Why Microsoft Is Losing This Browser War

Why Microsoft Is Losing This Browser War

by Wolfgang Gruener

Analysis – Google, Microsoft and Mozilla have all updated their browser
with major new versions this month. Despite the fact that the browser
market is changing quickly and can make a 360-degree turn within 6
months, we feel comfortable predicting that Microsoft will have no
chances of gaining market share in the browser market in 2011. Microsoft
will have to realign its browser strategy, if it wants IE to play a role
in the cloud computing age.

Two years ago, I wrote a column at my old TG Daily that described the
IE8 launch as a “trainwreck”. My argument back then was based on the
market share gains of the browser within the first days of launch and I
expressed concerns that the introduction was simply too slow to score
against Firefox. Back then, I had quite a few critics who argued that
Microsoft has a different user base that is much less enthusiastic than
the users of Firefox and that Microsoft’s users would upgrade
eventually. Not immediately, but over time.

Flash forward and 23 months later, Net Applications estimates IE8′s
market share at 35.7% in February 2011. That translates into a
conversion rate of about 63% over a period of 2 years. Those remaining
37% are still using IE6 (especially in Asia) and IE7. As IE9 is
released, we conclude that Microsoft has not been able to convert at
least 35% of its IE users to a current browser version – and is at a
high risk of losing a substantial share of them in the long term. In
comparison, Google converts more than 80% of its user base from one
version to the next in less than 2 weeks.

Back in March 2009, I argued that Microsoft’s problem will be the fact
that it cannot move its users quickly enough to a new version – a
technique Google has perfected since then. Mozilla is getting more
aggressive with its updates as well, while Microsoft missed to integrate
an automated update feature in IE8 via a software patch over the past 2
years.



March 2011: Firefox 4 Crushes IE9


StatCounter provides daily market share data for all browsers with some
interesting implications (editor’s note: we will also be using Net
Applications data below, so please take the exact numbers with a grain
of salt, as they are not directly comparable, but are simply used to
highlight trends that show similar directions at Net Applications and
StatCounter. Net Applications unfortunately does not provide daily
market shares anymore.)

Earlier this month, we learned that Microsoft’s IE9 was downloaded 2.35
million times within 24 hours. That compares to 8.1 million downloads
for Firefox 4 in 24 hours and about 16 million within 48 hours (which
exceeds the pace of Firefox 3, which was downloaded 9.5 million times
within 48 hours after launch.) StatCounter’s systems did not notice a
major adoption of the browser yet. On launch day, IE9 was at 0.59% share
and ended up at 0.9% earlier today. During the first 24 hours after
launch, IE9′s share climbed by 0.12 points. Firefox 4 saw a gain of 1.59
points in the same time frame and is estimated to hold a share of 3.54%
already.

There are obvious reasons and not so obvious reasons, while we are
somewhat surprised that the IE9 downloads appear to be extremely weak in
comparison. We previously speculated that Microsoft may be able to
convince users to download IE9, but may have trouble convincing them to
continue use the browser. Download = user is an equation that doesn’t
work. We tend to forget that.

The most obvious reason for the slow update pace for IE9 is its limited
OS support – Windows Vista SP2 and Windows 7 – and the way how the
browser gets screwed by this fact. Yet it is somewhat surprising that
Microsoft has more than 300 million sold Windows 7 licenses in the
market and there is a rather lukewarm download rate of IE9 (Windows 7 is
the primary target of IE9). We remember that IE9 Beta and RC were
downloaded slightly more than 36 million times between September 2010
and March 2011 and it appears that IE9 final is exceeding that download
pace only marginally. It is also worth noting that Mozilla’s 16 million
Firefox downloads have resulted in 3.54% market share and Microsoft’s 36
million beta/RC downloads brought in just over half a percent of market
share, which highlights a circumstance in which the actual share of IE9
usage/download is substantially below the share of Firefox usage/download.

The not so obvious reason for the slow IE9 adoption rate is the
traditional behavior of IE9 users. Microsoft educated users over the
past decade that they can update their browser whenever they want, while
its rivals are aggressively forcing or at least are suggesting to update
their browser now. Google even updates Chrome without asking the user
first. IE users will update their browser when they can spend the time
on it or they feel there is a need to update. If you are using IE7 until
now, there is not much reason to update to IE9 as browsing speed,
booting speed and interface enhancements may not matter – and HTML5 is
still far away from being a common sight on the Internet today.

There are still a number of users that are locked into using IE6 and
Microsoft has severely limited IE9′s compatibility with IE6 by not
offering an IE6 compatibility mode in this new browser. It is pure
speculation how severely Microsoft has limited the browser’s maximum
market share by supporting just Vista SP2/Windows 7, but we have run
previous examples that are based on IE8′s gains with exposure to the
entire Windows ecosystem in comparison to IE9, which reaches less than
one third of the Windows environment at this time. Overall, we believe
that IE9 cannot reach more than 35% of the browser market over its
lifetime, which may or may not be shortened by Microsoft due to the
accelerated update cycles of its rivals and Microsoft’s decision to repsond.



It can only go down

I have previously used many parallels between IE4 and IE9. Back in 1997,
Microsoft was reaching for the browser crown against Netscape, and
introduced a passionate and very capable browser with an impressive
launch campaign. IE9 is a very advanced browser from a technology
perspective – a browser that can run with the fastest in every major
discipline, and even outrun Firefox and Chrome in some applications.
There is no reason why you would not use IE9 today.

Compared to IE4 in 1997, however, Microsoft has a platform disadvantage.
Microsoft was able to use Windows as a major driver to push IE4 and kill
Netscape at the same time. Today, Windows feels disconnected from IE9
and there is no common ground between the web browser and Windows. Back
in 1997, Microsoft promoted the Dynamic HTML-driven Active Desktop,
which was enabled only by IE4.

There is no such feature in IE9. Instead, it is Google that uses Chrome
to develop web features for its Chrome OS surface – in fact, Chrome is
the Chrome OS surface. It is the foundation for its web app desktop and
users have every incentive they need to stay with Chrome and (let
itself) upgrade it. The incentive will grow for those who use Chrome OS,
even if there were Firefox or IE apps for Chrome OS. Google is the only
big browser manufacturer that is, at this time, avoiding a scenario in
which the role of the browser is degraded to become an app in an
app-centric user scenario. Both IE and Firefox are in the danger of just
becoming apps in the future, while apps will be in the spotlight.

Mozilla, however, is moving much faster than Microsoft: It will have a
mobile version of Firefox within a few weeks – a browser that will be
very attractive to be used on smart phones and tablets. Microsoft’s
mobile IE9 is several months behind. Additionally, Mozilla is using its
open web app platform to build its own platform and to turn Firefox into
an OS surface. Microsoft’s product refresh cycle for IE may be too slow
to keep pace with its rivals: At this time, the refresh cycle is 2 years
from one version to another. If IE 10 is scheduled for 2013, IE9 is toast.

When IE8 was introduced in March of 2009, IE held a market share of
68.10%, according to Net Applications. The share dropped to 56.77% by
February 2011. Now we are seeing IE9 with limited OS exposure and even
if we consider the negative impact of Windows Vista between the
beginning of 2006 and late 2009 (which surely slowed the adoption of
IE8), Windows 7 users do not show any signs of adopting IE9 any faster
than IE8 was adopted. Even if IE9 has been available for just 10 days,
it is clear that Microsoft’s enthusiasm for IE9 has not reached its
customers and their upgrade habits are not changing. IE9 will gain over
time, no doubt. But it will be at a much slower pace than Chrome and
Firefox and will strongly depend on Windows 7 installations. The slower
IE9 is adopted, the greater the opportunity for Google and Mozilla to
attack Microsoft directly and claim market share.

It is interesting that Microsoft is still focusing on IE6 as a major
problem for its market share dilemma. However, most IE6 users are in
Asia, especially in China (where IE6 market share is still above 34%,
according to Net Applications). In China, IE6 users are tied to IE6
because of standardized financial applications that do not run on IE7 or
later. Microsoft is simply stuck in Asia and its current focus should be
to get as many people from Windows XP/Vista to 7 and IE8/IE7 users to
IE9. IE6 is almost irrelevant for Microsoft at this time on a global basis.

Counterpoint: User transitions

There are several variables in browser transitions that Microsoft can
influence. For example, we know that a large portion of all browser
users is very moody and is willing to switch their browser in a
heartbeat. Microsoft will have to learn how to cater to that crowd by
providing very specific goodies. Its traditional, slow-updating user
group may also be an advantage in the end: IE7 users who have not
updated yet are unlikely to update to IE9 in droves in the near future.
There will also be many IE8 users that simply won’t update, because they
either can’t update because of corporate restrictions, or because they
are simply uncomfortable updating their Windows system. But Microsoft
can reach those users in a much easier way than its rivals through
general Windows system updates. It can still modify IE7 and IE8 with
such updates that could embed automated update mechanisms in these old
browsers, which could help the company to get more people to pay more
attention to the advantage of new browsers.

There has been an argument that Microsoft is using IE9 to force Windows
7 sales, which we would disagree with. IE9 is not powerful enough to
convince users to buy a Windows 7 PC – yet.

We have no idea how important IE9 is to Microsoft, but we believe that
IE9 will largely play into Microsoft’s cloud future and will be
positioned as the best browser to run cloud apps such as Office 365.
Microsoft may even count on very specific IE9 acceleration features to
position Office 365 as the better cloud office – in comparison to Google
Docs. If that is the case, then Microsoft has a huge problem and may
have to make some drastic decisions. If it was us, we would increase the
incentive to buy a Windows 7 PC. Microsoft may even consider a basic
free update from Windows XP to 7 to enable a much larger user base –
with an option to upgrade to the full version for a small fee in the
range of $20-30.

Right now, IE9 will live or die with Windows 7. If Microsoft just hopes
that the browser will succeed with its technology alone, Microsoft is
plain delusional. IE9 needs not support many more operating systems, it
needs to bridge platforms and it needs greater visibility that
highlights the browser as a must-have and not just as a nice-to-have
product.

Given the recent market developments, we are somewhat pessimistic that
the company can fix this problem in the short term. We believe that
Mozilla will be able to at least keep its market share and grow it back
into the 25% range (based on Net Applications historic data), while
Microsoft will lose market share to Google at an accelerated pace as IE8
is generally phased out. That pace will be impacted by Google’s success
with Chrome OS, which will only use Chrome as a browser. If these
computers will be the speculated $250 notebooks and represent a platform
the netbook once promised to be, Google has a huge opportunity at its
hands to grow Chrome’s influence. Take into account that Google is now
also going after Microsoft’s Office user base, and you could see a
perfect storm brewing for Microsoft.

At the current pace, Mozilla and Google will both hold somewhere between
20 and 25% of browser market share by the end of the year, while
Microsoft may be down to about 40-45% and lose its market share majority
in Q4 of this year.

http://www.conceivablytech.com/6418...rowser-war