IE rise could hurt Netcenter

But more than browsers are at stake in this battle: Netscape's (Nasdaq:NSCP) new Internet gateway, Netcenter, has come to account for a quarter of the company's revenues, and it relies heavily on Navigator to draw traffic.

"If (IE) is gaining ground... Netcenter won't be the default choice for a lot of users, and that's significant," said analyst Bridget Regan of Giga Information Group. "Everyone's looking to see how well Netcenter does, as a beacon to the future of Netscape."

While the Navigator brings in no direct revenues, analyst Ron Rappaport of Zona Research said the browser is an important part of Netscape's e-commerce and Netcenter strategies.

"It's Netscape's meat and potatoes," he said.

The AdKnowledge study showed that IE is used to access pages 45.6 percent of the time, up 9.6 percent from January, compared with Navigator's 52.2 percent.

No such thing as free lunch
Netcenter began to figure heavily in Netscape's plans after Microsoft's decision, a few months back, to offer Internet Explorer for free. To stay competitive, Netscape had to follow suit with Navigator, instantly erasing a big chunk of the company's income.

To make up for it, Netscape turned to Netcenter, the page that Navigator users first see when they start up the browser -- its default home page.

Many users don't know how (or don't bother) to change their home page, and Navigator is the most popular browser, making Netcenter automatically one of the highest-traffic sites on the Internet.

Therein lies the problem: Netscape, rather than spending vast amounts of cash on television and billboard advertising, is depending on its browser to bring in users for Netcenter. If the browser shares continue to drop, it could spell trouble for the Web site, and the revenue it brings in from e-commerce advertising.

"A central part of the Netcenter strategy is dependent on putting as many of its clients into the mass market as possible," said Rappaport. "There's a very easy one-to-one relationship between how many of those clients are out there, set to Netcenter, and (the site's) future potential."

A possible solution? Netscape has made noises that it will cut a deal with a major media company, following in the footsteps of CNet Inc., (Nasdaq:CNWK) which received significant investments from NBC, and Infoseek Corp., which sold a 43 percent stake to Walt Disney Co.

That could provide the advertising to make Netcenter a brand in its own right, independent of Navigator.

Too little, too late?
Some observers say that, given the superheated competition in the Internet -gateway market, advertising might not be enough.

"To be honest, I think it's a bit late in the game," said Alexis DePlanque of The Meta Group. "Netscape really needed to do something with Netcenter early on to make a mark, and a lot of the other gateways have more interesting services. It's a little bit of a hard sell."

And then again, while Netcenter is the highest-profile part of Netscape's business at the moment (just a week after the site's official launch) it isn't the only part.

'Still a software company'
"Netscape is still not completely a content company. It's still a software company," Rappaport said. "Their success depends on several lines of business.

"They are both an enterprise software provider, and a content provider for newbies," he added. "Somewhere in between there's got to be a business strategy that umbrellas both of those."