THE FIRST WEB WAR

By MICHAEL KRANTZ

The great American marketplace produces certain legendary commercial rivalries: Coke vs. Pepsi, Leno vs. Letterman, Republicans vs. Democrats. Now we welcome the first digital-age combatants: Netscape and Microsoft, the David and Goliath of the Internet.

They aren't dueling over peanuts: enormous fortunes await those whose software guides consumers through the cornucopia of goods and services that will comprise tomorrow's World Wide Web. Netscape founder Jim Clark realized this first, and his company released the initial--and now dominant--mainstream Web browser back in October '94. Today it enjoys a $3.5 billion market capitalization despite sales of just $80 million in 1995. Bill Gates saw the light last winter, famously stating that Microsoft was "hardcore about the Internet," and, to prove it, turning the $75 billion company, and its $8.7 billion of annual sales, around on a dime.

Half a year later, the duel has turned nasty, with legal shrapnel accompanying this month's releases of the latest versions of competing browsers, Netscape's Navigator 3.0 and Microsoft's Explorer 3.0. Which one is better? It's hard to say, and this in itself is a victory for Microsoft, which released its first weak browser just a year ago. Many Microsoft-loathing high-tech cognoscenti say Navigator remains the better guide. But the new Explorer narrows that gap convincingly, and the average user won't notice much difference.

The good news for consumers is that both new products reflect the Web's accelerating shift from geeky prototype to everyday appliance. Explorer 3.0 debuted two weeks ago, including free access to a number of otherwise fee-based offerings, among them such marquee sites as the Wall Street Journal Interactive Edition and ESPNet SportsZone. Navigator 3.0 followed days later, boasting similar deals with 26 partners, notably SportsLine U.S.A. and the New York Times, and spicing them up by offering daily delivery of customizable content--a personal newspaper of sorts.

The lesson? It's the message, not the medium, that matters. Browsers themselves will inexorably devolve into the equivalent of a dial tone, and the Web battles will be decided by how effectively content providers are able to develop and maintain increasingly rich, complex sites to keep users engrossed enough to spend their time and money online.

Here's where things get interesting, as Netscape and Microsoft are building their browsers around rival development tool kits, or platforms. Netscape is paired with Sun Microsystems' Java, a programming language that has won the fierce but possibly ephemeral allegiance of Silicon Valley's software jocks (the Netscape/Java alliance, a giddy Sun executive hyperbolized last year, "is the last great hope to stop Microsoft world domination"). Java is starting from scratch, though, and it could take painfully long for its adherents to produce high-quality applications. Microsoft's Active-X platform, by contrast, supports both Java and the venerable Visual Basic language, at which the company's army of content partners is already adept. Microsoft is starting the browser game late but with a much larger pile of chips.

And Gates is playing catch-up with his usual hell-bent, Type-A zeal. The latest example of Microsoft's stunning indifference to industry outrage came last month. Netscape claimed that Websites could be maintained more cheaply using its server software rather than Microsoft's server software when running Microsoft's own high-end NT Workstation programs. Microsoft countered, startlingly, by crippling its own product, changing the code on its latest NT release so that the machine could handle connections to no more than 10 outside users at a time--thus forcing NT customers into using Microsoft's server software as well. Customer fury forced Microsoft to abandon that charming initiative, but the point was made: when it comes to the Web, Gates is taking no prisoners.

This and other such maneuvers led Netscape this month to file an antitrust complaint with the Justice Department, whose investigation of Microsoft has been ongoing since last year's uproar over the Microsoft Network. In response, last Friday Microsoft released a lengthy rebuttal of Netscape's claims, which it called "irresponsible accusations" and "a calculated attempt to enlist the government and the media" in its cause.

The former may not be true, but the latter sure is. And who can blame Netscape? With Windows 95 more ubiquitous than ever, it's difficult to imagine anything short of a highly unlikely Ma Bell-style breakup quashing Microsoft's hegemony.

Which leaves Netscape trying to ward off Gates simply by offering the computer-literate population a better product. Good luck. Silicon Valley is haunted by the ghosts of companies that tried this, only to learn that better is a relative term when the alternative comes free with the operating system that runs most of the PCs on the planet. Netscape is a wall surrounding the Web, but Microsoft is an ocean. And the tide is rising.