After two college students disclosed Sept. 17 on the 'net that they had broken a security code in the ubiquitous Netscape Navigator Web browser, Netscape promptly admitted fault and said it would offer a free fix on its home page (http://home.netscape.com).
"We made a mistake, there's no question about that," said Rosanne Siino, director of corporate communications at Netscape Communications Corp., Mountain View, Calif.
The flaw could allow clever hackers to decode financial information, such as credit-card numbers, transmitted over the Internet. The problem apparently was discovered before anyone lost money, and analysts say the fix, involving changing how numbers are randomly generated for a code, is simple.
The bigger issue may be that Web shopping won't take off with the masses until or unless there is value and compelling content.
Of the estimated 8 million people worldwide who use Netscape Navigator to browse the 'net, fewer than 5%-or 400,000-engage in electronic commerce, Ms. Siino said.
"The more we look at electronic commerce as far as the retail and home consumer, we find more problems in the whole thing," said Clay Ryder, analyst with Zona Research, a Redwood City, Calif., market research and consulting company. "They're not insurmountable. But the solutions are not here right now."
"We don't get from users that [security] is holding up electronic commerce," said Kathey Hale, analyst with Dataquest, a San Jose, Calif. market research company.
Indeed, the majority of customers at Virtual Vineyards, an Internet shopping service that uses Netscape technology, don't bother to use an encryption feature to encode their credit-card numbers when they transmit orders. Savvy consumers know they can complain to the bank if someone steals their data, said Robert Olson, the marketer's president and a former computer security executive.
Still, Netscape showed it can cope with crisis. The company quickly disclosed the problem and solution. That's in contrast to Intel Corp., roundly criticized late last year for a delayed and bungled response to news that swept the Internet about a flaw in its Pentium chip.
Intel's technically oriented top management initially ignored the advice of its PR executives to come clean. Netscape management-including President-CEO Jim Barksdale, a veteran of image-savvy Federal Express Corp.--from the start decided on full disclosure.
"Everybody over there [at Netscape] talks about not being an Intel," said Mr. Olson.
While analysts think last week's security flaw will quickly fade in memory as Internet security is improving rapidly, they believe bugs will be an ongoing story that could cause a small number of consumers-and businesses-to steer clear of the 'net.
"This is a caution flag," said Bruce Guptill, senior analyst at Gartner Group, a Stamford, Conn., consulting and research company. Whether the issue is security or lack of consumer interest, the net 'net for marketers is proceed with caution.