With the advent of Google’s foray into Web browsers with Google Chrome, we have yet another contender for the title of Web Browser King. If you’re not a die-hard web user this may not seem like a great title. Some Web browsers are better than others, yes, but these browsers are free anyway, so what’s the point if one is more popular than another. Believe it or not, the business of Web browsers is pretty important, not to mention occasionally profitable. The popular websites of today may also be the operating systems of tomorrow.

Obligatory History Lesson

Before I continue, though, let me cover briefly how web browser companies make money. While they may be free to the user, companies who want to use the browser’s source code will have to pay for that privilege. The best example of this is Opera, a little-known web browser that concentrates on selling its small screen browsers to companies that make cell phones, consoles and handhelds. It does extremely well profit-wise with this strategy, well enough to make its personal computer browser available free of charge.

Other web browsers, notably Internet Explorer and Safari, are used to generate brand-name recognition, among other advantages. Internet Explorer is offered free, although you usually buy it incorporated as a part of the Windows operating system, such as Windows XP or Windows Vista. Similarly, Safari is offered on Apple’s Macintosh operating systems, starting with Mac OS X. Both these programs are offered as something of a loss leader, although Apple seems to be looking forward to more portable computers. Their iPhones use Safari to surf the Internet, and the compatibility between the iPhone and a system that uses Safari could lead to Apple cornering the market on Web browsers with its iPhone the same way it did with iTunes and the iPod.

The final category is that of companies such as Mozilla, who created the Firefox Web browser, and the current challenger that has been causing Internet Explorer’s market share to decline since it was introduced in 2004. They manage to make millions of dollars from deals cut with numerous search providers, such as Google itself.

The Masterplan

So what does Google hope to accomplish with their new Web browser? Their entry into the market would seem to target both Internet Explorer and Firefox. However, Google has recently resigned with Mozilla to keep their search bar in Firefox’s tool bar until 2011. The announcement is good news for Mozilla, seeing as how most of their revenue comes from there. In 2006, Mozilla made $68.8 million in revenue as a result of licensing that space to Google, which was a significant improvement over the $52.9 million they made in 2005. This suggests that either Google is covering all its bases, or that their main target is Microsoft’s Internet Explorer. Personally, I think both reasons are good. If you’re going to compete in the market, you might as well set your sights on the 43 percent of market share Internet Explorer offers, rather than the 20 percent claimed by Firefox.

Google also has another reason to go after Internet Explorer rather than Firefox. Both Google Chrome and Firefox are open source. Internet Explorer is not. Given the close relationship of Google and Mozilla, this suggests that both companies will be using each others source code to improve their own product. It makes an odd kind of sense, market-wise. If you and your competitors can strengthen each other’s products, you both win.

However, Google may be looking further ahead than market share. The idea of treating the Web browser as an operating system has been around since the early 1990s, and Google has worked hard on creating a suite of applications that are free and available on the Internet. They already have a free email client, joining the several already in existence, but they also have a calendar, a word processing program and a spreadsheet, among others. Everything is saved online, in your own personal Web space, provided by Google. Of course, it can also be saved to your computer as well, and all you need to do to access it is bring up your Web browser in offline mode. A lot of Google’s products seem to be focused in that direction.

However, if Google want to corner the market on this new paradigm, they’ll need a spectacular Web browser, something that shook up the Internet community the same way Firefox did when it was introduced. It’s Web browser may be solid, but a merely solid browser is not going to have the kind of market impact they desire.

By Chris Gottschalk
Analyst, Oxbury Research