's dealings with IBM. After its initial hit with DOS, Microsoft worked with IBM to develop OS/2, which was supposed to become the successor operating system for PCs. When the two companies parted ways, however, Microsoft had no reason to continue supporting IBM's OS/2 in addition to Windows. In turn, Gates and Microsoft were able to use their public relations prowess to win the chicken-or-egg process of having the winning product because they were perceived to have the winning product. The media's spin regarding who would win must have influenced purchasing decisions along the way. No one, especially corporate information systems managers, wanted to buy dead-end technology. The big trade press publishers made their bets early, and they bet on Windows. CMP Media Inc. acquired Windows andOS/2 magazine in 1991 and relaunched it the next year simply as Windows Magazine. Ziff-Davis Publishing Co. launched Windows Sources in February 1993. Neither ever fielded an OS/2 title.
In the business and consumer press as well, the buzz was that Windows 3.0 looked like the winning product. In the October 1, 1990 Business Week, Brandt described Windows as a "hot new product" and said that "the expensive switch to [IBM's] OS/2 [was] unnecessary for most people." And in Fortune's February 25, 1991 issue, Schlender had this to say about the Windows-OS/2 battle: "Now Microsoft is stoking a new strategy to make Windows the dominant operating system software for desktop PCs in the 1990s. [O]nly 300,000 copies of OS/2 have been sold. For one thing, the system is intimidatingly complex."
Mathews dismisses the role PR played in carrying the day for Windows. "We won on the basis of quality of the product," she says. "Windows 3.0 filled a technology vacuum that OS/2 did not fill." Besides its popularity with consumers, Win 3.0 garnered widespread support from software developers, notes Mathews. "Every month preceding the launch of Windows 3.0, it became more apparent to us that it was the product the developers had been looking for. The momentum that built up around it surprised even us."
As critical "influencers," software developers could create applications for either Windows or OS/2; it was often impractical for them to invest in both at once. To help chart the flow of development activity, many computer users and, increasingly, journalists, logged on to the freewheeling on-line bulletin boards for the real skinny on how Microsoft and IBM products were viewed by hard-core techies.
To fight on this front, Ballmer and Lazarus in the late 1980s organized a group of Windows "evangelists"-Microsoft employees whose sole purpose was to influence developer groups, trade magazine coverage, and the spin on Microsoft products in on-line bulletin boards and forums. The number of evangelists, who worked independently of Microsoft's official PR operation, rose from two in 1987 to about 50 in the mid-1990s, says Lazarus.
The evangelists were charged with proselytizing as many independent software developers as possible to write for Windows, not OS/2. IBM had a corporate policy at the time that barred any IBM employee from disparaging a competitor's product. Microsoft had no such restriction and exploited the situation masterfully. "We took maximum advantage of it," says Rick Segal, who led a 15-member evangelical team. As his group lobbied the developers and the forums, IBM had no idea of the strategic importance of these groups, he says, and the behemoth was vulnerable to the evangelists' attacks. "The issue that mattered most to me was how to make sure OS/2 never got a foothold to take over our operating system, our franchise."
Part of what Segal's group did was figure out ways to help the computer trade press present Windows in the best light. "There was no higher priority in the company than if a reporter was having a problem," he says. "The whole key to this whole deal was to make sure no press person ever gets an unsatisfactory experience with our product." Microsoft developed reviewers' guides that walked reporters step-by-step through product features and explained how they topped the competition. In reviews that were eventually published, Segal claims, many repeated precisely those points. The tactic "was the result of us thinking, 'We know these people are on deadline, and we know they're lazy, and we can do their work,'" Segal says. (Mathews says characterizing Microsoft's views of reporters that way is "flatly inaccurate.")
In 1992, the Microsoft evangelists began paying attention to on-line bulletin boards. "All of a sudden, press people started hanging out on CompuServe [home of the influential Canopus forum], and started using the forums as sources of information," says Segal, who monitored about 25 forums. Identifying themselves as Microsoft employees, Segal says, he and his colleagues would post retorts to anything they saw that portrayed Windows or Microsoft in a bad light.
IBM began to understand what was going on, and it appointed a lone OS/2 evangelist, David Whittle. He gamely joined the fray, posting items on the Canopus forum, which Microsoft now regarded as a hotbed of anti-Windows, pro-OS/2 sentiment, says Segal. The evangelists jumped on the outgunned Whittle. "It's outrageous how IBM sent him in with a pea shooter," recalls Segal. "We were going to cream him, pick him apart, slaughter him."
Their assault began to backfire, however, as forum regulars decried "big, bad Microsoft picking on this poor guy from OS/2," Segal says. According to Will Zachmann, then a PC Magazine columnist and industry researcher who ran the Canopus forum, Microsoft went even farther in its anti-IBM tactics.Zachmann and others discovered that a frequent poster named "Steve Barkto,"who claimed to be a corporate technology officer from Oklahoma unhappy with his OS/2 software, had opened his CompuServe account with Segal's Microsoft corporate credit card. What's more, Barkto was logging in from the Seattle area, not Oklahoma. Segal won't discuss the matter; Mathews also declines comment, but says "it is against company policy for an employee to falsely represent Microsoft and [his] identity."
"To me, it was just one more straw on a pile of evidence of how Microsoft does its business," says James Fallows, the former U.S. News & World Report editor who wrote about technology for The Atlantic Monthly at the time and was a Canopus regular. "It just suggested to me, as an episode insignificant in itself, to be revealing of a general approach to the game. And the game [for Microsoft] is: Do whatever it takes to win. And poor OS/2 would have to be eradicated. OS/2 is still better than Windows 95."
The sentiment that OS/2 is superior to Windows has a cult-like following in some techie circles, but it's virtually impossible for an objective outsider to make an assessment at this late date. Interestingly, Segal, the OS/2 slayer, claims IBM had the better product. "OS/2 was superior in every way, at the time," Segal says. "It kept the machine from crashing. There isn't a Microsoft person on the planet-if they're being honest-who wouldn't say that absolutely. In pure architecture, OS/2 and its technology were better. But IBM couldn't market its way out of a paper bag."
History is written by the victors, and Segal, who retired from Microsoft last fall, says that what he and the evangelists accomplished for Windows could be cast as either villainous or heroic. "Some call the Minutemen 'freedom fighters,'" he notes. "Others say they're terrorists. Depending on your side in the OS/2 wars, we were either terrorists or patriots."
However characterized, there is no dispute that Microsoft vanquished IBM in the crucial fight for desktop control. Certainly IBM-and, in its heyday, Apple Computer-had their own substantial marketing resources and, in Apple's case, a charismatic spokesman in Steve Jobs. But Mathews insists that a portrait of Microsoft as a winner by dint of press tactics and marketing clout is false. "To say that Microsoft is more of a marketing company than a technology company is wrong," she says. "We sell software, not PR or marketing services."She calls IBM a "stellar marketing company, but that did not help OS/2," and notes that "if you look at the Mac1 one of the key reasons they have a hard time is because they didn't do enough to help people understand how to write for their platform and how to build their business and co-market their products." Concludes Mathews: "This is why we have evangelists. And so, these days, does Apple."
With his days as an innovator long past, Gates found himself on a new stage as he vanquished IBM and a slew of once-formidable software competitors. Expectations of him rose. Microsoft now was the most pivotal company in the industry, possibly in the country, and Gates needed to act the part of the dignified industry visionary. But initially, he had great trouble tailoring his behavior to match his new role.
Stewart Alsop had covered Gates for a decade when, as editor of industry trade magazine InfoWorld, he drew Gates's wrath by publishing a 1993 story critical of the just-released Microsoft DOS 6.0. InfoWorld's testing lab found DOS 6.0, which was still an important product for Microsoft given the huge installed base of DOS machines, to be riddled with bugs. As the story went to press, Microsoft "dropped on us like a ton of bricks," Alsop recalls. Three Microsoft employees came to InfoWorld's lab to scrutinize its testing procedures. Alsop says that the chief intent was to prove InfoWorld's testing lab inept, rather than try to fix bugs in an already-shipped product.
"The way they apply pressure is not to go to the publisher or screw around with advertising," says Alsop. "They apply pressure through logic. They said that this was a major product that spent months with [Microsoft] testers. And [Microsoft's testers hadn't] been able to find flaws in DOS 6.0. Now you're saying it's broken, accusing us of shipping a flawed product. Then they start picking apart the way we test."
InfoWorld stood by its story and, after several days, Gates took his case to Alsop personally. "Bill wanted to find out how much we believed in the story," Alsop recalls. "I was on the Dallas [freeway], on my cell phone. And Bill was yelling at me, 'You don't have anywhere near the resources we do. You're making us look bad.' I was kind of shaken afterwards. This is a very powerful guy in the industry, and he can be pretty intimidating."
Alsop's May 10, 1993 column described the encounter, which had "shown me an entirely different side of Microsoft ... [O]ur dealings with the company have nearly persuaded me that the only thing it is interested in doing is proclaiming that DOS 6.0 has no bugs and that any problems that occur in the use of the product are the fault of another vendor-or even the users." What's more, Alsop wrote, Gates had called him and his publisher, accusing them of incompetence, intentional sabotage of DOS 6.0 in its tests, anti-Microsoft bias, and "destroying the chances for the product's success."
InfoWorld came in for more abuse in March 1995, when the chief of its testing lab, executive editor Nicholas Petreley, wrote a widely picked-up column identifying troublesome bugs in the final prerelease version of Windows 95. After his scoop, Petreley says he was cut off from getting early versions of Microsoft software, the lifeblood of technology journalists, especially those who evaluate products. "What it means is that I can't write in a timely manner," he says. "I just have to choose other topics." Mathews disputes Petreley's notion of a personal ban:InfoWorld "has historically received and currently receives Microsoft software for review purposes," she says. When told of Mathews's comments, Petreley said his difficulty in obtaining review copies of Microsoft products had lasted three years-until a week after Brill's Content asked Mathews about the supposed ban. A Wagged staffer then called Petreley and offered to remedy the situation.
Petreley charges that Microsoft does not like to cooperate with the few journalists who understand the nitty-gritty of software code, because it cannot win the game at that level. Microsoft "bend[s] the ear of those people at the top of the press chain, the people who have the least amount of technical knowledge," says Petreley, now an InfoWorld contributing editor. The company "presents its case as strongly as possible at that level, and works its way down, and [tries] to get its results that way. It's very clever."
According to reporters who covered him in the 1980s, Gates often reacted harshly to stories he didn't like. But with the high profile Gates had achieved by the time of his run-in with Alsop, if he flew into a rage, that was newsworthy, too. Gates's May 19, 1994 appearance on CBS's Eye to Eye with Connie Chung was likely his most embarrassing display during this period.
Chung irked Gates by mispronouncing MS-DOS (it's "doss," not "doze," as she said), and broke what Gates had thought was a promise not to ask personal questions (she pressed him on how he had fallen in love with his wife, a Microsoft marketing manager). Chung then brought up a patent-infringement case Microsoft had just lost, confronting Gates with a clip from the plaintiff, who described Microsoft as using "knife fight" tactics. Gates ripped off his microphone and walked out of the interview. The show drew considerable notice for "catching" Gates in a rage. "Ms. Chung asked a series of questions that Bill found offensive, which is why he ended the interview," says Mathews. "People forget that Bill is human, too."
The botched prime-time TV appearance highlighted a flaw in the strategy of using the temperamental Gates as the face of a now-dominant Microsoft. When Gates behaved badly in interviews up until that point, he was saying, in effect, that "he didn't care" about how he was perceived, says a source familiar with Microsoft's PR operation. "But great big public figures can't do what they want to do. They have to play the game." Either Gates had to temper his behavior to fit his new, higher-profile role, or Microsoft would have to rebuild or rethink its media strategy.
WHEN THE NEW YORK TIMES SAYS YOU'RE A MONOPOLY...
Microsoft had signed a consent decree in 1994 Justice Department to settle antitrust issues. Coverage of the years-long antitrust investigation had been remarkably mild, generally limited to stories pegged to official meetings. Allegations of any wrongdoing were usually attributed to government sources, and original reporting that independently examined Microsoft's business practices was scarce.
A cover story by James Gleick in The New York Times Magazine on November 5, 1995, was unusual because Gleick went out and found evidence in the market that suggested Microsoft was acting as an anti-competitive monopoly, despite the previous year's consent decree. Gleick's lead anecdote, about how the company rigged its Windows software to be incompatible with a competing web browser, would become one of the focuses of the antitrust suit filed against Microsoft in 1998.
Microsoft had cooperated with Gleick, granting him an interview with Ballmer and a dinner with Nathan Myhrvold, its resident "deep thinker," as he spent several months reporting the piece. An interview with Gates was limited to a hurried phone call from Gleick's Seattle-area hotel room. "One of the many elements of the carrot-and-stick technique Microsoft uses with the press is face time with Bill," says Gleick. "It's a valuable commodity with some reporters, who like to be able to say to their editors, 'I was talking to Bill Gates...' I've seen how the process works. I've seen how proud some reporters are with their access to Gates, though it might be a yearly face-to-face meeting. And they're not willing to sever ties to Microsoft to the point that they don't have that kind of access."
For Microsoft, Gleick's story was a public relations disaster. The ugly allegations that Microsoft won by not quite playing fair had supposedly been put to rest by the consent decree. Gleick's article revived the issue again.
Microsoft fought back by waging a "whispering campaign" against Gleick, he says. He had sold an Internet company he founded to PSI Net in 1995, and still owned PSI Net stock worth about $32 million at the time of the article. PSI Net is an Internet service-provider, and Microsoft then owned 15 percent of UUNet, another Internet service-provider. Although Microsoft had not challenged Gleick's impartiality before the story was published, it sought afterwards to make his stake in PSINet an issue that invalidated his reporting. Waggener Edstrom staffers "called a number of reporters and tried to sell them this as a story immediately after my story ran," says Gleick. In the end, no mainstream publication ran a story about Gleick's alleged conflict of interest. In December, The New York Times Magazine published a letter from a Microsoft PR executive saying the magazine "should have disclosed that the article was written by a major investor in one of Microsoft's competitors." In an editor's note, the Times stood by Gleick, saying PSINet was not a direct competitor to Microsoft.
The campaign to get Microsoft beat reporters to write stories critical of Gleick wasn't the work of an overzealous PR staffer, Gleick asserts. "Ten months later, I happened to bump into Gates at Stewart Alsop's 'Agenda' conference," Gleick says. (Alsop, now a Fortune columnist and venture capitalist, runs the annual conference for high-tech executives.) "I directly asked Bill Gates about this. He said yes, he did know [about the alleged smear campaign], and that he personally approved the list of reporters they were calling. I was really angry about it. I said to him, 'This is dishonest. Do you actually think my ownership of PSI stock had anything to do with what I wrote?' Gates is not an idiot. He said no. He certainly was not in any way embarrassed about it. He wanted me to know that his PR people do not do things he doesn't know about."
Through a spokesman, Gates disputed Gleick's version of events, confirming only that the two discussed Gleick's alleged conflict of interest. The idea of a PR campaign never came up, says spokesman Mark Murray. "There is no way that Bill would ever be involved in that level of day-to-day minutiae of our media relations."
ATOP THE CONVERGED WORLD
On the heels of the Connie Chung blowup and inanticipation of the damaging New York Times Magazine cover story, it was clear that Gates needed some help if he was to grow into his role as a technology visionary whose insights would transform the economy and enrich the fabric of everyone's lives. To pull it off, Gates needed a different PR team.
Gates brought in more polished PR handlers from the world of entertainment. In August 1995, the company hired Josh Baran, a veteran Hollywood PR counsel, as its senior corporate PR executive. Microsoft also dumped Edelman Public Relations Worldwide, the firm that had been representing it in Washington, D.C., on antitrust issues, and retained Kenneth Lerer, a PR executive with New York-based Robinson, Lerer, Montgomery whose clients have included Viacom, NBC, and David Letterman's production company.
The new PR advisers helped Gates spiff up his image and establish him as the technology partner of choice in the hazily emerging world of information, media, and technology convergence. By the early 1990s, Gates already was cultivating media moguls; he invited News Corp. chieftain Rupert Murdoch to pay him a visit at Microsoft headquarters and hosted media entrepreneur Barry Diller there as well. In 1994, Gates attended investment banker Herbert Allen's media-mogul retreat in Sun Valley, Idaho, for the first time. "The Allen thing opened up that whole world for him," says a Microsoft PR source from that period. "He made friends with [Steven] Spielberg, [David] Geffen." Becoming the technology partner for these people became "critical to his vision...to be the king of the world."
These relationships and Gates's heightened profile in media circles were beginning to pay off. In December 1995, after flirting with a big investment in Ted Turner's Cable News Network, Gates struck an agreement with General Electric Co.'s NBC to launch MSNBC, a cable and Internet news service. In 1995, NBC anchorman Tom Brokaw did a flattering, hour-long prime-time profile of Gates, titled "Tycoon." Although critics in the trade press would continue to pick apart Microsoft's products, and seasoned technology journalists like Gleick would hold Gates's feet to the fire on occasion, the NBC special represented the big time: Gates as the titan of American business had arrived.
By the August 1995 launch of Windows 95, Microsoft's huge PR machine was at the top of its game. Although Windows 95 was "not any fundamental step forward," recalls New York Times technology writer John Markoff, the media hullabaloo surrounding the launch on August 24 was a tour de force. It created such excitement for the product that many computer retail stores opened at midnight because customers couldn't wait to buy their copy of Win 95. The theme of the coverage was remarkably consistent: Windows 95 was the future, and Bill Gates, the amiable Information Age visionary, wanted nothing more than to help you get there.
Gates was now so famous that he could choose to bypass the media and communicate directly to the public. A notable effort was Gates's 1995 book, The Road Ahead, co-written with Myhrvold and Peter Rinearson, a former Seattle Times reporter. In the book, which took nearly three years to produce, Gates mapped out the course of our collective future. The jacket photo was taken by celebrity photographer Annie Leibovitz; it shows a smiling Gates, clad in a crewneck sweater and his hair lightly tousled, with a pastoral highway reaching to the horizon. PR adviser Lerer helped make sure the publicity tour for the book exposed Gates to a wide, non-techie audience. Lerer arranged for Gates to appear in a skit on Late Night with David Letterman in November 1995 and to tape a segment for MTV.
Some reviewers panned the book, but it was enormously popular with the general audience for whom it was written and sold more than 2.5 million copies. Gates is working on a second book, one that will tell executives how technology can help them run their businesses better.
In 1995, Ballmer, who always has overseen PR, came up with the idea that Gates approach the New York Times Syndicate to write breezy biweekly columns. Gates prepares the columns by commenting on a topic via a tape recorder in a regular meeting; an in-house PR staffer then produces such pieces as "A Las Vegas treasure hunt:Comdex 1997" and "Ten attributes of a good employee." While the Times Syndicate won't divulge which papers carry the column, Gates's editor, Gloria Anderson, says it is more popular in overseas markets. All the better; as PC sales take off abroad, consumers making their first PC purchases can feel more confident buying from a famous world leader who appears in the local newspaper. Gates's "time is very scarce and this is a great way of communicating with a broad set of people both domestically and internationally," says Mathews.
On his home turf, Gates and Forbes magazine organized a "CEO Summit" for spring 1997, inviting the chief executives of more than 100 large companies to Seattle. The summit came as Microsoft pushed its Windows NT operating system and its concept of a "digital nervous system" to large corporate users, a market it wanted to crack. As an added attraction, Gates welcomed the executives to his new $50 million house on Lake Washington for dinner. The summit was billed as a chance to discuss the future with Gates, the visionary. The subtext: convince the captive CEOs that the first step toward that future was their adoption of Windows NT.
In case the chief executives wanted an independent assessment of how significant NT would be, Fortune ran a cover on just that subject in its May 26 issue, shortly after the summit had ended. The headline was "He Wants All Your Business-and He's Starting to Get It." The subhead proclaimed that Windows NT "is the real future of Microsoft."
"Microsoft controls the editorial agenda in a way other companies can't," marvels a public relations executive at another large technology company. "All they have to do is offer up Bill, and people will come and write down what he says, whether it's newsworthy or not. If it's coming out of his mouth, people will listen." In short, once Gates declares a Microsoft product important, the press generally treats it as such.
Sometimes, the news he is pitching proves to be important, as when Gates discovered (albeit belatedly) that the Internet would command Microsoft's future. Other times, Gates turned out to be wrong-as with such now-forgotten products as Microsoft Bob, a cartoonish PC operating system, or MSN, when it was a proprietary on-line network designed to compete with America Online. Even with its failures, Microsoft products enjoy a promotional aura other companies can only dream of. When its products are plagued by bugs or lack cutting-edge technology, their PR halo still prompts many consumers to adopt what they perceive will become the industry standard.
To be sure, Mathews makes the legitimate point that buzz is not the decisive factor. The product itself has to be good. "Creating confidence and credibility is important to the long-term success of any software product," says Mathews. "But history clearly shows that perceptions alone aren't enough." She ticks off the NeXT computer (Jobs's post-Apple venture), Apple's Newton personal digital assistant, and even Bob as failures that never lived up to their hype. "The majority of the press was saying that these products were unique and innovative and would define new dimensions of technology,"Mathews notes. "But users, who have the final vote with their pocketbooks, didn't walk into the stores and buy these products, even though they were written up by all the press as positive breakthroughs and had tons of marketing money and PR effort behind them."
A NEW MAN
Last fall, the Department of Justice sued Microsoft for alleged violations of the antitrust consent decree signed in 1994. Microsoft responded combatively, and the press, rightly or wrongly, began to focus on how an arrogant Gates and his cohorts seemed to thumb their noses at the government. Applied Communications, a Silicon Valley PR firm, tracked the use of seven different adjectives describing Microsoft in 450 publications from February 1997 through mid-April 1998. As the Justice Department stepped up its investigation, use of the word "unfair" jumped more than sevenfold from July to October 1997, "anticompetitive" rose nearly tenfold by October, and "arrogant/arrogance" surged similarly by January.
Microsoft PR then shifted gears into a campaign to make Gates appear a more genial and accessible character to the general public. Its PR operation had long trained its efforts on first establishing that Gates was more powerful than his company's size suggested, then on cultivating and persuading a relatively small circle of influential journalists that Microsoft products were undisputed winners. The new PR direction was a tough transition to make, especially under such close scrutiny.
Josh Baran and Ken Lerer, the two media and entertainment PR veterans who had been hired by Gates in 1995, had left the scene. Baran, who never really fit in with Microsoft's techie culture, departed in 1996. He now is a PR adviser to the Dalai Lama, among others. Lerer ceased working for Microsoft in early 1997, after some within Microsoft's interactive media division argued that his new relationship with America Online posed a conflict. Since last year, Edelman Worldwide, led by vice-chairman Leslie Dach in the firm's Washington, D.C., office, has been rehired to handle Microsoft's government and antitrust-related PR.
Microsoft's PR operation, once run cohesively by Pam Edstrom and her partner, Melissa Waggener, has become huge and unwieldy. Wagged still tends to a great deal of Microsoft's product PR, but it's unclear how much authority it has in setting the image strategy for Gates and the company. Microsoft's in-house corporate PR department of about 20 people is headed by Mich Mathews; another unit, run by general counsel William Neukom, shares with her oversight of the government affairs PR done by Edelman. Although one source familiar with Microsoft's PR operation says the division of responsibilities has resulted in "a civil war between PR and legal," Mathews says "our collaboration is probably stronger than it ever has been."She adds that she shares season tickets with Neukom and sits next to him at Seattle Supersonics basketball games. "On the rare occasion when we see things from a different point of view, that is entirely healthy."
For years, Gates's image machine worked beautifully-so smoothly that no one noticed the machinery, only the results. Now, however, the image campaign has begun to falter, under siege by a more skeptical press and rivals who have finally perceived a vulnerability. The more sophisticated journalists who have long covered Gates consider his regular-guy stunts to be staged and unconvincing, and their wise-guy commentary on Gates's efforts to soften his image has doomed the makeover. Despite its PR army and outside strategists, Microsoft appears unable to master this treacherous new terrain. "Microsoft is at the point now where any idea, any tactic is criticized," says a source familiar with the company's PR strategy. "It's definitely much more difficult."
At this juncture, the company appears strategically frozen. For the first time in its history, Microsoft PR seems to lack a convincing plan for its man. "Inside the industry, Microsoft's whole approach works fine," says Stewart Alsop. But "out in the world, once it's in the mainstream, it doesn't work anymore. It's Microsoft's weak underbelly, because they don't understand how people see this stuff."
PLAYING ON ASTROTURF
This spring, Edelman prepared an elaborate plan for Microsoft to target attorneys general, opinion leaders, and consumers in 12 states that were considering antitrust actions against the company. But such tactics (called "Astroturf" campaigns in the PR trade) only work if the media are unaware that their impressions are being so elaborately manipulated.
In a March 30 confidential memo addressed to two Microsoft PR executives outlining the plan, Edelman identified well-connected public relations firms in each state to manage the effort locally. Those involved met at a hotel near Chicago's O'Hare airport on April 6 to go over the plan, which was to be executed almost immediately. The firms, which would have no overt link to Microsoft, were to generate a variety of stories in their local media, from feel-good pieces about Microsoft "empowering" kids to op-eds written by Edelman-paid freelancers but bearing the name of a seemingly unaffiliated person.
Greg Miller, a reporter at the Los Angeles Times, obtained a copy of the memo. On April 10, the Times ran the scoop on its front page:"Microsoft Plans Stealth Media Blitz." After the Times story broke, Microsoft PR largely succeeded in blunting its impact by arguing that the tactics outlined in the memo were common for a big company.
A PR executive familiar with Microsoft's preparations for the Astroturf campaign tells a different story. This executive, who participated in some of the conference calls Microsoft and Edelman PR executives held with the regional PR firms, says that deception was a key component of Microsoft's plan. "This was total obfuscation. They wanted to hide that they were behind this." For the groundswell of support for Microsoft to be credible, it had to appear to be unconnected with the company. "Third-party endorsements are the big thing in the PR business, so there's believability," says the executive. For the plan to work, Microsoft and Edelman had "to hide the fact that all the witnesses were bought and paid for by Microsoft."
This executive says the plan would likely have cost Microsoft as much as $5.4 million to hire the targeted 12 firms for an initial four- to six-month campaign. All payments were to be funnelled through Edelman so that the regional PR firms could deny they were representing or being paid by Microsoft, this source says. Microsoft and Edelman were gung-ho, the source adds, seizing on the Astroturf plan as a sure-fire fix for Microsoft's image woes, and perhaps for its antitrust problems with the state attorneys general. Mathews disputes the budget for the plan, saying it was "not more than $250,000 as presented." She also says "it's plainly inaccurate to suggest any firm retained by Microsoft would not identify itself as working for Microsoft."
The wide attention paid to the Times story meant that Microsoft had to step in and try to push its version as reporters at several news outlets who cover Microsoft prepared to follow up on the piece. Mathews says that she "proactively" gave copies of the Edelman memo to some of the beat reporters.
While Mathews won't specify which reporters got their copies from her, Elizabeth Corcoran's next-day story for the April 11, 1998, edition of The Washington Post described the full memo "which the Post subsequently obtained." Her article pressed the point that many of the tactics in the memo were standard corporate practice. "Carefully fashioning a media campaign to convince people to buy products or think warmly of a company is the bread-and-butter work of public relations firms," the article said. Asked about her story, Corcoran says, "I don't want to confirm or deny that Microsoft gave me a copy of the memo. I may have gotten a copy from Microsoft; I may also have gotten it from other places."
Other stories, written by reporters who did not indicate they had copies of the Edelman memo, were more harsh. In the April 16 New York Times, reporter Peter Lewis described it as a "propaganda plan." On April 13, CNNfn's Steve Young reported that "Microsoft was trying to engineer the false impression of spontaneous grassroots support," and that the campaign "blew up in the software giant's face."
UNHYPING WINDOWS 98
"It'll be quick," says Wagged's Cara Walker apologetically as she rushes Stephanie Miles into a meeting room at the San Francisco Ritz-Carlton. Miles is a reporter for CNET news.com, a technology news website. In the bare room, seated at a table with a sweating pitcher of ice water, is Rob Bennett, Microsoft's group product manager for Windows 98.
It's 10:05 on the morning of June 25, the consumer launch date for Windows 98, Microsoft's new operating system. Bennett has been doing interviews like this one since 6 A.M.; anything he says to Miles is embargoed, or can't be published, until 5 P.M. The purpose of such interviews is to brief the press covering the event on the big news of the day, so that everyone can prepare their stories with theoretically consistent Microsoft-stressed themes ahead of time.
But Bennett isn't saying anything even moderately newsworthy. He reveals that advance orders for Win 98 have shown "super strong momentum." He carefully stresses the big news that Gates will be revealing at the launch event: Gates "will predict that by 2001, home PC penetration will reach 60 percent."
In her allotted 25 minutes, Miles politely strains to find any topic that Bennett will answer with more than a canned answer. She has no luck with questions about the antitrust case. The best detail she can get: Bennett says that the 200-person team that worked for three years on the new product will be rewarded with a "fleece," or sweatshirt.
At 10:28, Walker interrupts sunnily: "We have to wrap up!" Miles folds her notebook and heads back to the CNET newsroom to file her story, which recites Gates's predictions on PC penetration. She doesn't quote Bennett.
With Win 98, for perhaps the first time in its history, Microsoft is trying to play down the distinction of a major product launch, knowing that hype is its enemy until the antitrust suits are resolved. That's bad news for the media organizations that have grown accustomed to feeding on the fare Microsoft PR dishes out. "We've been writing the same things [about Win 98] for the past several months," laments Jai Singh, news.com's editor. "This is kind of dragging along, a yawner."
Three years ago, when Microsoft launched Win 95, the company's PR machine expertly calibrated the hype, and Win 95 was everywhere. This time around, with a federal antitrust trial scheduled to start September 8, and after a bruising spring that saw the company's PR efforts backfire, Microsoft is laying low. Instead of holding the Win 98 launch at headquarters in Redmond, with celebrities, swarms of journalists, and developer partners on hand as it did for Win 95, Microsoft has opted for a modest presentation for fewer than 1,000 people at an old warehouse on San Francisco Bay.
Gates speaks for 20 minutes on technology and society. Afterwards, he lingers for a few minutes, nodding for the TV cameras as one of the developers demonstrates a product. Gates then quickly slips out a side door.
He gives no interviews.
Have an opinion about what you just read?
Join the discussion on our message boards.
a letter to the editor.
We post some of the letters we receive, and may edit for length and clarity. Please tell us if you don't want us to share yours.
books at 25% below retail prices.
(for free) lively commentary from leading opinion makers, cultural figures and book experts.
Spend $25 on anything at Contentville and get a free subscription to Brill's Content magazine, plus a membership in the Citizens' Club, which gives you a 5% discount off already-low prices. Shop NOW and get your FREE subscription!
|DISCUSS this article on the message boards.|
| a letter to the editor.
|READ recent feedback.