The number-one online service made the announcement just one day after declaring a licensing agreement with Netscape Communications for Navigator.
"There's some confusion [about this announcement]," AOL Chairman and CEO Steve Case acknowledged today. "Microsoft will become our primary technology partner, while Netscape will focus on our GNN brand. Netscape will be an option for users, but Explorer will be built in and shipped on our new disks."
GNN (Global Network Navigator) became a subsidiary of America Online last summer and offers Internet access separate from AOL's own proprietary content service. AOL and GNN are different brands targeted at different markets and therefore need different browsers, Case said. AOL will discontinue the development of its browser.
Case said that using Microsoft's Internet Explorer as a primary AOL browser works better than Navigator. He didn't elaborate but said users can still choose whichever browser they want--they'll simply get Internet Explorer automatically when they sign on to AOL.
Microsoft's part of the deal calls for bundling the AOL installation software with Windows 95. Windows 95 users will have the option to sign on to AOL as part of the OS installation process. The AOL icon will pop up in the list of Windows 95 programs and will appear on the desktop next to Microsoft Network, according to Microsoft Chairman and CEO Bill Gates.
MSN has 850,000 subscribers, and Gates said he doesn't expect AOL to affect the future of the Microsoft online service. "We are still very committed to competing in the content space. MSN will be there exactly as is it now, and we see an opportunity to continue growing that as well," Gates said.
With built-in access to all Windows 95 users as a carrot, many analysts were surprised that AOL opted for Microsoft and Explorer, and they wondered if AOL might confuse its users with the option of two different browsers for its two Net access services.
"I'm not surprised they chose Microsoft, but I am surprised they would split energies," said Emily Green, an analyst with Forrester Research. "I'm wondering how AOL subscribers will react to it... I think AOL's whole goal is to make it simple, and I'm not sure how this reconciles with those goals. Having to download and choose between a different browser argues against that."
AOL subscribers who use Macs--a healthy portion of its membership--may also be upset by the fact that the Macintosh version of Internet Explorer is not in synch with the Windows version. While the Windows version will get support for Microsoft's ActiveX controls this summer, for example, the Mac's won't catch up until the end of the year, if then.
The deals with online service providers are so critical to the battling browser vendors because fully half of all home Internet users come in through commercial online services, according to the Homefront survey released last week by San Francisco-based market research firm Odyssey.
Although yesterday's announcement of the Navigator-GNN deal was interpreted as a blow to Microsoft and today's announcement of the Explorer-AOL deal as a blow to Netscape, some analysts still don't think that the AOL-Microsoft alliance will necessarily do Netscape serious damage. After all, the number-two online service, CompuServe, went with Navigator on Friday. Gaining 5 million AOL users is expected to give Microsoft a boost, but Netscape's 80 percent market share will still be hard to catch up with.
"I don't think Microsoft will catch up. I think Netscape has too big of a lead, but this does give Microsoft a boost," said David Folger, an analyst with META Group. "I think the market will eventually be split between the two, but for the next year or two Netscape will be number one and Microsoft will be number two."
Folger also expects that the announcement will only split AOL's subscriber base between Microsoft and Netscape, instead of giving the whole pie to Microsoft.