AOL helps IE inch past Netscape, IDC says

Microsoft's Internet Explorer has inched past Netscape's browsers in US market share, aided by America Online (AOL) subscribers who are forced to use IE, according to a new study by IDC. Netscape dropped to 41.5% from 50.5% at the beginning of the year, while Microsoft's browser gained 4.7 percentage points for a total of 43.8% of the market.

Microsoft's Internet Explorer has inched past Netscape's browsers in US market share, aided by America Online (AOL) subscribers who are forced to use IE, according to a new study by International Data.

Netscape lost nine points of market share, dropping to 41.5% from 50.5% at the beginning of the year, while Microsoft's browser gained 4.7 percentage points for a total of 43.8% of the market, IDC concluded in its study.

Of Microsoft's total share, 16.3 percent represents AOL 3.0 and 4.0 subscribers who automatically get the IE browser as part of their service package and don't get to choose their browser, said Joan-Carol Brigham, a research manager in IDC's Internet and eCommerce Strategies research program. The percentage of non-AOL users of IE is 27.5, she said today. The few remaining subscribers of AOL 2.0 get a hybrid browser.

Microsoft continues to make steady progress in each user segment, but its greatest challenge is to further penetrate medium-size and large businesses, she said.

"That's to be expected," said Mike Nichols, IE product manager. "We have healthy growth in medium and larger businesses. They typically have much longer evaluation cycles."

AOL is solid in homes and has made good progress in small businesses, whereas Netscape lost nearly 10 percent share in both those segments in the first half of the year, Brigham said.

Netscape has also lost about 9 percent of its share in the medium and large business market in the last six months.

The study's slant toward home users and its timing unfairly skewed the results in Microsoft's favor, according to Chris Saito, director of client product marketing at Netscape.

Of the nearly 1,000 telephone survey respondents, more than 670, representing more than 60 percent of the total, were in the home market while the other markets -- small business, medium and large business, government and education -- had only just over 100 respondents each. "They didn't get a good reach from the other markets," Saito said.

Meanwhile, Saito said Microsoft's practice of bundling its software onto PCs, over which the U.S. government has sued Microsoft claiming it is anticompetitive, has the most impact in the home market. "We believe our market share is strong in the business and education markets," at 47 percent and 67 percent, respectively, he added.

In addition, the survey was conducted in June before the release of the Communicator 4.5 beta and Communicator 4.0.6. Since then, there have been 14 million downloads of Communicator 4.5 from Netscape's home page, Saito said. "There has been a huge increase in traffic and registration" on Netscape's Netcenter Portal site, he added.

IDC's Brigham said she was surprised at the drop in Netscape share even after Netscape began giving its browser away for free and offering the source code to developers for free.

"I thought that with Netscape's giveaway and making the browser free and with their new portal strategy that it would keep their profile up higher than it actually did," she said.

However, Brigham noted that Netscape's Mozilla initiative may actually have contributed to a loss of brand recognition for Netscape. The initiative allowed corporations and Internet service providers (ISPs) to customize the Navigator browser, for instance to allow the company name or logo to replace Netscape's. Thus, some Netscape users may not realize they are actually using a Netscape browser and would be lumped in the "other" browser category.

"Netscape is clearly hedging its bets on a pure web implementation and tying Navigator 4.5 much more closely to their portal Netcenter," Brigham said. "And that's risky 'because portals are not a sure thing whereas Microsoft tying (its browser) to an operating system where they have a monopoly is pretty much a sure thing in the very least for the next five years."

Brigham said Netscape should keep its portal strategy but also diversify its offerings, as well as work to increase its ISP partnerships. "Microsoft has a lot of ISPs locked up, (and) the PC bundles are locked up, so they're going to continue to be pretty prominent in front of all the new users coming online."

IDC, based in Framingham, Massachusetts, can be reached at +1-508-935-4389 or on the Web at http://www.idcresearch.com/.

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