How does Internet Explorer make money?
January 8, 2010 6:00 PM   Subscribe

How does Internet Explorer make money?

Microsoft must have many employees on their payroll working on IE but other competitors like Firefox do the same but they give their product for free. So how does Microsoft make money? According to wikipedia Microsoft spend $100 million a year on IE. Why not just let IE go and Microsoft can focus on their OS which they still have a monopoly?
posted by abbat to Computers & Internet (20 answers total) 6 users marked this as a favorite
 
IE is microsoft's gateway into selling proprietary backend software to run web applications that run on .NET.

I really doubt it costs $100 million a year, how many $120,000 rockstar programmer salaries is that?
posted by thewalrus at 2:53 AM on January 9, 2010


It's probably somewhat similar to firefox:

What was Mozilla's total revenue for 2008?

Mozilla's consolidated reported revenues (Mozilla Foundation and all Subsidiaries) for 2008 were $79 million, up approximately 5% from 2007 reported revenues of $75 million.

How does Mozilla generate revenue?

The majority of this revenue is generated from the search functionality in Mozilla Firefox from partners such as Google, Yahoo, Amazon, EBay, and others. Mozilla takes in additional revenue from donations, online affiliate programs, the Mozilla Store, and income on our invested assets. In 2008, we expanded our Firefox partnerships with new firms such as Yandex (Russia Search), Canonical (Ubuntu), and Nokia (Mobile).
Firefox has a larger market share then IE, but one would guess that if they could make near what Mozilla does on their browser, it could bring in $50k/year.

---

But the real value for IE is in stymieing advancement on the web. By putting out a browser, getting a large installed base, and then not implementing new technology, they prevent the browser from becoming a competitor with the OS as platform for applications, which keeps windows in business. If they let their market share totally stagnate (like they did for a while -- they actually shut down development after IE6) then people would move to other browsers. And keeping windows in business is probably worth quite a bit.

Even if you don't want to buy the theory that they are intentionally trying to hobble the web, it still makes sense for them to have a say in what goes on on the web, so technology doesn't totally pass them by.
posted by delmoi at 2:55 AM on January 9, 2010


I really doubt it costs $100 million a year, how many $120,000 rockstar programmer salaries is that?

Uh 100,000,000/120,000 = 833 +1/3.
posted by delmoi at 2:58 AM on January 9, 2010


Firefox has a larger market share then IE
On the W3Schools site you linked to.

See Wikipedia for something more geneeral.
posted by devnull at 3:44 AM on January 9, 2010


IE lets Microsoft deploy web-based technologies which suit their business strategy without respect for standards or waiting for other organizations to build functionality for them.
posted by beerbajay at 4:05 AM on January 9, 2010


To provide some factual backdrop for my previously deleted comment, David Bank was a reporter with the Wall Street Journal when he researched and wrote Breaking Windows, a book about the history of Office and Internet Explorer, and the antitrust lawsuit conducted by the US Department of Justice against Microsoft.

In his book, Bank interviewed managers at Microsoft who were responsible for these technologies, who confirmed that their software serves one main end: Keeping people buying Windows, keeping them within the Microsoft ecology by offering products that do not interoperate with competing software. David Bank reports how this now-classic "embrace and extend" dogma actively guided many of the decisions Microsoft made in the mid-1990s regarding its two main non-OS products.

While Internet Explorer is "free", it is not free in that its technology helps make it costly for businesses using ActiveX, ASP, SharePoint, Outlook and other IE-dependent technologies to pursue alternatives. By doing what it can to keep customers from using non-Microsoft products, IE ultimately helps protect a significant portion of Microsoft's bottom line.
posted by Blazecock Pileon at 4:36 AM on January 9, 2010


I'm an IT director who inherited a web application that's really important to our business. One of the points of implementing something as a web application is that it should be usable on almost any client with a web browser. This web application doesn't do anything that couldn't easily be done with standards-based technology. Instead it uses proprietary stuff that only runs on IE/Windows. But for that application, I could move a large number of our users to Linux.
posted by paulg at 4:55 AM on January 9, 2010


They wouldn't have a monopoly, without Internet Explorer and Office and most importantly help from governments and businesses to entrench their IT systems with Microsoft products like IE and Office that do not interoperate with non-Microsoft products. IE is "free", not free.
posted by Blazecock Pileon at 6:11 PM on January 8, 2010


There is some amount of money to be made from the increased traffic to msn.com. I would guess though, that IE does lose money.
posted by demagogue at 6:12 PM on January 8, 2010


To continue what Blazecock Pileon said, IE is free but not without cost. IT is a loss leader to keep you in the microsoft fold.
posted by JohnnyGunn at 6:13 PM on January 8, 2010


This is a long, long story.

The underlying reason has to do with the early years of the web. Microsoft believed that whoever controlled the browser could control the web, and they made it their goal to create the dominant browser in the industry. This was assisted, of course, by the fact that they could integrate the browser directly into their dominant operating system, basically ensuring that everyone had it installed. But IE was a good browser, too, at least by the time it got to version 4. At this point, it really was a better browser than Netscape Navigator, and it began to take over. This was probably an inevitability, however, given the monopoly and the fact that they were giving it away for free.

Anyway, Microsoft learned that controlling the browser has little or nothing to do with controlling the web (thanks, Google!), but they created a world where the expectation is that a browser will be included as an integral component of the operating system. How could they possibly start charging for it now? Everyone would just download Firefox or Chrome or switch to Mac OS.
posted by mr_roboto at 6:14 PM on January 8, 2010 [1 favorite]


Why not just let IE go and Microsoft can focus on their OS which they still have a monopoly?

Because Microsoft's #1 concern is backwards compatibility. They sell a lot of Windows licenses to businesses, and businesses just care that their old apps work on their new desktops. As paulg just proved, there are a lot of 5-10 year old apps that only run on IE, whether due to IE HTML extensions or ActiveX. None of the other browsers support those extensions, so Microsoft has to ship IE. They actually tried to let it go, but as you can see above, people lambasted them for that too.
posted by smackfu at 6:58 AM on January 9, 2010


Also, to be clear, that $100 million figure is from 1999, which was IE 5. That's about when they stopped doing major development.
posted by smackfu at 7:13 AM on January 9, 2010


The answer to "Why does Microsoft do foo" is because it is part of an end-to-end scenario that drives adoption of the Windows platform. I will bold the profitable parts of the stack.

For example, IE runs on Windows. IE is the preferred client for ASP.NET applications, which are developed in Visual Studio on Windows. ASP.NET applications are hosted in IIS, which is a server role in Windows Server. ASP.NET applications are often backed by a SQL Server database running on Windows Server. This is a compete play with the LAMP stack.

Also, Silverlight applications are hosted in IE on Windows. Silverlight applications are WPF applications developed using Expression Blend and Visual Studio on Windows. You can see the combination of IE and Silverlight as an Adobe compete play. The reason for competing with Adobe is to try and break designers and web developers from the Mac platform.
posted by crazycanuck at 9:21 AM on January 9, 2010


MSIE also directly makes revenue by driving search traffic to Bing. IE's default search engine is whatever Microsoft chooses, and the revenue from the search page advertisements is directly creditable to MSIE. In the Microsoft case the revenue is currently internal and not particularly visible. It's more clear with Firefox case, since they have an advertising deal with Google making piles of money. Mozilla made $78 million in 2008, and while they don't break it out it's safe to assume the large majority of that comes from driving search traffic to Google.

Microsoft (these days) is quite careful to be sure that changing that search engine is easy for both consumers and companies. But the default is still often used, and has value.

(I tend to discount the theory that IE is a conspiracy to make the Web suck. Tech companies don't work that way, even Microsoft, the people who work on IE are trying to build a good product. I think it's more accurate to say that IE is Microsoft's way of influencing the Web in the direction they want. So VML instead of SVG, because they want to control the vector graphics experience and believe their solution is better. At the highest strategic levels Microsoft may decide where to put effort: Silverlight vs. IE, for instance.)
posted by Nelson at 9:27 AM on January 9, 2010


Oh yeah it also drives adoption of Office. IE is the client for Sharepoint, which is hosted on Windows Server. Sharepoint is a collaborative tool for dealing with inputs and outputs from Microsoft Office applications. There are development tools in Visual Studio for creating Sharepoint workflows, etc.
posted by crazycanuck at 9:37 AM on January 9, 2010


IE isn't free. The price is bundled into the cost of Windows. They did let IE stagnate back after IE6 - they reallocated the dev team - (and gave it up on the mac altogether) but when firefox started to really bust into their market share they reformed and resumed dev work to try and stop the rot - the last thing they want is someone else dictating the web - as google apps show, who needs windows if you can run it in the 'cloud'?

As Nelson states, IE is also a classic example of Not Invented Here syndrome from microsoft - ignore what other people are doing, because clearly it'll be inferior to doing your own way, to your own standards, fully integrated into your own OS/Server/App stack.

This does make some sense from a certain point of view; Active Directory is the heart of the enterprise windows ecosystem, and IE fits into it far better than firefox or opera or chrome. Tie it in with Office, Sharepoint, Outlook Web Access, etc etc and it means microsoft has its fingers into everything.

The thing is of course, if you end up using one piece of the integrated system, you end up using all of it; windows gets you office, office gets you exchange, IE gets you sharepoint, and that means windows servers, active directory and CALs and volume licences up the wazoo.

Microsoft make so much of their money from business deployments, the home market really is secondary. If you look at every decision they ever make from the following viewpoints:
1) Microsoft always make the best stuff. Lets do it inhouse.
2) How can we make this even more integrated for our business customers so they end up even more locked-in to our products?

you won't go far wrong.
posted by ArkhanJG at 12:00 PM on January 9, 2010


Up front: I was a member of the IE development team from 2001 to 2007.

To answer the basic question: IE is part of Windows, from both a code perspective and an organizational perspective. It makes money because Windows makes money. To not have it diminishes Windows. And it makes money by sending people to Bing as the default, out of the box search engine.

Several people have made points along the lines that it further makes the company money by encouraging the use of Microsoft products end-to-end. This is also true. Microsoft is a business that tries to maximize profits across their entire line. However, Microsoft has recently been making some very sincere efforts at improving interoperability, which I will address a little further on.

I was not at Microsoft during the period referenced by Breaking Windows, but I will say that what I saw when I got there was not so much a desire to control the web, but a desire to continue to control the platform. The distinction is important. Microsoft started in compilers but really came to dominance with the operating system. When the operating system is the platform, you ensure your continued survival (which is what businesses do) by ensuring everyone continues to target your platform. HTML was seen as the next platform that would very quickly replace the operating system as the platform of choice. After all, HTML is a lot easier than Win32, leads to much faster prototyping and makes distribution much easier. Microsoft's rush and zeal to win the browser war was motivated by this.

The only problem was the HTML of the mid 90s was a terrible way to build applications of any complexity. In fact it is only very recently that "web applications" have gotten usable from my view as a user, and even then it's still not the same experience as a well-written os-native application. However, the point is that was what motivated the embrace-and-extend maneuvers. HTML sucked as a platform, but everyone thought it was the next platform. So Microsoft embraced it, to not be left behind, and extended it in a (perhaps misguided) attempt to make it suck less.

Of course right after winning, they realized HTML wasn't going to be the platform everyone was dreaming of so they set off to build WPF, and later Silverlight, and now they are finally starting to understand that the browser needs to be standards compliant to ensure their continued market share. Yes, there are still bugs and layout issues, but every browser has bugs and layout issues. No two programs that implement an HTML rendering engine are going to do it exactly the same. Like I said, HTML (and CSS) sucks as a platform to develop applications, and part of the reason is the standards are complex, often open to interpretation and at times self-contradictory. Anyone who claims that the IE teams isn't making a genuine effort in terms of standards support these days is just wrong.

Again, this is how I see things.

It doesn't. It was a loss leader intended to push other companies out of the Internet space. They basically succeeded, but now they're stuck with an app that has a massive security surface area and no cocnceivable way of making them money.

Completely wrong on all accounts. It was intended to maintain Microsoft's relevance as a platform, and that failed because HTML sucks as a platform. They did not succeed, as is evidenced by their declining market share, the resurgence of Netscape reborn as Firefox, and the entry of Chrome into the market. All of these browsers have security issues and the number related to IE was surpassed last year by Firefox. And as we've already shown, it does make Microsoft money.

They wouldn't have a monopoly, without Internet Explorer and Office and most importantly help from governments and businesses to entrench their IT systems with Microsoft products like IE and Office that do not interoperate with non-Microsoft products. IE is "free", not free.

They had a monopoly in the operating system first. The gist of the anti-trust suit was they leveraged this monopoly to further gain a monopoly on the Browser. IE isn't free: it's included in the cost of Windows, just as Notepad isn't free.

Microsoft believed that whoever controlled the browser could control the web...

This whole comment is essentially correct, but remember: it's about the platform, not the web.

IE is microsoft's gateway into selling proprietary backend software to run web applications that run on .NET.

I'm not sure specifically what technology you're referring to, but if you're talking about Silverlight or ASP .net, then, no. Those all work in pretty much any webbrowser, though there are probably specific instances of compatibility issues (bugs). Or maybe SharePoint.

I really doubt it costs $100 million a year, how many $120,000 rockstar programmer salaries is that?

Not all Microsoft programmers make $120k. (Adjust upward about 3% to 6%). But there are hundreds of people in the IE org, plus marketing, support, infrastructure... it adds up quick.

Firefox has a larger market share then IE...

This is shady of you. The stats from w3schools are primarily the stats of developers and early adopters, and nobody pretends that they are representative of the actual market share of browsers. I mean, come on, they have Chrome at almost 10%. The Wikipedia page gives you a much wider range of estimates and a better overall pictures. Though by any measure, IE's market share is on a good, steady decline. Which is why now, more than ever, the IE team needs to focus on interoperability.

But the real value for IE is in stymieing advancement on the web. By putting out a browser, getting a large installed base, and then not implementing new technology, they prevent the browser from becoming a competitor with the OS as platform for applications, which keeps windows in business. If they let their market share totally stagnate (like they did for a while -- they actually shut down development after IE6) then people would move to other browsers. And keeping windows in business is probably worth quite a bit. Even if you don't want to buy the theory that they are intentionally trying to hobble the web...

There is no value in Microsoft trying to stall advancement on the web. Shutting down IE development after IE6 was a huge mistake, but it makes (some sort of) sense when you view it in terms of trying to maintain their status as the premier and relevant platform. Their attempts to advance the web were met with opposition, and they concluded it was impossible to turn the web into the application platform everyone was envisioning. So they abandoned HTML as a platform. The IE team was reformed for two reasons: the first was to address the growing security disaster that was IE6 (the XP SP2 release) and the second was to address the growing public relations disaster that was IE6 in the face of Firefox. The team that was formed was a team that cared deeply about the product and the users. IE7 was a user-focused release that added modern UI to IE (tabs, etc) and attempted to fix some of the most painful HTML and CSS issues for developers. IE8 was a web-standards focused release that did a pretty major overhaul on the rendering engine.

HTML may not have been the platform everyone thought it would be, but it did finally evolve into a platform for doing useful things. After all, Microsoft was the first to implement and use XMLHttpRequest, which is the foundation for all these modern AJAX-based web-applications.

... it still makes sense for them to have a say in what goes on on the web, so technology doesn't totally pass them by.

Absolutely. The shut down after IE6 was a mistake because it let other browsers get ahead of IE, and they've been playing catch-up ever since.

IE lets Microsoft deploy web-based technologies which suit their business strategy without respect for standards or waiting for other organizations to build functionality for them.

Such as? As stated, this doesn't make any sense. Please show me a company which doesn't do things to suit their business strategy and waits for other organizations to build functionality for them.

While Internet Explorer is "free", it is not free in that its technology helps make it costly for businesses using ActiveX, ASP, SharePoint, Outlook and other IE-dependent technologies to pursue alternatives.

ActiveX is a plug-in model that only IE supports; true. When developing plug-ins for webbrowsers, you have to pay the two-models tax. There is the Netscape Plugin model, or NPAPI, and there is ActiveX. I've spent a lot of time implementing plugins for both, and all I can really say in IE's defense here is NPAPI totally sucks. It's a C API from 1995 that is full of missing functionality (e.g. you can't set custom HTTP headers with GET requests, only POST) and all kinds of undocumented hacks that differ from browser to browser that were added to support specific plug-ins (Flash), and the whole thing should really be taken out back and shot.

Personally I would like to see as much attention paid to browser and content extension standards as is paid to HTML and CSS standards. Trying to develop a plug-in that works on all browsers is not fun. It rather sucks. All of this is legacy, though, and other browsers have just as much (well, except Chrome, but they've adopted NPAPI so, yeah, them too).

I worked for a time as an ASP .net developer and I saw nothing that tied it specifically to IE. My site worked just fine in Firefox and other browsers, and all the fighting was getting CSS to behave properly cross-site. Enter jQuery. Though I freely admit to being an amateur ASP developer and will gladly admit that I'm wrong here in the face of examples.

SharePoint I don't know much about, but it wouldn't surprise me if it looked better in IE than other browsers. Most of the on-line office stuff (OWA) does. But again, having IE in the OS doesn't really mean you have to go buy this Microsoft back end. Google apps works just as well in IE as it does in Firefox.

By doing what it can to keep customers from using non-Microsoft products, IE ultimately helps protect a significant portion of Microsoft's bottom line.

Look at it from the opposite point of view: not having IE would be a major gap in Microsoft's end-to-end product offering.

The answer to "Why does Microsoft do foo" is because it is part of an end-to-end scenario that drives adoption of the Windows platform.

Everything here is essentially true and has the added benefit of answering the original question. IE is a key component in Microsoft's end-to-end offering. Without it, there would be a major gap in the product line.

Also, Silverlight applications are hosted in IE on Windows. Silverlight applications are WPF applications developed using Expression Blend and Visual Studio on Windows. You can see the combination of IE and Silverlight as an Adobe compete play. The reason for competing with Adobe is to try and break designers and web developers from the Mac platform.

Well, true, but with the following modifications. Silverlight runs just fine in Firefox on my Mac. And Visual Studio should be in bold, because I think it's profitable. I'm sure Microsoft is hoping to get lots of users for Silverlight, but I don't think that's the primary goal. Again we go back to trying to be the relevant platform. Since Microsoft abandoned HTML as a platform for a time after IE6, they went off and built WPF, which was... unwieldy, and then out of that came Silverlight. The pre-IE6 team is the team that built WPF and Silverlight. You can see the original motivation of being the platform continue in that heritage. The post-IE6 team is a different team that was reformed to clean-up the IE6 mess.

---

So, well, that ended up being longer than I thought, but a major part of my life was spent working on IE, so I guess it's to be expected. For the record, I hate supporting IE6 as much as everyone else, and I use Chrome as my primary browser these days. But I have high hopes for IE. It will be interesting to see if they can win back the hearts and minds they've lost and stem the decline of their market share.
posted by jeffamaphone at 12:04 PM on January 9, 2010 [13 favorites]


SharePoint I don't know much about, but it wouldn't surprise me if it looked better in IE than other browsers

Sharepoint sites do not function completely outside of internet explorer. Many of the file sharing and editing features of Sharepoint only work in IE.
posted by device55 at 6:43 PM on January 9, 2010


This is shady of you. The stats from w3schools are primarily the stats of developers and early adopters, and nobody pretends that they are representative of the actual market share of browsers.

Actually didn't even realize those were site specific stats. If Wikipedia is right and IE has more then twice Firefox's market share, then it should make much more then $100 million a year if they can get the same level of revenue/user.
posted by delmoi at 2:13 AM on January 10, 2010


« Older Can I be my own accountant?   |   Recommend a good Salsa private instructor in Los... Newer »
This thread is closed to new comments.