Netscape Case Memo

In: Business and Management

Submitted By JennaAlex
Words 1377
Pages 6
1. Why are investors excited about Netscape? What is Netscape’s business model? What must Netscape accomplish if it is going to be successful in the long run? What are the risks Netscape faces?

Marc Andreessen, along with the other founders of Mosaic, accomplished what other Internet providers before failed to do: they created a Web browser that did not require the user to have expertise in HTML coding. Mosaic’s user-friendly click-and-point interface allowed for a wider customer base. After purchasing the licensing rights of Mosaic from Spyglass, Andreessen’s newly formed Netscape Communications Corporation looked to expand the popularity of the software. Netscape’s founders followed the business model they used at Mosaic that created a 60% market share for the firm. Netscape initially gave the software away for free, hoping to generate demand for the product and later be able to sell it. This model allowed the company to gain 75% by spring of 1995. Through the product’s success, Netscape was able to handle the first immediate risk to the firm: to eliminate competition from Spyglass’s Mosaic software. Netscape was the first mover in combining a user-friendly web browser and also a comprehensive server system for companies to conduct business online.

Like any first mover, Netscape faced the risk of new entrants into the market. American Online and Prodigy came out with their own Web browsers. Companies like Compuserve and Microsoft purchased licensing rights from Spyglass to create their own web browsers. Microsoft, the largest software company in the world, posed as the largest long term threat to Netscape with the imminent release of Windows ‘95, which included its own Web browser. Prior to their Initial Public Offering, Netscape operated at a loss. Netscape would need to find a way to generate positive net income in order to ensure long-term success for the…...

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