The Web-based game industry started in 1995 with the release of two browser plug-ins: Java and Shockwave. Shockwave was a playback engine for content made in Macromedia Director, a multimedia authoring tool that had been around for many years. So there were already many developers out there, and some of them had games that could be adapted for Web-based playback.
By the end of 1995, dozens of Shockwave games were on Web sites. By the beginning of 1996, several arcade sites had started and some developers were specializing in Web-based game content for Shockwave or Java.
In 1997, Macromedia released another development environment and plug-in for Web-based applications called Flash. It was derived from FutureSplash, which the company had purchased earlier.
While early versions of Flash lacked the ability to be programmed for games, Flash 4 have a basic scripting language and Flash 5, released in 2001, had a robust scripting language called ActionScript. This allowed for Flash to be used for games.
Also in 2001, Shockwave received an upgrade that allowed it to use 3D art assets and a 3D environment for 3D gaming.
With the addition of ActionScript to Flash, many artists and programmers began developing simple Web-based games and distributing them for free. Some would put them at their own sites, while others would submit them to sites that aggregated free online games.
By 2000, some investment went into large Web game sites like Shockwave.com (originally called ShockRave) and sites by AOL, Yahoo and Microsoft. These sites would develop some of their own games, as well as license games from.