The Netscape electronic launch.

Last December 15, Netscape Communications rolled out its first software title, an Internet Web browser called Netscape Navigator. But Netscape didn't produce or ship a single shrink-wrapped copy of Navigator; in fact, the only way users could get a copy was to download it directly from Netscape's own Web server.

Moreover, these downloaded copies were full-featured free trial versions--in essence, shareware. Users were invited to try the product for 30 days, and--if they decided to keep using it--were encouraged to send Netscape a $39 license fee.

Shareware distribution rarely produces big hits, but Navigator broke all the rules: Within six months, Netscape had distributed more than five million copies of Navigator, and these copies in turn were being used to generate at least 75% of all Internet accesses. "As far as we know," says Netscape marketing vice president Mike Homer, "this was the fastest consumer adoption of any software product in history."

Netscape's electronic rollout also left some formidable competitors in the dust. At the time Navigator appeared on the Internet, NSAC's rival Mosaic browser already claimed upwards of three million users, and IBM had just launched a massive advertising campaign promoting the Internet access features in OS/2 Warp. Both quickly turned into also-tans in the Web browser market.

Netscape's real challenge, of course, was to turn these millions of shareware copies into a sustainable revenue stream. Netscape collects a "reasonable number" of $39 license fees from individuals, Homer says, but from the beginning the company's main goal was to build an installed base for follow-on products. "If somebody isn't going to pay us, we'd just as soon have them use the software anyway," he says--because the huge Navigator installed base helps Netscape sell big-ticket server editions and site licenses to corporate accounts. (Homer says the company already has signed up 80 of the Fortune 100 as customers, 25 of whom have paid for site licenses.)

This month, moreover, Netscape plans to roll out a conventional shrinkwrapped version of Navigator for the retail channel, which Homer expects will benefit from Netscape's high profile in the Internet world. The retail version includes an automated sign-up option for users who haven't yet picked an Internet access service--and Netscape will collect a few more dollars for every new subscriber it generates for these services.

Not surprisingly, Homer argues that the Internet and other electronic channels have become potentially "the best and cheapest and highest ROI marketing vehicle in the world." At last month's Marketing Summit conference he shared a few insights about how to build a successful electronic launch strategy:

* Expect to develop new kinds of customer relationships: "The Internet fundamentally changes the way you do business," says Homer, who points out that most of Netscape's revenues and profit are earned after a customer acquires a product. "We get more than four million accesses a day at our home page, which is the largest site on the Web that we know of," he says. "Every time someone comes back to our home page it's an opportunity to sell them something else--if we manage to create an enriched continuity experience."

* Electronic distribution favors fast-moving companies: "You can turn software very quickly on the Internet," says Homer, who notes that electronic distribution gives a definite edge to companies that introduce new technology faster than their competitors. "If we had released this same product six months later, other people probably would have been more competitive with us."

* It pays to have impressive friends: Netscape appeared on the scene so quickly that it had virtually no reputation among corporate customers. So the company set up marketing alliances and OEM relationships with as many big players as possible-- including Sun, Silicon Graphics, DEC, MCI, Delphi, and Novell. "You're known by the company you keep," says Homer. "These partners definitely lent credibility when we needed it most."

* Simplify the purchasing process: Netscape ran into trouble with "large numbers" of early users, Homer admits, because procedures for accepting license fees from customers were unnecessarily complex. "There were a lot of little nits that we had to refine, but now we've made the process very clear and simple--they just push a button and they've bought the software."

Michael J. Homer, vice president of marketing, Netscape Communications, 501 E. Middlefield Rd., Mountain View, Calif. 94043; 415/254-1900.