CompuServe Internet product business slowing down

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Division rethinks marketing plans as browser's share plummets

Compuserve's Internet division isn't looking nearly as spry as it used to.

Market share for the flagship Internet in a Box Web browser is plummeting, and CompuServe is licensing Microsoft Corp.'s Internet Explorer Web product, a competing product.

Reports also surfaced last week that CompuServe was cutting back on advertising and trade show marketing for the Internet Division. CompuServe denied the reports.

Internet in a Box's retail market share fell to 14% in October from 59.1% in June, according to PC Data, Reston, Va. In the same time period, Netscape Communications Corp.'s Navigator Personal Edition shot up from 6.4% to 41.5% of the market.

CompuServe is cutting back on marketing for some Internet products, executives familiar with the company said. The online service paid $100 million to acquire Seattle-based Spry last March, renaming it CompuServe Internet Division.

In addition to Internet in a Box, the division markets online access services and customized browsers and access services for businesses.

Deanna Leung, director of marketing for the Internet Division, denied CompuServe would discontinue advertising and trade show marketing for its Internet products this year. But she indicated that the company would redirect some of its marketing efforts to value-added and bundling deals starting in the second quarter.

"We're reallocating our channel distribution," she said.

Seattle advertising agencies Imagio and Elgin Syferd/ DDB Needham have handled the Mosaic and Internet in a Box lines.

Analysts have watched the fortunes of the Internet Division's browser products closely since CompuServe said late last year it would allow consumers to download their choice of browsers. The company also said it would license Microsoft's Internet Explorer browser.

Some say CompuServe's moves are as good a death knell as they've heard lately for a proprietary browser.

"It's not to say they can't still have a viable business, it's just not going to be on the same order as Netscape or Microsoft," said Ted Julian, research manager for Internet communications at International Data Corp., Framingham, Mass.

It's a distinction--or concession--the service also seemed to make last week.

"In the past we thought we had to be in on the business of pushing the envelope," said David Bezaire, director of Internet services at CompuServe. "We can instead put our attention on where our customers want to go now."

He added: "Our reason for licensing and redistributing the Internet Explorer is the convenience factor ... There's been a change in the competitive environment ... Now we can assume that people will have their own browser."

Prodigy made a similar move late last year, announcing it would offer its subscribers access to the popular Netscape browser this year, in addition to its proprietary software.

The moves send a strong signal that the Web browser market will soon be a two-horse race. Netscape controls three-fourths of the market in terms of usage (many people have downloaded the software for free), and Microsoft's product is expected to come on strong this year.

Copyright January 1996 Crain Communications Inc.

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