InformationWeek

Browsing The Browsers

Dozens of rivals vie in a market where the most competitive price is free

By Wendy Marx
Issue date: Oct. 23, 1995

There's a lot more to World Wide Web browsers than Netscape Communications Corp. Netscape helped make the Web a household word after the company's spectacular initial public stock offering in mid-August, when its shares traded at more than twice the offering price and turned its founders into overnight millionaires.

Meanwhile, dozens of companies have introduced graphical Web browser software over the past year. It's a fierce market where the most competitive price is absolutely free.

M ore companies, including Apple Computer and Microsoft, have entered the fray. Current estimates put the number of Web-browser users at anywhere from 5 million to 7 million--or more. "It's market-share prime time," says Lisa Thorell, VP of marketing for Spry, CompuServe's Internet division in Seattle. Spry expects to have 3.5 million licensees to its Web browser by year's end (many Web users have more than one browser package).

The current market leaders are Netscape in Mountain View, Calif., Spry, and Spyglass Inc. in Naperville, Ill. But industry analysts say the market is still wide open. The Internet
is still in its infancy and poised for growth.

In less than a year, sales of Web browsers have zoomed from practically zero to $50 million, according to Forrester Research Inc., a market research firm in Cambridge, Mass. By the end of this decade, Forrester predicts that Web browser sales will hit $250 million annually.

Yet almost no one expects to make a killing by selling or licensing browse r software. The real money is in the overall Internet products and services business, of which the browser business is but a small part. Forrester Research expects that broader business to be worth $10 billion by decade's end.

A Web browser is an easy-to-use graphical front-end to a Web server. It's also the client to the Web server. The name "browser" has caught on because this software does just that: It lets people navigate the Web effortlessly. Browsers also retrieve documents across the Web by using a standard protocol called http (hypertext transfer protocol).

Browser software is often free, or at least inexpensive. The first graphical browsers were given away free over the Internet by the University of Illinois in 1993. Since then, the Web has grown to perhaps as many as 7 million users and is expected to hit 10 million by year's end, according to Jupiter Communications, a New York market research company. The fact that most browsers are free or nearly so hasn't hurt a bit.

Earnings Dra g
From the viewpoint of the browser vendors, however, the free model has been a drag on earnings. For example, Netscape, which has an estimated 70% of the browser market, posted a net loss of $12.8 million for the first half of this year.

Spyglass, which licenses its Enhanced Mosaic browser technology to others, did somewhat better, reporting third-quarter net income of $365,000 on revenue of $2.8 million. "There's a tremendous amount of competition and a lot of cutthroat pricing," says Bruce Guptill, a senior analyst in the electronic commerce group at Gartner Group Inc., an information technology advisory firm in Stamford, Conn. "[The browser market] is a worse-case business situation. You have to constantly innovate. At the same time, you have to cut prices." Adds David Cappucio, VP of network technologies at Gartner: "Any Web browser purchased today should be considered to have a half-life of six months at most."

Spry, which has an estimated 7% share of the browser market, is generating sizable revenue, reporting $22 million in browser-related revenue for the first half of this year. Spry also reported net income of $10 million for the first quarter of 1995, up sharply from $2.7 million for the same quarter a year earlier.

Since being acquired by CompuServe in April, Spry has not separately reported its earnings. Browser vendors expect to make most of their money on transactions or services related to the browser. Their revenue model is similar to the one adopted by the commercial online services, which give away their software while charging for their services. Netscape, for instance, introduced products for corporate services in mid-September: the LiveWire and LiveWire Pro development packages, LiveWorks management tool, and Navigator 2.0 browser.

Selling browsers is quickly becoming a commodity market, says Emerick Woods, VP and general manager of Quarterdeck Office Systems, Inc., in Santa Monica, Calif., which recently introduced two retail browser products, Internet Suite and Q uarterdeck Mosaic.

New Avenues
Vendors try for a bigger chunk of the greater Internet business by forming alliances with content and service providers. Typical of these alliances is Quarterdeck's plan to package its browser with Homework Helper from Infonautics Corp. of Wayne, Pa., an online homework service for students now available only through Prodigy. Quarterdeck is customizing its browser to open on Homework Helper's home page. In return, Quarterdeck will get a percentage of Homework Helper's monthly subscriber fees. The combined product, which has not yet been named, should be available in November.

Also, browsers could become the next direct-marketing vehicle. Already, some browser vendors have allied themselves with corporate marketers.

Spry, for example, customizes its Mosaic browser for corporations to use as a promotional giveaway. Hilton Hotels Corp., in a test program this past summer, gave some 200,000 customers free copies of Spry Web browsers that opened to Hilton's h ome page, says Jeffrey Diskin, the hotel chain's VP of corporate marketing. Spry believes such co-marketing deals will give it access to new customers.

Spry is even willing to give a corporate customer a competitor's browser. "If a customer doesn't like our browser, they can put on the Netscape browser," says marketing VP Thorell. "CompuServe is not just a browser company. We own an underlying network as well."

In fact, all the major browser vendors--including Netscape, Quarterdeck, Spyglass, and Spry--package total Web solutions for the corporate market. These corporate applications, unlike browsers, are costly. Netscape, for example, sells Web server products to corporations for $50,000 and up.

Web technology also can be used by corporations to create what are known as private Internets. These are intracompany networks that are protected by firewalls from the public Internet. The advantage: Companies can electronically link their employees, gaining a tremendous boost in productivity and inform ation sharing without incurring costly long-distance telephone charges.

"Internal corporate applications are the biggest opportunity and the fastest growth area," says Mike Homer, Netscape's VP of marketing. "You have the opportunity to sell browsers to thousands of users, instead of one at a time as you do in the consumer market." Adds Tom Pincince, a senior analyst at Forrester Research: "It's a lot cheaper to use the Web as an alternative to Lotus Notes than to try to sell T-shirts over the Internet. In the near term, the corporate marketplace is the more significant one for Web server companies."

Sun Microsystems, for example, has more than 300 Web servers for internal and external Internet use. Sun has licensed Netscape's and Mosaic's browsers and also has its own HotJava browser in early tests. Similarly, Lockheed Martin Corp. in Bethesda, Md., licensed Netscape's browser this spring for corporatewide use for both internal and external communications. A key goal: Migrate the company's policies and procedures, which reside on a mainframe, to a client-server system. That move will save the company hundreds of thousands of dollars a year, says a spokeswoman. The browser will also eliminate the need to create new clients for each application.

"The Web browser becomes the client for any and all applications," says Skip Slone, senior systems architect for Lockheed Martin. "It eliminates a lot of reinventing the wheel."

Some industry watchers believe Web browsers could become ubiquitous on PCs, perhaps even replacing operating systems. "In three years, you'll be hard-pressed not to have a machine with World Wide Web compatibility that has a browser built in," says Jack Gold, program director of Meta Group, a Stamford, Conn., consulting firm.

Also on the drawing board are Internet information management products that sift through and organize reams of online data. Typical of these is a new release from Frontier Technology Corp. of Mequon, Wis., called CyberSearch. It bundles a browser with a CD-ROM-based Internet search engine to help users search the Internet more quickly, says Dennis Freemen, Frontier's director of marketing.

NetManage Inc. in Cupertino, Calif., which makes the popular Chameleon connectivity product, released a version of Internet Chameleon in June that bundles 18 applications such as information management intended to make the Internet easier to use. It includes an Internet address book that lets users store Internet addresses by subject.

Computer hardware and software companies, hoping to gain a toehold in the online world, are busy adding Net connections to their products. IBM, for one, has incorporated a Web browser into its OS/2 operating system. In August, Apple Computer introduced its Internet Connection Kit, which includes Netscape's Navigator browser, automatic dial-up connection to the Internet, and other Net features. Apple expects to bundle browser technology into the operating system with some of its higher-end computers next year, according to Mike Gallagh er, manager of Apple's Internet products.

Oracle Corp. recently announced a Web-based database application that incorporates browser and server technology licensed from Spyglass.

Industry watchers say Novell, Lotus Development, and others will add Web offerings in the coming months. "Every company on the planet has to have some interface to the Internet" says Charlotte Walker, a managing director at brokerage Bear, Stearns & Co. in New York.

Get In The Game
Then, of course, there's Microsoft. Until the release of Windows 95, the software giant had sat on the Web's sidelines. Now Microsoft offers Plus! for Windows, a browser add-on to Windows 95 that includes the Internet Explorer browser, based on technology licensed from Spyglass, plus 20 hours of free access time to the Microsoft Network. In racing to meet Windows 95's Aug. 24 deadline, Microsoft did not include a browser in copies of the operating system offered through retail channels. But it did include the browser in OEM ver sions.

The vendor plans to include its browser in future retail releases, says John Ludwig, general manager of Microsoft's personal systems division. Meanwhile, the Internet Explorer browser can be downloaded from
the Internet.

Industry analysts are already enthusiastic about Microsoft's entry. "The Microsoft browser is one of the best we've seen," says Guptill. "Over time, Microsoft will succeed because of its market name and because they are doing what companies need to do to be successful--letting users move seamlessly between the Internet and other applications."

What's next for Web browsers? Well, if someone could figure out how to get a Web browser to program a VCR, that would really be something.

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Hot links in this article:
Browser/Company
IBM Web Explorer, IBM
Internet Explorer, Microsoft
NCSA Mosaic, National Center for Supercomputing Applications, University of Illinois
Enhanced Mosaic, Spyglass
Mosaic In A Box For Windows 95, Spry
Quarterdeck Mosaic, Quarterdeck
Netscape Navigator, Netscape Communications
Super Highway Access Browser, Frontier Technologies