AOL, King of the ISPs?
The Industry Standard, November 25, 1998
by Jason K. Krause
thestandard.net
The full effect of the AOL-Netscape buyout
will not be felt for some time, but already
AOL's newfound strength looks to put it in a
position to derail the efforts of the country's
second-tier ISPs.
Some ISPs say the deal will have no effect
on their business since AOL has acquired
nothing that competes directly with them.
But that ignores the fact that AOL ups the
Web ante with Netcenter. According to
Media Metrix, AOL already commands as
much as 50 percent of Web traffic, and
NetRatings says that figure could reach 70
percent with the companies' combined
strengths.
"AOL is proud of the fact its users stay
away from the Web and in its closed
channels," says Kirsten Kappos, VP of
corporate communications for ISP
EarthLink. "But it's only a matter of time
now before we start seeing those AOL
triangles all over Web sites. Starting with
Netcenter, they'll be making partnerships
and content deals all over the place."
From the perspective of an ISP, the most
interesting part of the deal will be AOL's
relationship with Sun, which involves AOL
helping Sun to resell Netscape software.
"As long as AOL doesn't do anything to
alienate the second-tier ISPs, their
software ought to continue to be popular
with ISPs," says Ford Cavallari, VP of
Internet strategy at Renaissance
Worldwide, an industry analyst firm. "The
second-tier ISPs make up a good chunk of
Netscape's software business, so it
doesn't make sense to lose that business."
The most likely source of conflict will be if
AOL decides to use Netcenter as the
default home page for Netscape browsers.
"The majority of Netscape browsers have
been distributed on OEM boxes or by ISPs
like ourselves," says Kappos. "If AOL tries
to control the browser business, ISPs will
go exclusively to Internet Explorer."
Another big question facing ISPs is how the
Sun and Netscape product lines will
converge. Sun Solaris is the most popular
operating system for ISPs, but Microsoft
looks to fill any holes with its own server
offerings should Sun fail to integrate the
two lines. Sun's big score for the short
term is $500 million in sales to AOL for
Sun's Solaris- and Sparc-based servers.
AOL runs on a mixture of platforms, but will
likely become more reliant on Sun products
with the deal. The second big score for
Sun is that AOL is licensing Sun's
Java-based technologies for
next-generation applications and consumer
devices.
Sun takes over none of Netscape's product
road map, but AOL and Sun say they are
committed to converging their companies'
product lines. According to John
McFarlane, president of Sun's Solaris
group, the shift will most profoundly affect
the application server space as well as
e-commerce offerings from the
companies.
Competitors admit that the deal may put
AOL in a league of its own. "There's no
way we can compare to AOL in terms of
size," says EarthLink's Kappos. "They're
taking their brand recognition to the extreme – I think their main
competitor now is Microsoft."
|
