December 30, 1997 4:00 AM PST

Netscape late to leverage traffic

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When it comes to Netscape Communications (NSCP) taking advantage of its heavily visited Web site to make money, the motto that comes to mind is "better late than never."

Netscape launched the Netcenter set of services in September to cash in on the popularity of its Web site, fueled in part by the fact that Netscape browsers have "netscape.com" as their default home page. Netscape has always had a popular Web site, but other than posting company information, it had never taken full advantage of the traffic it generates.

Research firm RelevantKnowledge tabbed Netscape as the second most-visited site in November with 13.1 million unique visitors. Yahoo was first, and Microsoft, Excite, and AOL were third through fifth, respectively. Microsoft in particular has made a swift transformation from software-only company to growing Web content provider. (See related story)

"I think Netscape missed a big opportunity," said Evan Neufeld, senior advertising analyst at Jupiter Communications. "If they had done these deals two years ago, they'd be a big media company. Back in the day when they had 90 percent of all browsers pointing to their home page, it was time to cement those deals."

The company has done a good job catching up, according to Neufeld, by consolidating old services, such as the Inbox Direct email newsletter and software downloads, with new services provided by third parties, such as Individual's daily business headlines, Yahoo's Net guides, Concentric Network's intranet hosting, and online shopping, all gathered under the Netcenter roof.

For example, users can visit Netcenter's "Business Journal" and get free daily headlines. After registration, users can customize the service and have the news delivered via email.

"They seem to have laid a good foundation, and having over 50 percent of all browsers default to their home page is still nothing to sneeze at," Neufeld said.

(Netscape claims to have 67 percent of the browser market share compared to Microsoft's 33 percent, while Microsoft points to a Dataquest survey that put the ratio at 57 to 40.)

Microsoft has aggressively promoted its browser through many of its content sites. Netscape lacks the same scope of content on the Web, but still designs services that are Navigator-only, such as Inbox Direct and Smart Update.

"We certainly encourage people to use Communicator, but we don't design programs and services to disadvantage people using other products," said Jerrell Jimerson, director of online and content comarketing. Communicator is the software suite that contains the 4.x version of the Navigator browser.

The only thing IE users can't access on the Netscape site is the Netcaster channel finder and the drop-down navigation menus built with the nonstandard HTML layer tag, Jimerson said. The menus are available to Navigator 4.x users only. Users of other browsers, including previous versions of Navigator, can navigate the site through more traditional means.

The company just began to use its home page more aggressively for a new campaign to displace Internet Explorer with Navigator.

Services that include the Web site and its banner ads, Netcenter partnerships, and fees paid for premium services account for approximately 30 percent of the company's total revenue. It's a revenue stream that is bound to increase with two factors: the growing acceptance of online transactions and advertising, and what many observers feel is an inevitable move by Netscape to give the browser away for free. The company's client product revenues have shrunk to less than 20 percent of total income, and chief executive Jim Barksdale has recently mentioned giving Navigator away to defend its market share.

Early 1997 figures from Jupiter Communications show the top online publishers spending about 24 cents for advertising on other sites for every dollar they earn from advertising on their own sites. Netscape was ahead of that curve, with ad earnings outpacing expenditures six to one, according to Neufeld.

Netscape's Jimerson declined to confirm those figures or give new ones.

Netcenter now boasts more than 2 million subscribers, which is more than double the base it started with in September. The company immediately counted membership at 1 million because of subscribers for Inbox Direct and other registration-only services. To put the 2 million in perspective, AOL and some of the free email services claim to have more than 10 million subscribers. Netscape inked a deal in November to promote direct marketing giant CUC International's netMarket site, signaling Netscape's intent to sell subscriber demographics to add to its revenue stream.

However, Jimerson stressed that any information provided to Netcenter partners can only be used within the Netcenter services.

"We only make a subscriber's information available when the subscriber requests it," Jimerson said. "The partner doesn't have the right to resell a person's name or provide it to another third party."

The challenge for Netscape and any other subscriber-based content provider is to attract loyal eyeballs and provide detailed demographics to advertisers, according to Jupiter's Neufeld.

"Two million subscribers is good, but of that 2 million, how many have come back more than three times?" he asked. "It's not just having 9 billion hits, it's more about qualifying the audience to a much finer degree."

 

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