PC GIANTS OFFER BRANDED BROWSERS: COMPAQ, HP, ACER WILL EMPLOY ENCOMPASS' AD-BACKED PRODUCT

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Major computer marketers including No. 1 Compaq Computer Corp. plan to introduce self-branded, ad-supported browsers for their home PCs, signaling competition for Microsoft and a new place to run banner promotions for advertisers.

Hewlett-Packard Co. and Acer America also have come out with self-branded browsers for their PCs, throwing a new twist into the ongoing browser wars between Netscape Communications Corp. and Microsoft Corp.

The browser software for all three PC manufacturers is supplied by one company, start-up Encompass Inc., Atlanta and Cupertino, Calif., which will begin selling banner ads this week for the product. The PC makers will share in the revenues from the ads, expected to reach millions of new PC users.

CONTROVERSIAL MOVE

In what's sure to be seen as a controversial move, the banner ad at the bottom of the PC-branded browsers, which will rotate every 30 seconds, will stay on-screen no matter what site the user has called up.

Word of the PC-branded browsers comes as Microsoft is being investigated by the Justice Department for forcing computer makers to include its Internet Explorer browser on their PCs. Justice has released testimony quoting various PC maker executives -- including those at Compaq -- as saying that Microsoft pressured them to include icons for Explorer on their PC screens.

Microsoft declined to comment directly on the new browser.

"We haven't seen what Encompass is doing specifically, and it's hard for us to comment on that," said Craig Beilinson, Internet Explorer product manager.

But Mr. Beilinson said Microsoft's deals with PC makers leave them free to install additional browsers as long as they also ship Internet Explorer. That required bundling of Internet Explorer with Windows 95 is at the heart of the current Justice Department investigation.

MICROSOFT CUSTOM WORK

Mr. Beilinson noted Microsoft has worked with others to do custom browsers. Lotus Development Corp., for example, uses Internet Explorer technology inside Lotus Notes, but Notes users never see the Internet Explorer icon.

The new PC-branded browsers by Encompass actually sit on the Explorer platform, and use Microsoft's ActiveX software, though there is no Microsoft or Explorer identification visible to users.

While the PC makers' own branded offerings likely will be the default browser on the PCs when they ship, users could still fire up Explorer or Netscape, or make either the default browser, if they wish.

Compaq will begin including the browser next year with Presario, the No. 1 selling home PC, according to an executive close to the deal, though officially Compaq said it's not aware of any deal.

Compaq worked with Microsoft on a custom version of Internet Explorer that began shipping with home PCs in October, but that browser isn't branded by the PC maker.

DEAL WITH PACKARD BELL NEC?

Encompass is believed to be also hoping for a deal with Packard Bell NEC's No. 2 selling home PC brand, Packard Bell, and other computer manufacturers.

Drew Lanham, Encompass VP-business development, wouldn't discuss specifics, but said the company expects the browsers to be available on 6.5 million PCs by the end of 1998.

Encompass-equipped PCs have an Internet connection either on the keyboard or as an icon. After a PC user hits the icon or the key, a 41/2-minute introduction to the Internet is automatically played. After watching that (or bypassing it), users are asked by an on-screen prompt if they want to connect to the Internet.

An 800-number then gets the user a list of local access numbers, and with one more click the user is connected to the Internet, via a browser branded by the PC maker.

The Internet service provider is GTE Corp., and users automatically get 50 hours for free. Then the user will be asked to pay for the ISP.

PETRY IS AD REP

Encompass has hired Petry Interactive, New York, to be its ad rep and is about to hire an executive to run its ad sales operation.

Though Hewlett-Packard has been offering its Encompass supplied Pavilion Custom Browser since July, the formal Encompass ad sales effort is only now starting.

The PC-branded browsers show icons that link to a number of sites, aggregated by subject matter. For example, click on computers and technology, and all eight of the icons will be various sites of Ziff-Davis' ZDNet, according to an executive familiar with the deal.

LINKS TO ZDNET SITES

ZDNet has signed a deal with Encompass for the links, freezing out International Data Group and CMP Media, unless otherwise specified by the computer maker. ZDNet pays the PC makers for the privilege of being on their browsers -- $3,000-$8,000, the executive said -- and pays Encompass a fee for each clickthough to one of ZDNet's sites.

ZDNet President Daniel Rosensweig wouldn't discuss financial terms, but said ZDNet sees the Encompass program as a way to reach a broad base of new computer users.

Encompass' deals with the PC makers run 18 months, and during that period the clickthrough amount for ZDNet is capped "in the $100,000 range," the executive noted.

Yahoo! Corp. is providing the browser's search engine.

The company is also working on a version for one of the office-supply store chains. In that scenario the chain would distribute the browser software on CD-

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