The encyclopedia · Strategy & Leadership · Strategic decision · 1998
Netscape owned 90% of the browser market — then Microsoft gave IE away for free
Netscape had 90% browser share in 1995. Microsoft bundled Internet Explorer free with Windows. By 2002, Netscape was dead and antitrust lawyers were busy.
Netscape · Microsoft · 1998
What happened
Netscape Navigator dominated the web browser market in the mid-1990s, with over 90% market share. Its 1995 IPO was one of the most spectacular in tech history, and the company was the face of the commercial internet.
Microsoft responded by bundling Internet Explorer with Windows — for free. The 'browser war' that followed was brutal: Microsoft used its Windows monopoly to push IE, integrating it into the OS and making it difficult to remove. Netscape, which charged for its browser, could not compete with free.
Netscape's market share collapsed from 90% to under 10% by 2002. The company was acquired by AOL in 1999 for $4.2 billion, but the browser was effectively dead. The US government sued Microsoft for antitrust violations, and the case resulted in a landmark ruling. The case illustrated how a platform monopoly can destroy a competitor by giving away what the competitor sells.
Why it happened
- Microsoft bundled Internet Explorer free with Windows, making it impossible for Netscape to compete on price.
- Microsoft used its Windows monopoly to integrate IE deeply into the OS, making it difficult to remove.
- Netscape's business model — selling a browser — could not survive when the competitor's product was free.
- The antitrust case against Microsoft confirmed the anti-competitive behavior but came too late to save Netscape.
The lesson
When your competitor owns the platform and gives away what you sell, your business model is dead. In platform markets, the platform owner always wins.
Aftermath
Netscape was acquired by AOL and the browser was discontinued. The antitrust case against Microsoft resulted in a landmark ruling. Netscape's open-source code became Mozilla Firefox, which later challenged IE. The case shaped antitrust thinking about platform competition for decades.
Sources
- Netscape — Wikipedia (browser war, Microsoft antitrust)
- US Department of Justice, Antitrust Division — U.S. v. Microsoft Corporation [Browser and Middleware] (case opened May 1998; Findings of Fact Nov 1999; Final Judgment Nov 2002)
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