Netscape Search Engine Too Late, Analysts Say

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June 25, 1999 (3:29 AM EDT)

Netscape Search Engine Too Late, Analysts Say

By Malcolm Maclachlan,

Netscape launched its own search service Thursday, but according to some analysts, it may be three years too late.

For years, Netscape was criticized for sending traffic to search engine partners like Alta Vista, Excite, Infoseek, Lycos and Yahoo. These companies used links from Netscape's browser and websites to become not just search providers but major content players. They now stand as the biggest rivals to Netscape and its new owner, America Online.

Rob Enderle, an analyst with Giga Information Group, thinks Netscape would have done well if it had pushed its own search engine in 1996 or 1997 and stopped sending competitors traffic.

"It was something that they could have carved out for themselves at the front end and they would have still been a power," Enderle said. "For THE Internet company to miss the whole concept of the Internet is kind of embarrassing."

Netscape got too caught up in competing with Microsoft on the software front, he said, when it should have been competing with the search engine players on the content front. The biggest winner in the browser wars, Enderle said, turned out to be Yahoo.

But other analysts don't see it that way. The main reason Yahoo became such a big success was its effective branding and ability to roll out new services, said Anya Sacharow, an analyst with Jupiter Communications.

Laurie McCabe, an analyst with Summit Strategies, agreed. Users have always sought choice, she said. She compared the situation with cable television, which took years to break the networks' hold on television viewers. On the Internet, she said, barriers to entry are far lower. The increasingly fragmented nature of Internet viewership will prevent any one company from controlling much of it, even if they are Netscape or Yahoo.

Search is increasingly becoming a standard commodity, McCabe added. Users expect major sites to have search services, she said, and they expect those services to get better and better over time. However, she said, the Net has passed the point where Netscape could make a big splash with its search service.

"The market is pretty saturated now," McCabe said.

However, analysts liked the service. Google, Netscape's search partner, has some very impressive technology, said analyst Barry Parr of International Data Corp. The service also allows Netscape to make money off search. The service centers largely around Netscape's Open Directory. This is a human-compiled list of sites the company acquired in November when it bought NewHoo. Open Directory uses 13,000 volunteer editors who have now catalogued 675,000 websites.

Open Directory looks a lot like Yahoo, Enderle said, and that's not necessarily a bad thing. As the Web has grown, more portals have turned to directory services. Lycos launched such a service earlier this month. Last week, Inktomi, the company which supplies the search technology behind many portals and search sites, unveiled their Directory Engine. This is software designed to help search customers quickly create directories.

"There is no bad news here for consumers," Enderle said.