Microsoft's Renewed Browser Wars

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The recent video released by Microsoft (NASDAQ: MSFT) to bring back its former users to its Internet Explorer browser has renewed the browser war that is mainly among Microsoft's IE, Mozilla Firefox and Google (NASDAQ: GOOG) and its Chrome browser. Will Microsoft be able to reclaim its status in the browsers market?   

Browser wars

In recent years the competition between Microsoft and Google seem to have concluded with Google's chrome cutting down on the market share of Microsoft's IE. As of December 2012, Chrome accounts for nearly 47% of browser market share. In comparison, Microsoft's IE accounts for only 14.7%, Firefox accounts for nearly 31%, and Apple (NASDAQ: AAPL) with its Safari browser has a market share of only 4.2%.  As a side note, regarding Apple's market share in the browsing market, since its operating system in desktops and laptops account for 8.7%, and since it's reasonable to assume that most of the Safari users have an Apple desktop/laptop, then the market share of Safari among Apple's products is substantial and might be as high as 50% (based on the calculation of 4.2%/8.7%). The low market share of Apple's browser suggests it had little success outside Apple's products.   

Turning back to Microsoft, its attempt to renew its brand might be difficult. The company's browser had technical and security problems, and its upload time was much higher than other leading browsers, such as Chrome and Firefox. The result of these problems led to a steady drop in the IE market share: In the past year, the company's market share fell by nearly 6 percentage points. Moreover, back in 2008 IE's market share was around 50%, but the rise in Google's chrome at the end of 2008 cut Firefox and Microsoft's market share to their current low shares.

The reason Microsoft is trying to regain its market share is because this industry could generate revenues for the company. One of the ways is via ads in its search engine. In Chrome, users tend to use Google's search engine; in IE, users tend to use Bing or Yahoo. This is likely to be the prime source of revenue from browsers. Despite the fall in IE's market share, the revenues of Bing Yahoo Network (BYN) from ads are still robust. Moreover, the click share of BYN has increased in the recent quarters and in the process cut the market share of Google's click share. If Microsoft will be able to regain some of its market share in the browser market, this could also pull up revenue from its Bing profit center.  

The rise in the mobile sector is another aspect Microsoft is trying to reinvent its self and expand its operations.

Mobile is growing but is still small

The mobile market, which includes Smart-phone and tablets, continues to sharply expand. But in terms of browsers they still take a very small portion of the total market: as of December 2012, the Mobile's share in the OS account for only 2.2%. Moreover, since the major sites such as Twitter, Facebook and Youtube have their own application, the usage of browsers in mobile devices is limited. The dominance of Apple in the mobile industry is slowly declining and as of December 2012 the iOS accounted for 48% of the mobile market. Back in January 2012 it accounted for nearly 56%. So this industry might be another source of growth for Microsoft's revenue. The company's launch of the new operating system Windows 8 that works on Nokia's Lumia Smart-phone seems to be paying off: Nokia's sales from its Smart-phone soared in the last quarter of 2012. If sales of Nokia's Lumia will continue to rise, it could also suggest the usage of Microsoft's browser will also grow, which could lead to another source of revenues growth.

Bottom line

Microsoft is trying to reinvent itself and take back its hold on the browser market. I think that if the company's browser will beat the performance of its leading competitors (and not just try to appeal to its users' nostalgic sentiment) the users will get back to it. In the meantime, the company's potential growth in revenues from browser usage is likely to come from mobile devices.  

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