September 29, 1998 12:30 PM PDT

Study: Netscape share below 50%

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Netscape Communications is rapidly losing ground to Microsoft in their battle for the Web browser market, according to a new study.

The study, by International Data Corporation, shows that Netscape's Navigator client lost its majority hold on market share for the first time, dropping from just over half the installed base at the end of 1997 to two-fifths by mid-year.

From December 1997 to July 1998, Microsoft increased the overall domestic market share of the Internet Explorer browser to 27.5 percent from 22.8 percent. In the same period, Netscape's share fell from its majority 50.5 percent share to a plurality 41.5 position.

America Online's browser--an AOL-branded version of IE--rose slightly to 16.3 percent from 16.1 percent. Other browsers collectively rose to 14.7 percent from 10.6 percent.

The IDC results come as some analysts see Netscape conceding the browser war to Microsoft, whose browser has brought Netscape's one-time dominance of the market to the brink.

"Netscape really is shrugging its shoulders on the browser issue," said IDC's Joan-Carol Brigham. "They're just not marketing it as hard as Microsoft is marketing IE."

Instead, Brigham said, Netscape is putting its marketing efforts into Netcenter, its search, directory, and content aggregation site--or portal.

Netscape has gone to great lengths this year to integrate its browser and its portal site. With the release this summer of Navigator 4.06, the Navigator Web address bar began doubling as a search box that brings users to Netcenter search and directory results pages. A link to Netcenter's personalization page is featured prominently on new versions of the browser.

Indeed, Netscape played down the significance of today's results in part based on its new focus on the portal.

"It's not the browser wars anymore, it's the portal wars," said Dave Rothschild, vice president of client products at Netscape. "We are getting huge growth in Netcenter users, and that's what counts--driving people to your portal."

Nevertheless, Netscape's long-time dominance in the browser market is what enabled the company to make a strong entry into the portal space even though the company was extremely late. The company's front door was and is the default home page for millions of Navigator users.

"None of the other players have the portal and the browser," Rothschild said.

Microsoft, however, is revving up a portal site of its own, called MSN. Microsoft also was late to market, but like Netscape, the giant is relying on its recognizable brand name to drive traffic to its site.

Companies are focusing on portals because they provide the promise of making money down the line with consumer e-commerce and advertising deals.

Whether the browser is the key to a successful Netcenter or merely a feature of it, Brigham cautioned that Netscape should not put all its eggs into its portal basket.

"The whole portal area is hot but it's not necessarily the end-all," Brigham said. "It's an unproven area. They don't have a for-sure strategy."

Brigham pointed out another weakness in Netscape's defense against both Microsoft and AOL.

"Netscape is also saying they're doing very well distributing the browser among large businesses, but we're just not picking that up. We're not seeing it," Brigham said. She noted that among small-business users, AOL had made significant gains.

Netscape's Rothschild said that the IDC study gave short shrift to browser use at large firms. Netscape has announced many distribution deals for the browser with large firms and even other portals, including, most recently, Snap. Snap is a joint venture between NBC and News.com publisher CNET: The Computer Network.

But Brigham emphasized that IDC's methodology was the same from last year's report to this one.

Rothschild also pointed out the new IDC numbers do not take into account an increase in downloads since the posting of Navigator 4.06--which includes many of the "smart browsing" features designed for Navigator 4.5--and two beta releases of Navigator 4.5.

"We have had more than 12 million downloads of client product since this study was concluded," Rothschild said.

Microsoft's Mike Nichols, IE product manager, however, found no fault with the study. "We are gratified that users across all customer segments are increasingly choosing Internet Explorer," he said. "IE's success to date is a testament to the hard work of our developers in providing customers the best-of-breed browsing technologies and solutions."

IE's success in challenging Navigator also is attributable to Microsoft's decision to integrate the browser with its market-dominating Windows operating system, and a series of agreements with PC manufacturers and Internet service providers to make IE the default browser.

Both of those strategies have been extremely successful in boosting IE's market share. They also have brought Microsoft the scrutiny of the Justice Department's antitrust division, as well as that of 20 states and other firms.

 

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