Browser Wars free essay sample

Although Netscape had first mover advantage and a strong product; Microsoft was able to knock them out of the competition for Internet browser control. This was accomplished mainly by bundling Microsoft’s Internet browser, Internet Explorer, with its operating systems. Netscape was unable to compete and was ultimately purchased by America Online. AOL can now utilize several of the Netscape’s strengths to add value to their base product as an Internet portal and in establishing the browser of the future that will be used in non-PC Internet connected devices. Problem Statement Microsoft is attempting to establish a monopoly lock on the browser market. If this happens, they could potentially create proprietary control of the way customers access the internet and the standards used in creating webpages, effectively crippling any current or future competitors. Statement of Facts Netscape Netscape believed that eventually the network would replace the computer and cross-platform browsers would be more important than the operating system. Their vision of the future included a single interface that smart phones, television and interactive games would all use to communicate. This vision necessitated open standards to connect everything. Netscape released the first version of navigator in 1994 and almost immediately gained more than 50% of browser market share. The web was its primary distribution channel but over time it expanded into other means of distribution. Netscape negotiated bundling arrangements with computer manufacturers and software venders. It was originally priced at $39, but was free for academic and non-profit use. By 1995 Navigator had more than 10 million users and over $40 million in sales. The growth continued for 10 quarters but reversed in 1997. In response to the fall in revenues, Netscape cutback their development program and posted their source code at www. mozilla. org for developers to modify and upgrade. Netscape felt their strong commitment to cross-platform development was their greatest asset, â€Å"Netscape’s browser was available on 16 different operating systems. † Netscape also expanded into website services and electronic commerce software, and planned to utilize the fact that â€Å"Netcenter,† Netscape’s homepage was the second most popular destination on the web. A new division was created to focus on online advertising, and Netscape began working on innovations that tied their web browser to their main web site. Microsoft Despite Netscape’s success, Microsoft was slow to move into the browser market, and not competitive at first. Although Internet Explorer was bundled with Windows 96, it would take four generations before Microsoft’s Internet Explorer was able to diminish Netscape’s lead in market share. According to the case, â€Å"Dataquest reported that Microsoft’s share had nearly doubled in the past year from 20% to 39%, while Netscape’s had fallen from 73% to 57%. † Microsoft’s goal was to integrate internet technologies into their already established products, beginning with it Windows 95 operating systems. Microsoft also negotiated distribution agreements with Internet service providers and online services. Microsoft faced many legal challenges slowing its progress towards success in the browser market. The Department of Justice determined that â€Å"the company had violated the terms of a 1995 consent decree by tying the distribution of Internet Explorer to Windows 95. † Other computer distributers claimed that Microsoft had required them to install Internet Explorer in order to license Windows 95. The company agreed to concessions, mainly offering a version of Windows 95 without Internet Explorer. However, this did not end the legal troubles. In 1998, federal and state antitrust suits were brought against Microsoft. America Online America Online tried to invest in Netscape’s first round of financing in 1994 and also attempted to license Navigator, however neither action was successful. After a partnership proposal with Netscape was turned down in 1996, AOL partnered made Internet Explorer its default browser. The case gives three arguments for this agreement, â€Å"It(Internet Explorer) was free, Microsoft would customize the browser to provide seamless integration with AOL, and Bill Gates was willing to bundle access to AOL with Windows 95. AOl further entrenched itself in the browser battle by acquiring Netscape in 1998. Standardization Despite their legal trouble, Microsoft continued to tightly integrated Internet Explorer into the code of their newest operating system, while Netscape â€Å"viewed the browser as a graphical user interface that could sit on top of Windows or any OS. † Although Netscape ch ampioned the idea of open technologies and general standardization, both companies focused more on innovation than adherence to established standards. This caused subtle difference between the browser and made it difficult for web designers. â€Å"The Web Standards Project, a developers’ group, estimated in 1998 that the need to accommodate more sophisticated features of different browsers amounted to approximately 25% of the cost of building a site. † Webmasters were forced to choose a browser or spend more time and money making it compatible with each. Analysis of Facts Microsoft was slow to spot the importance the Web but then raced to catch up. It reached technical parity with Netscape in its 4th generation browser, but did not capture market share until it started adopting the tactics that provoked the antitrust cases. By intimidating computer distributors and not allowing them to provide other browser options, Microsoft was able to capture a larger share of the market due to their almost universally used operating system. As the personal computer market grew, so did Microsoft’s share of the browser market. Even though they were the second mover, they had advantages that broke down the normally strong barriers to entry that Netscape established through first-mover advantage. The main advantage was control over the distribution of PCs, a complement to Internet browsers. A Netscape executive states it best in the case, â€Å"The key to success for the whole thing was getting ubiquity on the [browser] side†¦One of the fundamental lessons is that market share now equals revenue later†¦Another fundamental lesson is that whoever gets the volume does win in the end. † Recommendations – America Online should understand that Microsoft has won the browser war and look to Netscape’s other strengths. Namely, the traffic heavy â€Å"Netcenter†, the electronic commerce software, and the open source application development fostered through Mozilla. org. America Online is the leader among Internet portal companies, they should expand their audience even further via Netscape’s Netcenter website. America online should concentrate on advertising revenues and leverage the fact that it has the two most visited websites on the Internet. With America Online’s significant share of content creation and access points on the Internet, it can easily move into electronic commerce. AOL should utilize Netscape’s skills at transmission encryption and server authentication to establish a strong foundation in the e-commerce market. America Online should not cut ties with Microsoft and should continue to use Internet explorer as the front end for its consumers but it should also use its relationship with Microsoft to help ensure adherence to web standards from both Internet Explorer and Netscape Navigator. This will ensure ease-of-use for AOL customers and a user-friendly network of browsers for web developers. Lastly, America Online should continue to foster growth in the open source browser effort to harness the talent of developers all over the world and create the next generation browser for mobile applications. As people move away from PC’s and into more mobile Internet devices, Microsoft’s Internet Explorer will no longer have the advantage of being automatically bundles with the device. AOL and Netscape should also take advantage of the lawsuits and legal challenges that are plaguing Microsoft. They have a window of opportunity while Microsoft can’t retaliate with the same ruthlessness that it did against Netscape originally.