Sound of One Hand Clapping: Netscape Finds the Zen of Free Browsers

Netscape got religion on the power of “free” and decided to give its
popular client away, a move we encouraged here in this report
, and one that found its way into the hallowed halls of the Mountain
View, CA software maker.

The pioneering software developer, which defined the Internet in many ways,
went a step further than a free browser and plans to give away the
programming code behind the browser, effectively leveraging the entire Web
developer community into its fold as its research and development
department on the client side.

Wall Street, which has had little reason to put its hands together in
clapping fashion for Netscape in quite a long time, pulled out its
mysterious and rare applause machine briefly and pushed NSCP up $0.25 to
$18.125 per share.

Here’s a point that Mozilla’s makers seem to be getting and which CEO Jim
Barksdale clearly iterated: Netscape is part software powerhouse and part
media company. No more than RCA got into radio and TV, but was a key player
in the actual technology of radio and broadcasting, Netscape, we believe
may have the opportunity to play in many arenas. But like the
commoditization of radio and TV sets, we think that Web software could be
far less valuable than the “programs,” “commerce,” and “services” it enables.

It already is. Take (NASDAQ:AMZN), for example, a $1.47 billion
company as of Jan. 22. Netscape was at $1.64 billion. Netscape client
software–Navigator and Communicator–holds a 65% or so market share. Let’s
say 65% of Amazon’s customers use Netscape to get to Amazon. Who cares?

The technology is invisible, the “value” or “perceived value” lies 100% in
the commerce experience. No more than the piece of plastic called “CD” is
basically a piece of plastic much like other plastic. Its value is the
media stored on it, music or movie. Otherwise it’s a nickel and a cheap

So the announcement by Netscape that it will now give away the browser
(except the professional edition for enterprises which it will charge $29
for, which makes zero sense) must be considered a first step at realizing
the horsepower under the hood. Each menu item slot, each icon, each pixel
of screen real estate that it possesses as the innovator of a Web browser
that it says has 68 million users, is valuable.

No reason why Netscape can’t auction off these icons to the highest bidders.
These icons become the equivalent of “instant commerce” for both Netscape,
which receives a handy fee, and the buyer, which gets the prominent
location in front of 136 million eyeballs looking at discounted plane fares
or books.

To complement this strategy, Netscape boasts of its NetCenter business
news and resource service, an attempt at being Yahoo and CompuServe in one,
without the dialup aspect of a CompuServe. Aside from a name about as
exciting as watching turtles yawn, NetCenter may or may not be too late in
the content aggregation space.

This raises an issue that is central to the viability and long-term
position of Netscape as a software or media company. In many ways, the
navigation networks (Yahoo, Excite, and Lycos) have become the “software”
of the Internet.

Said another way, both Microsoft’s Internet Explorer and Netscape’s
Navigator icons were far more valuable when users needed a
no-brainer icon to perform a net search or find “what’s new.” What happened
along the way is the search engines and indexers-turned media companies
appropriated searching and what’s new into simple hyperlinks.

Hyperlinks and hyperlinked icons, in many ways, replace the browser
functionality. Browser sales account for 13% of Netscape revenue, so the
company will certainly take a hit short term by giving the software away.
But it’s taking a hit anyway in browser sales thanks to competition from
Microsoft, which gives its browser away. It’s a matter of time before the
point is more than moot.

So giving a browser away that’s losing market share is a big step and
little one. One giant step for Netscape, one small step for Web kind. To
paraphrase Jerry Maguire meets Marshall Mc Luhan, now “show us the media,
the media is the message.”

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