$137.8B U.S. ad spend for top 200 advertisers
The comparison is astonishing: For the first quarter of 1997, Netscape bought just seven pages of U.S. tech and business ads, according to Adscope; Microsoft bought more than 1,000 pages. In 1996, Netscape spent a piddling $1.8 million in print (with no TV). Microsoft spent $137 million in print and TV combined. Indeed, Microsoft spends more hawking a computer mouse than Netscape spends on print overall.
In the pitched battle for Internet dominance, this is the marketing equivalent of David vs. Goliath, pitting Netscape's near-total reliance on online marketing and public relations-based good will against Microsoft Corp.'s powerful reach and all-pervasive print and TV spending effort.
Most crushing of all: Microsoft even outspends Netscape more than 2-1 in Web advertising.
"Netscape is rolling the dice and they're going to make it or break it based on the Net," says John McCarthy, group director-new media research at Forrester Research, Cambridge, Mass.
"It's purely born out of necessity and philosophy, and if they win that will be viewed as brilliance. I think it's the right strategy."
Other analysts question whether Netscape shouldn't begin beefing up its marketing budget, especially given that Microsoft's print spending soared 60% in the first quarter of '97. But does Netscape intend to expand its print budget?
NO TV PLANS
Says Senior VP Marketing Mike Homer: "I don't see it growing significantly."
TV plans? Get real.
For Netscape, all business flows from the Internet, including marketing. Since the company began in 1994, launched on the strength of Marc Andreessen's browser software, it has pioneered use of the Web for everything from free software downloads to business partnering to Web advertising (it is the No. 1 Web publisher in terms of ad revenue at $28 million last year) to overall image branding.
So successful has this campaign been that the Netscape name is now virtually synonymous with the Internet.
"You would be hard-pressed to find a company that has created broader brand awareness with a better set of brand qualities than we have in two years," Mr. Homer says.
`THEY'RE SCRAPPY FOLKS'
"I don't underestimate them for a second," says Yusuf Mehdi, group product manager on Microsoft's Internet Explorer. "They're scrappy folks. You always have to take them seriously."
Certainly, Netscape's overall business strategy has evolved over time. The company introduced the first major branded Web browser in late 1994, doing to browsers what VisiCalc did for spreadsheets and what WordStar did for word processors.
Unlike those failed pioneers, Netscape has adapted: It focused in 1996 on the corporate market, building on Internet expertise to create software for intranets, e-mail and collaboration.
But the marketing strategy stayed firmly online. Netscape may have the world's first self-sustaining marketing program: The company sells advertising on the site, then takes that money and recycles it into ads bought or bartered on other sites -- all of which drives traffic back to Netscape.
The Web is at the center of Netscape marketing and the company's use of the Internet is comprehensive and cutting-edge.
"Virtually all of our revenue is somehow touched by the Web," says Jennifer Bailey, Netscape VP-electronic marketing. "There is probably not a customer that doesn't come to the Web site to do something."
How to lure in traffic? A Netscape Now! button on more than 30,000 sites allows a PC user to download the latest browser, for which http://home.netscape.com magically appears as the default home page.
Banner ads on other sites and e-mail sent out to sales prospects by Netscape also drives the traffic.
Netscape has the capacity to send 300,000 outbound messages a day, pitching customers to try and maybe buy new software, or offering targeted customers relevant case studies of Netscape success stories.
HIGH RESPONSE TO E-MAIL
Netscape's e-mail goes only to a highly qualified list of people registered at the site. Ms. Bailey says the direct e-mail is cheaper and has a higher response rate than regular direct mail.
"I don't think Netscape has ever done a traditional direct mail campaign," she says.
For example, all Netscape server software is free to sample and visitors download 250,000 copies every quarter. Each visitor is a prospect, Mr. Homer says, giving the company leads he figures would cost $300 a person to replicate in direct response print advertising.
"We have the world's lowest-cost direct marketing facility on our Web site," Mr. Homer says.
Given the Web's efficiencies, Mr. Homer says he would rather harness the Internet than spend big bucks on other media to reach customers and prospects.
"Once they're on the Web, we have the most efficient machine in existence to get at them," he says.
Netscape's home page draws some 130 million hits a day from more than 4 million users. The site packs in a lot of features: Search engines, news headlines, links. But unlike Microsoft and Microsoft Network, Netscape isn't in the content business; its site is meant to promote and sell software.
How to sell software? By giving it away. Visitors can download a version of anything Netscape makes for a free evaluation.
Netscape is on the honor system: After 90 days, you're supposed to pay $49 for Navigator or its successor, the $59 Communicator.
LOOKING THE OTHER WAY
Netscape looks the other way when people forget to pay for their browsers. The company has little choice: Microsoft's competing Internet Explorer browser is available free on the Web, bundled with 6,500 Internet service providers worldwide and included inside Windows 95.
Microsoft's strategy is working: From April 1996 to January 1997, Microsoft's share of the corporate browser market rose to 28% from 4%; Netscape's share dropped to 70% from a peak of 87%.
So why doesn't Netscape bite the bullet and offer a free, no-support browser to turn millions of petty thieves into loyal, legitimate members of the Netscape community -- not to mention slowing Microsoft's market share gains?
Executives say the idea has been discussed. But Mr. Homer says Netscape is not "currently planning" such a deal.
He cryptically adds: "Timing is everything. Why would I tell you what we're going to do three months from now?"
In the business market, Mr. Homer adds, customers are more willing to pay for browsers and other Internet software to be legal and to get support.
PR IS A KEY TOOL
Next to the Web, Mr. Homer says Netscape's most important marketing communications tool is public relations. Netscape, in fact, spends more on PR than traditional advertising. Again, it's a matter of focus: Netscape bets it can get a bigger bang for the buck with PR.
That the Netscape story is so well-known is a testament to the company's PR skills. Anyone who keeps up with business or popular culture knows the tale of Silicon Graphics founder Jim Clark teaming up with twentysomething Marc Andreessen, a developer of the Mosaic browser at the University of Illinois, to launch Netscape in April 1994.
Mr. Clark recruited James Barksdale, a charismatic executive from McCaw Cellular Communications and Federal Express Corp., as president-CEO. When Internet mania swept the media and public, the trio was primed.
"Barksdale always likes to say, `Find a parade and jump in front of it,' " says Rosanne Siino, director-corporate communications, who was the first executive in Netscape marketing when she arrived in June 1994.
Mr. Andreessen, the senior VP-technology, became poster child for the Internet. He is still a public relations magnet, recently profiled (negatively) in GQ magazine and interviewed (positively) in Rolling Stone.
Netscape got another major PR boost when it launched its initial public stock offering in August 1995 for what many investors were convinced was the next Microsoft.
"The public offering was as much a marketing tool as it was a way to raise capital," Mr. Homer says. Indeed, for a time some outsiders perceived Netscape as Goliath to Microsoft's David. Reality soon sank in and Netscape's lofty stock price fell back to earth.
Ms. Siino must keep finding new ways to spin the tale now that much of the novelty has worn off. "The biggest goal," she says, "is to keep the visibility up."
One missing ingredient: A newsstand magazine about Netscape. Ms. Siino says Netscape has talked with International Data Group, Ziff-Davis Inc. and others.
"That may happen soon or not soon," she says. "It just depends. People are trying to gauge the market." Netscape would like to see a magazine but has no interest in becoming a major print advertiser.
Beyond Net marketing and aggressive PR, Netscape has another force in its fight against Microsoft: It's allied with Sun Microsystems, Oracle Corp., IBM Corp. and other major powers that compete with Microsoft.
Netscape is Microsoft compatible: Its software works with various Microsoft operating systems. But Netscape is also enterprise compatible, while Microsoft must mesh its Internet strategy with a need to sell Windows 95 and Windows NT.
THE `FOIL' AGAINST MICROSOFT
"If you want to build a successful company, solve people's problems," says Danny Shader, Netscape's VP-developer and industry relations.
"There's a lot of frustration [among customers] against Microsoft right now and Netscape is one way to express that," says Rob Enderle, analyst at Giga Information Group, Santa Clara, Calif. "Netscape often is used as the foil, the bargaining chip against Microsoft."
But Netscape is vulnerable. In focusing on the Web, Netscape ignores an influential group that other tech companies aggressively court in print and broadcast: Senior executives who don't spend much if any time on the Web, but who must approve major tech purchases.
And while Netscape marshals its comparatively limited resources toward the enterprise, Microsoft has the ability to take on both the business and consumer markets.
"[Netscape's] consumer story is not what it needs to be," says Kathey Hale, an analyst with Dataquest, San Jose, Calif.
Netscape plans to step up its consumer efforts in 1998. It's a serious issue: Even with its business focus, Netscape needs to be a contender in the consumer Internet market to draw in the crucial mass of Web developers -- and to drive traffic and advertising to its core Web site.
NEW BROWSERS UPCOMING
Netscape has high hopes for its new Communicator browser suite, but Microsoft is similarly counting on the upcoming Internet Explorer 4.0 to give it the lead over Netscape in browser installations.
One measure of Microsoft's resolve: The company has assigned more than 20 product managers to help market Explorer, which is more than it had working on Windows 95.
"Having a majority presence in the browser market is very important," Mr. Mehdi says. "That sets your brand image in the Internet space."
Mr. Homer dismisses browser battles as "last year's war."
"It's important for us to be one of the leading share players in the market," he says. "It doesn't mean 70%. That doesn't necessarily mean 60%."
Ms. Siino says she's not sure Netscape even needs to have 50% browser share to be perceived as an Internet technology leader.
Mr. Homer is looking beyond browsers. Netscape's goal, he says, is to grab 30% to 50% of a $10 billion market for enterprise software tied to the Internet and intranets by the year 2000. It took Microsoft 19 years to become a $3 billion company; Mr. Homer proposes to do it in seven.
"If that's where we're heading," Mr. Homer says, "no one will be talking about browser market share."
This story originally ran in Advertising Age's Business Marketing.