Do You Netscape? Not Quite Yet

Apr 27 1998

Netscape last week put the finishing touches on its much-anticipated "portal" strategy, announcing a free e-mail service and setting the stage for a protracted battle with Yahoo and a handful of other aspiring Net brands.

The contracts between Netscape and the search engines expire on April 30, and the companies are in the midst of complex negotiations over just how they might be renewed. Mike Homer, the veteran Netscape marketing VP who recently took the reins of the company's Netcenter Web unit, says Netscape expects its forthcoming search engine to displace Yahoo, Infoseek, Excite and Lycos from their dominant positions on the Netscape Search page. Yahoo CEO Jeff Mallett downplays Homer's claims, saying he has "yet to see what the Netscape search program will look like."

Still, with 24 million visitors a month to its home page, Netscape has been a major force in driving traffic to the established search engines. By the end of June, visitors to Netcenter will be able to get free e-mail, surf through channels covering sports, finance, entertainment and other topics, and hunt for sites with Netscape's new search engine.

Netscape's decision last month to make the Web operation a separate 180-person division prompted speculation that Netcenter, or maybe even the whole company, was up for sale. But Homer says that both he and the company are in it for the long haul. "I'll never shift back [to the parent company]," he insisted last week.

Meanwhile, Yahoo , Excite and other rivals have put marketing muscle behind their brands, spinning off other properties, such as magazines and credit cards, and are using quirky television and print advertising to pitch their services to consumers. Netscape first needs to draw visitors to Netcenter by providing an easy, one-stop Internet portal. Then Netscape somehow needs to keep visitors. One strategy is to use the Netscape search engine to "recirculate" people to other areas of Netcenter. While Netscape wants to take eyeballs away from Yahoo and the other portals, it also has to renegotiate its contracts with them. The deals under the closest scrutiny are for the real estate on the Netcenter Search page, which highlights the most popular directories on the Web, with preferred placement for multimillion-dollar contracts. The Search program accounted for more than 40 percent of the $94 million the Web site generated last year. By comparison, Yahoo generated $67 million.

Netscape guarantees a minimum number of page impressions for each search engine by rotating each provider as the default - the most prominent option - when a user clicks through to its Search page. This strategy will likely continue with the upcoming contracts, according to Homer, but with one big difference: Netscape's own search engine will be one of the premier options. "Our basic plan is to increase the amount of the Netscape search rotation over the next couple of years, and it's conceivable that it will end up with 50 to 100 percent," Homer said last week. Homer also wants to extend the Netscape brand beyond the Web site, just as Yahoo has done with its consumer magazine Internet Life. He says he's considering several options, including a Netscape magazine and a Netscape credit card.

Skeptics point out that Homer has always been in charge of the company's overall marketing plan and has had plenty of time to capitalize on the company's popular home page. He'll have his hands full outmaneuvering Yahoo.