You might expect the average small business to relate to the digital rags-to-riches success of Netscape Communications Corp. The startup not only popularized the World Wide Web but proved an inspiration to thousands of mouse-clicking entrepreneurs.

So who are small businesses rooting for in the Business Trial of the Century? Ever-ubiquitous Microsoft Corp. or the antitrust squad at the Justice Dept., which is protecting Netscape's interests? If their choice of Web browser is any indication, the tide is turning in favor of Bill Gates & Co.

So says recent research from International Data Corp., which runs surveys of small-business Web habits every six months. IDC's latest study of 108 small companies found that Microsoft's Internet Explorer browser was taking a big chunk out of Netscape's once-commanding market share. Internet Explorer's share of the small-business market jumped from 26.1% to 31.5% in the last six months alone and now runs nearly neck-in-neck with Netscape Navigator, at 36.1%. (See table).

Navigator's hold on the small-business computer desktop has fallen steadily since yearend 1997, when it plateaued at 45.7%. The Mountain View, Calif., company has also yielded much of its territory to the America Online Web browser -- a specially configured version of Internet Explorer. AOL's browser is now the main Web-surfing tool for 19.4% of small businesses, up from 13% six months ago. Overall, 41.5% of Web surfers use Netscape Navigator, 32.3% use Internet Explorer, and 16.3% use AOL's special Internet Explorer browser.

"This half year was a total surprise," says IDC analyst Joan-Carol Brigham. "It was a real shock that Netscape had lost so much share overall and AOL gained the business segment."

"ODD MAN OUT." The biggest winner in the small-business browser market is clearly Microsoft, which controlled only 18.5% in 1996. Why such a big jump? The company has successfully bundled its software into new computer systems, says Brigham. And that has left Netscape "the odd man out," she notes. "I just got a Dell, and it had every piece of software except Netscape."

What's more, says Dataquest analyst James Staten, most users simply don't care which product they use. "I don't think small businesses are 'pro' one or 'anti' another. It depends on the influencer," says Staten. That influence, he adds, might come from an Internet service provider (which may distribute one, standard browser) or from friends or colleagues. "Rarely do I see a small business that says, 'Everyone must use this browser.' "

Isn't there at least the chance that small businesses would stick to Netscape out of some sort of entrepreneurial camaraderie, as a digital protest against Microsoft's desktop dominance?

Not so, says Nelson Cramer, general manager of Northside Commercial, a 10-person real estate office in Atlanta that uses Macs and PCs. Cramer began Web surfing on Netscape, but he switched to Internet Explorer because he preferred its features, such as the way it bookmarked sites. He's contemplating test-driving Netscape Communicator 4.5 and might consider running both if version 4.5 measures up, he says. "I felt bad for Netscape," says Cramer, "but not bad enough to avoid going with the browser and features I needed." If that attitude prevails as more small companies hit the Web, it might not matter whether Netscape wins or loses in court.

By Dennis Berman in New York
dennis_berman@businesweek.com

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