Just a few days after Valentine's Day, a piece of explosive news spread rapidly: the internet industry giant Egret's large-scale employee stock ownership plan.
This had already caught the attention of many media outlets, and most reports speculated that Simon Westeros would try to minimize the amount of stock rewards distributed. However, when the stock distribution plan was announced—valued at 25% of Egret's total shares and worth a staggering $25 billion—it far exceeded industry expectations, leaving everyone in shock.
$25 billion—an amount greater than the entire fortune of many traditional tycoons—would undoubtedly create hundreds of new billionaires and millionaires if fully realized.
Had Simon Westeros gone mad again, suddenly giving away so many shares as rewards?
Hundreds of journalists from around the world quickly flocked to San Francisco because of this news, and more and more details began to surface.
Amid the whirlwind of rumors, one confirmed piece of news from Egret finally brought some clarity: the $25 billion employee stock ownership plan was real. However, these stocks were not being given out unconditionally to Egret's 25,000 employees globally. Instead, they came with various restrictive clauses.
Simply put, the greater the reward, the greater the restrictions.
The most attention was on Egret's four giants—Tim Berners-Lee, Jeff Bezos, Carol Bartz, and Alice Ferguson. It was said that to claim their promised 17% of the shares, the first thing they had to do was sign a new five-year employment contract.
Because their original contracts hadn't yet expired, part of their reward shares would be deferred and distributed over the next five years, contingent on strict performance targets. Moreover, after receiving these shares, there would be many limitations on how they could sell them.
If they resigned during the next contract term, they would have to return a large portion of the shares.
The four giants were taking up the majority of this employee stock plan, but the remaining 8%, valued at $8 billion, was still aimed at other management and regular employees. With Egret's 25,000 employees, this worked out to an average of $320,000 per person.
In Silicon Valley, where there's a severe talent shortage and average salaries have quickly risen to $80,000, a $320,000 bonus is equivalent to four years of salary for many programmers.
Moreover, the stock allocation wasn't going to be evenly distributed. Most people would only receive a symbolic amount of shares, and many would still have to buy them at a discount rather than getting them for free. The main recipients of this incentive were those in management and technical roles who had made significant contributions to Egret. Many of these individuals would become millionaires or billionaires.
One critical condition was that most employees participating in the reward and purchase plan would have to sign at least a three-year non-compete agreement.
Egret's many products, at least on the surface, seemed easy to imitate and replicate.
With the rapid rise of the new tech wave, many investors eager to break into the internet industry had set their sights on Egret, which had already established several sustainable business models. By poaching talent from Egret to build teams—whether for portals, search engines, social networks, or online communities—copying these business models would make success much easier.
In recent years, one of Egret's biggest headaches was the ongoing exodus of employees, as competitors relentlessly poached talent.
Once this large-scale employee stock ownership plan was implemented, relying on the extensive non-compete agreements, it would become much more difficult for other companies to steal talent from Egret over the next three years.
In the fast-evolving tech sector, even if some employees insisted on leaving, the non-compete clauses would prevent them from working in related fields for a set period. By the time the non-compete agreements expired, many of the advanced skills and knowledge they had would already be outdated.
This period would give Egret ample time to solidify its industry dominance and leave most potential competitors far behind.
Overall, with Egret's massive $100 billion valuation, Simon Westeros, by offering only $8 billion in shares outside the contracts for the four giants, could maintain the company's industry advantage for at least the next three years. In comparison, this seemed like a very worthwhile deal.
It's worth noting that by February, Cisco, one of the three tech giants within the Westeros system, had easily surpassed a market value of $150 billion and was heading toward $200 billion.
Egret's growth momentum and monopolistic position were no less impressive than Cisco's. With an IPO valuation of $100 billion, Egret might also become a $200 billion super-giant after going public. Given the potential gains, even the full $25 billion reward plan was completely justified.
Amid the amazement, there were naturally doubts.
For the average person, the biggest question was whether Egret was really worth $100 billion.
Many reporters began digging deeper into this issue.
Soon, news broke.
On February 19, the East Coast media giant The New York Times ran a special Sunday edition on the topic, revealing something even more shocking to industry insiders than Egret's $100 billion valuation: Egret's revenue for 1994 was expected to reach a staggering $10 billion.
Considering Egret's five-year history and how it had gone from zero to generating $10 billion in revenue, anyone with a basic understanding of business would recognize how astonishing this figure was.
At this point, many long-established Fortune 500 companies still didn't reach $10 billion in revenue. In fact, according to last year's data, the revenue threshold for the Fortune 500 was only $1.8 billion, and among those companies, only 97 had revenues of $10 billion or more.
Egret, in just over five years, had already achieved what many companies couldn't in generations. How could this not be seen as a miracle?
Even within the new tech industry, take Microsoft, for example, whose business was increasingly overlapping with Egret's.
Microsoft's fiscal year runs from July to June. In the fiscal year from July 1993 to June 1994, the company, which had been established for over 20 years, generated $5.63 billion in revenue and had a net profit of $1.29 billion.
This revenue was only on par with Egret's $5.41 billion in revenue for the calendar year of 1993, and Microsoft's annual growth rate was just 31%. In contrast, Egret's 1994 growth rate, which would break through $10 billion in revenue, remained a terrifying 100%.
On the other hand, according to data released earlier last year, Egret's losses for 1993 amounted to $390 million, seemingly far behind Microsoft's over $1 billion in net profits. However, everyone understood that this was simply because Egret, still in its high-growth phase, was making massive investments in various areas.
A closer look at Egret's business would reveal that aside from its heavily loss-making e-commerce division, its other core businesses—software, data centers, advertising, etc.—all had extremely high gross profit margins. Overall, if Egret were purely focused on profits, its net profit margin could easily match Microsoft's.
Based on Microsoft's previous fiscal year's 23% net profit margin, Egret's $10 billion in revenue could theoretically generate over $2 billion in net profits.
The reason Egret wasn't currently pursuing profits was that it prioritized growth, investing heavily in research, development, and marketing.
Even so, according to The New York Times, Egret's pace of making money had already surpassed its spending. Whether for IPO reasons or not, Egret was likely to post a significant profit for 1994.
When The New York Times published its article, even some professional financial media were skeptical of Egret's ability to generate $10 billion in revenue within five years.
However, the reality seemed to be just that.
The key to this success was monopoly!
In the past five years, Egret, along with Cisco and AOL, had pioneered the internet industry, rapidly ushering the United States and the world into the Information Age.
This was undeniable.
Because of their first-mover advantage, Cisco had nearly monopolized the market for professional routers and switches, while AOL's market share in the ISP sector far surpassed even established giants like AT&T. As for Egret, its monopoly was even stronger, and it covered a wider range of fields.
Egret had virtually complete control over all internet infrastructure software, with a comprehensive patent barrier firmly in place, making it impossible for competitors to match.
With the ability to set prices, costs were naturally high.
In the face of such a rapidly advancing technological wave, anyone wanting to enter this field or create a website couldn't avoid using Egret's suite of basic tools. This was exactly what Warren Buffett envisioned as the ideal "toll bridge," but this toll bridge served the global market, and it was the only one.
Moreover, as Egret transitioned its software business from the traditional one-time sale model to a subscription-based "rent-collection" model, it significantly reduced the risk of piracy.
Even if a website was tucked away in some remote corner of Africa, Egret could easily check whether or not they were using pirated software by verifying their subscription information. If a website didn't have a legitimate subscription, not only would it be excluded from Egret's recommendation systems, but it could also face a lawsuit from Egret at any time.
Thus, any company hoping to make a mark in the internet space had no choice but to pay the "toll" to Egret.
In recent years, there were already tens of thousands of internet companies worldwide, and many of them had unwittingly contributed billions of dollars in revenue to Egret's software division.
Next was the advertising business.
Thanks to Simon's foresight and memory
of mature business models, Egret's advertising division was quickly segmented into four parts: portal site ads, social network ads, search engine ads, and the advertising network program.
Due to the dominance of Egret's Internet Explorer (IE) browser, companies outside the Westeros system had no choice but to advertise with Egret if they wanted to gain more online traffic.
This essentially formed yet another "toll bridge."
As the internet grew rapidly, online advertising customers were no longer limited to tech companies—traditional industries were also starting to place ads online.
In 1993, Egret's advertising revenue had already reached $1.15 billion. Given the industry's explosive growth in 1994, this figure was expected to increase even more dramatically.
Media outlets estimated that just Egret's software and advertising businesses in 1994 would likely generate more revenue than Egret's entire revenue in 1993.
For those who knew the inside story, this was actually true.
Beyond its core software and advertising businesses, Egret also had the YWS data center business, e-commerce, app store, online gaming, professional solutions, and technology licensing—all of which had strong competitive advantages over others in the industry.
Take the online gaming division, for example. By the end of 1994, Farm Frenzy, a game that had taken the world by storm, had generated $250 million in revenue for Egret in just seven months, while the development cost was a mere $1.5 million. The return on investment was more than a hundredfold.
Then there was the data center business.
Despite some of Egret's cloud computing technology leaking due to competitors poaching staff over the years, other companies couldn't match Egret's advantages in cloud computing anytime soon and were forced to stick with more traditional data center services.
To mislead rivals, Egret's YWS also positioned itself as a data center (IDC) business.
In the past year, Egret had begun constructing 11 large data centers in North America, Europe, and Asia, each with an investment exceeding $100 million. These investments far exceeded Amazon's seven large logistics centers, which were limited to North America.
Clearly, Egret wouldn't have made such significant investments without sufficient motivation.
It's important to note that although many of these centers were still under construction, even the ones already operational had far more capacity than Egret itself needed.
Because the barriers to entry for data centers were relatively low, and aside from Egret's core cloud computing technology, this field wasn't dominated by Egret alone. In recent years, old giants like IBM, HP, and even Microsoft had entered the IDC space, along with many small and mid-sized independent IDC firms.
According to industry statistics, Egret's YWS held around 50% of the market share.
But even that 50%, in a market that was nearly $5 billion over the past year, represented significant revenue for Egret.
Lastly, the e-commerce business.
As Amazon's seven large logistics centers across the U.S. gradually came online, it became evident that Egret's e-commerce division was in a league of its own compared to its peers. Thanks to Simon's memories of the e-commerce landscape, Alice Ferguson, who was in charge of Egret's e-commerce, had avoided many of the common pitfalls.
Although e-commerce was Egret's biggest source of losses, the rapid growth in recent years had left no doubt about the enormous commercial potential in this field.
It could be said that if Egret were to run any of its individual businesses separately, each one would struggle to achieve significant scale. However, when all these businesses were combined, they created strong synergy and monopolistic advantages for Egret.
While other companies were still struggling to find a viable business model or desperately trying to capture more market share, Egret, thanks to its overwhelming advantages and Simon's knowledge of mature business strategies, had effortlessly captured the majority of profits in these fields. Even in its weakest segment, the data center business, Egret held more than 50% of the market share. Its online advertising revenue accounted for more than 90%, and its foundational software tools were set to achieve 100% market dominance.
As the entire industry burned through money in a frenzy to grab a slice of the rapidly growing internet pie, much of that money was quietly flowing into Egret's pockets.
For a company with over $10 billion in revenue, growing at such an astonishing rate and maintaining a monopoly in its sector, a $100 billion valuation was, without a doubt, an underestimate.
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