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AOL, Netscape: A closer look
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November 23, 1998: 5:50 p.m. ET
Internet ventures that turned into multi-million dollar success stories
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NEW YORK (CNNfn) - Internet giants America Online Inc. and Netscape Communications Corp., which Monday announced they were in talks about a possible merger, are in many ways pioneers on the World Wide Web.
Here's a closer look at the companies' histories and strategies.
America Online
America Online has long been considered a heavyweight on the World Wide Web. The $2 billion Dulles, Va.-based company, which was started in 1985 as an online chat system for Apple computer users, today reaches more than 14 million Internet subscribers.
As the Internet evolved, AOL transformed itself into an Internet Service Provider. Within nine years of its inception, AOL membership jumped to one million. By 1996, subscribers totaled five million, doubling to ten million by 1997.
But it wasn't always smooth sailing for AOL. In late 1996 and early 1997, the company was besieged by complaints, when it apparently took on more subscribers than it could handle, burdening customers with busy signals and persistent service outages. But AOL rebounded, resolving many of the problems after pledging $350 million in new modems, increasing its customer support staff and upgrading other infrastructures.
The company also pursued an aggressive growth strategy, most notably acquiring competitor CompuServe in 1997. The move added another 2 million subscribers to AOL's base.
In addition to other acquisitions, AOL recently snapped up ICQ Web chat software, adding another10 million active users among an audience that is considered more Web-savvy than AOL's mainstream subscribers. AOL officials hope ICQ will help the company lure subscribers from rivals Yahoo! Inc. and Microsoft's HotMail free electronic mail service.
AOL (AOL) has also established a presence in the competitive online city guide market. Its Digital City Web sites, a series of local guides that offer news, weather and sports in 58 North American cities, already outperform Microsoft's rival Sidewalk.com and USA Networks Inc.'s CitySearch. Digital City is set to expand internationally next year.
AOL's success has not been limited to the United States. The company already offers separate national services of its trademark Web site in Canada, the United Kingdom, Germany, France, Sweden, Japan and Australia. A Hong Kong version is in the works.
AOL, which boasts a 60 percent marketshare, currently is looking beyond subscriber fees for revenues, working to sell advertising on its Web site and forging marketing agreements with other companies.
A deal with Netscape would support AOL's goals of becoming a full-package online service provider able to compete effectively with rival Yahoo!
Netscape Communications
When Netscape Communications was formed in 1994, it was a way for college students to more easily navigate an obscure computer network known as the Internet.
Four years later, the Mountain View, California company employs more than 2,000 people in 17 countries and reported revenues of $150 million in its third quarter ended July 31. Netscape's Navigator Internet client software has become the world's most popular PC application.
Netscape (NSCP) ignited the Internet craze on Wall Street in August 1995 when the stock of the company, which had yet to post any profits, soared in its initial public offering in one of the hottest stock market debuts ever -- just 16 months after the company was founded.
The company's browser so quickly dominated the market that it made even software giant Microsoft Corp. nervous.
Microsoft came up with its own browser, Internet Explorer, which it distributed for free, and grabbed market share away from Netscape.
In an effort to stem the loss in customers, Netscape started giving the browser away. While Netscape, which once controlled more than 80 percent of the Internet browser market, is still the leader, No. 2 Microsoft is very close on its heels. A survey this summer showed Netscape's market share for its Navigator Internet browser was 52.2 percent vs. 45.6 percent for Microsoft's Internet Explorer.
Although the browser is no longer a direct source of Netscape's revenue, it remains a critical tool in attracting people to its other businesses, including its NetCenter Web site, and its software which runs and manages the server computers that power Web sites.
Netscape has also developed software used to run Web-based electronic commerce sites, a technology that has attracted both AOL and Sun Microsystems Inc., which may seek to integrate the software into their own Web offerings, analysts said. 
-- from staff and wire reports
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