Double Dealmaking in the Browser Wars (A) - Case Solution

Executive summary – Double Dealmaking in the Browser Wars

The double dealmaking in the browser wars involved three parties: AOL, Netscape, and Microsoft. Although it seemed at first that Netscape had a higher negotiating power, the negotiation ended up with AOL making a deal with Microsoft that undercut the previous deal between Netscape and AOL. Netscape’s ultimate loss in the case was attributed to:

1. Netscape falsely identified and conceptualized its interests and AOL’s interests in the deal as simply a buyer-seller deal, while Microsoft seemed to understand AOL’s interests and leverage them to convince AOL to take their offer;
2. Psychological issues fooled Netscape into thinking that AOL had no choice but to pick their browser since it was the best fit for AOL. Netscape also underestimated AOL’s BATNA based on their assumptions that AOL and Microsoft were direct competitors and basically enemies.

Analysis

Main players and their interests (Exhibit 1)

1. AOL

Interests

1. Offer a browser to its subscribers to catch up with the exponential growth of the Web;
2. Improve technological image while maintaining the “feel” for AOL’s users: by offering a cutting-edge browser integrated into its software, AOL can distance itself from the bad image of “Internet for dummies;”
3. Minimize browser licensing cost: since its subscriber base is huge, AOL would want to lower the licensing cost to the lowest;
4. Lower competitive threat from Microsoft’s MSN;
5. Lower competitive threat from Netscape in the long run: given Netscape’s potential of becoming a monopoly in Web technology.

2. Netscape

What Netscape could potentially get from the deal:

1. Strategic partnership with AOL and a lower competitive threat from Microsoft: a partnership between Netscape and AOL could help in lowering the competitive threat from Microsoft, especially to Netscape, since Internet Explorer would take longer to gain market share;
2. Increase market share: Netscape would be able to penetrate into AOL’s subscriber base (5 million users);
3. Maximize revenue/profits by taking advantage of its popular but underexploited website.

How Netscape conceptualized their interests from the deal:

1. Maximize revenue/profits by licensing a high-end browser to AOL and using AOL as a distribution and promotional channel.

It is clear that Netscape considered the AOL deal simply as a buyer-seller contract in which they could only gain revenue/profits from licensing its high-end browser Navigator to AOL.

3. Microsoft

What Microsoft could potentially get from the deal:
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