Netscape deal to make AOL instant portal power
Published: 24 Nov 1998 12:51 GMT
The acquisition of Netscape Communications Corp. would solidify America Online Inc.'s position as the top online company through the acquisition of Netscape's Netcenter portal, server software and business relationships, Internet industry experts said Monday.
However, the deal will make little difference for consumer Internet sites at least in the short term, the experts said.
America Online and Netscape confirmed Monday that the companies are involved in talks that could result in AOL's purchase of Netscape, including its browser and server technology and its popular Web site, Netcenter. Sun Microsystems Inc., based in Palo Alto, Calif., would also be involved in the deal, helping to sell Netscape's server software.
The move would bring Netcenter and AOL.com, two of the biggest Web sites, under the control of one company. That would mean a shift in the playing field for the remaining Internet hubs, known as portals. Industry observers said, however, they have been expecting such shifts for months. "We've been saying for the last couple of months that it's hard for anybody to move the needle in the portal business at this point, through marketing or that sort of thing," said Barry Parr, an analyst with International Data Corp. "Acquisition is the only way to do it," he said. "We've been expecting a merger between one or more players among the seven or eight portals, so this makes sense."
With more than 14 million fee-paying users, AOL's business is far more lucrative than that of such free, Internet-based services as Yahoo! and Microsoft's MSN.com. But AOL lacks a firm presence in the Internet, with the flexibility and reach the Net provides. Experts characterise AOL.com as mainly a stopping-off point for users of AOL's proprietary service.
By acquiring Netscape, of Mountain View, California, AOL would gain control of Netcenter, a portal that has become popular by virtue of being the default home page for the Navigator browser software. Netcenter has most of the features of Yahoo! Inc.'s Web site.
As with CompuServe, an earlier AOL acquisition, Netcenter's 16-million user base is generally more Web-savvy than the average AOL novices. "If this goes through, AOL will then own the proprietary service AOL, AOL.com, CompuServe and Netcenter, all catering to slightly different online demographics," said analyst Jill Frankle, also with IDC. "If you're looking at AOL as the new media company of the 21st century, building a number of different brands, this would be a great deal for them." The acquisition of Netscape's expertise at building Internet architectures and e-commerce infrastructure would be even more valuable for AOL.
By closing the deal, AOL could use Netscape's staff to revamp the AOL proprietary service, and improve its applications for online buying and selling. "Instead of trying to buy 500 new employees who are developers, they might have reasoned it is easier to buy the company," said analyst Alexis dePlanque of Meta Group. "Their underlying systems architecture sucks, it doesn't scale, it's so slow ... so this could be a great way to buy a bunch of Web developers to improve that."
AOL, based in Dulles, Virginia., would also acquire its own browser, freeing it from having to license Microsoft Corp.'s Internet Explorer, as it does today. The browser could also give AOL another channel for communicating with Web users. "AOL could ... start using the Netscape browser. That would take away some of the users from [Internet Explorer], and it could boost [AOL's] own Web presence if Netscape users went to [AOL's] Web site," said analyst Bridget Regan with Giga information Group.
"I don't really see AOL competing against the portals in this, it's more... looking three or four moves ahead and lining up to retain the top position ... as a funnel for consumer commerce on the Web," she added. Representatives of portal Lycos Inc. -- which has been growing rapidly recently through acquisitions of its own -- said they were not worried that consolidation will shut them out. "Consolidation is continuing as Internet companies become major media companies," said Lycos spokeswoman Madeline Mooney. "But we're growing, while others are declining. We think our strategy is on the right track."
AOL.com attracts about 24 million visitors a month, according to research firm Media Metrix, and Netcenter sees about 16 million. Combined, the two would top Yahoo!'s 25 million monthly visitors; AOL properties would occupy the No. 1 position for Internet traffic.
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