Meta Isn't Netscape. It's Microsoft.

Who Gets Paid in AI | Part 2 of 3

By Hans Albrecht, Options With Hans

In August 1995, Netscape went public, and the stock more than doubled on its first day. I recall the moment vividly - everyone was glued to the overhead TV monitor. Netscape's Navigator browser was how most people saw the internet for the first time. It had the lion's share of the market.

Then Microsoft showed up. It didn't need a better browser. It put Internet Explorer on every Windows computer and gave it away, because Windows paid the bills. Netscape was still charging businesses for a license.

You know how this ends. In 1998, Netscape agreed to sell itself to AOL. By 2001, Internet Explorer had more than 90 percent of the market.

I've called Muse the Netscape moment for AI agents, the point where this stuff got easy enough for regular people to use. But here's the twist. Meta Platforms (META) isn't Netscape in this story. It's Microsoft.

In Part 1, I showed you the smart part of AI is getting cheap, so the money moves to whoever owns the habit. Microsoft owned the desktop. Meta owns the scroll. About 3.6 billion people use Meta's apps every day, and Muse lives right inside WhatsApp. It doesn't have to go find customers. They're already in the building.

It's working, too. Ten days after launch, Muse was the No. 1 free iPhone app in America, ahead of ChatGPT. And it's only in the U.S. and Canada so far. Most of those 3.6 billion people can't even get it yet. That's runway.

Now the part that should scare every AI lab. Microsoft could give the browser away because Windows paid the bills. Meta can practically give the smart part away because ads pay the bills. Meta brought in $60.8 billion last quarter, almost all of it from ads.

So Muse is free for up to 100 million tokens a week. Developers can use Meta's Muse Spark model for $4.25 per million output tokens, while Anthropic's Opus 5.5 charges $20. Let Meta learn from your prompts, and it cuts that price about 95 percent, to 20 cents. Zuckerberg has said the pricing from "some of the other labs is very extreme and has very high margins." He's coming for those margins.

Microsoft could give the browser away because Windows paid the bills. Meta can give the smart part away because ads pay the bills.

Sound familiar? It's the oldest play in Facebook's book. You never paid for Facebook. You paid with your attention. Now the smart part is nearly free, and you pay with your habits. Remember the cheaper chicken from Part 1? Meta's serving it at every table.

Then it starts making you money. On launch day, Zuckerberg said, "we think that this thing is actually going to make you money and save you money." That's the same pitch I made in Part 1, straight from the guy writing the checks. Make life easier, save people money, help them make money, and they don't leave.

And Meta is pushing right into business. Meta says roughly one in three early Muse users hooked it up to a business account. At the end of September it launched Muse for Small Business, which plugs into QuickBooks, Shopify, Stripe, Slack, even Klaviyo, the platform I use to send my emails. Zuckerberg also announced Meta Enterprise Platform and called it "the next major pillar" of Meta's business.

This is the loop that gets me excited. Muse helps a small business find customers. That business spends more on Meta ads to find more of them. And when Muse buys something for you, Meta wants a cut. At Connect, Zuckerberg said, "over time we will profit by taking a small fee from transactions." Meta gets paid on the way in and on the way out.

Now the other side, because there always is one. Amazon.com (AMZN) blocked Muse from shopping on its site, saying the agent didn't identify itself and appeared to store customers' logins. Meta denies it. That's the Agent Wars I keep talking about. Every walled garden is going to fight over which bots get through its door, and trust matters more here than the market thinks.

It isn't cheap, either. Meta plans to spend $130 to $145 billion on capex this year. Free cash flow shrank to $784 million last quarter, and analysts now see it going negative this year. And Meta's last big enterprise product, Workplace, never lived up to its early promise. Meta pulled the plug on it. Small business is the wedge. Enterprise is the stretch.

Look, Netscape got there first, and it lost. Meta doesn't need the smartest model. It needs to make life easier for 3.6 billion people before anybody else does. Capture them early, and why would they ever leave?

Part 3 lands Thursday: how I'm positioning, who else wins when everybody has an agent, who gets squeezed, and how I'd own Meta without betting the farm on a company that's still spending like a drunken sailor.

Trade smart, stay hedged,

Hans

P.S. The number I'm watching next: how fast Muse rolls out beyond the U.S. and Canada. Every new country opens another wing of the world's biggest waiting room.

What to put on your sticky note

• Meta isn't Netscape. It's Microsoft: it owns the place people already are.

• Ads pay the bills, so Meta can practically give the smart part away.

• Muse gets paid on the way in (ads) and on the way out (transaction fees).

• The risks are real: bot blocking, trust, and heavy capex squeezing free cash flow.

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