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Browser Wars: The Beginning
In the beginning, there was Netscape (ok, that wasn't the absolute beginning, but for the mass market it is close enough). Netscape was the Mozilla-based browser that dominated the World Wide Web. Along came Internet Explorer (IE): the sword that Microsoft would use to conquer the internet.
In April of 1996, Netscape controlled 90% of the browser market, with lowly IE possessing a mere 3%. But this would not last. By the second quarter of 2004, IE controlled 95% of the browser market, and Netscape was dead. How did IE accomplish this? Simple: Better performance and better features.
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In the years that would follow IE's destruction of Netscape, occasional attempts at competition would arise. Some of them from Netscape itself (Netscape Navigator, Netscape Communicator, AOL-Netscape, etc.). All of them failed. Newcomers to the scene could not produce significant enough improvements in feature set or performance. IE also had the considerable advantage of being installed on every desktop PC that shipped with Windows. It seemed like IE's dominance was inevitable and insurmountable.
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Along Comes Firefox
In mid 2004, IE had 95% of the browser market to itself. The browser wars appeared to be over - permanently.
At the end of 2008, IE's share of the browser market had dropped to 69%. Most of that loss is due to Firefox, which had surged to control 20.66% of the browser market.
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Why is Firefox Gaining Ground?
One simple answer would be: it is better. It is encroaching on IE's market dominance in the same way IE pushed out Netscape: better performance and better features.
But specifically, why is Firefox beating IE?
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Firefox pared down the Mozilla source code in order to maximize performance and strip out unnecessary features. It is also open source, which allows an entire community of developers to find and fix bugs and inefficiencies. It makes use of the XUL user interface markup language, which preserves its cross platform capabilities while also making extensions and themes simple to create (more on extensions later).
In general, Firefox loads faster, uses less memory, and even loads most web sites faster. That is hard to beat.
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One of the "killer features" of Firefox was the introduction of tabbed browsing. This allowed multiple web pages/sites to be opened in tiled windows within the application. This was easier and used less memory that opening multiple instances of IE, and it kept all your sites organized in a single application. This single feature alone played a huge role in converting people to Firefox.
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As already noted, the XUL user interface markup language made it possible for developers to create "extensions", which were additional programs to enhance Firefox's functionality. This was yet another benefit of the open source nature of Firefox - it attracted a huge community of interested and talented programmers willing to devoted free time to improving the product. Extensions can add all sorts of extra functionality to Firefox: from improved bookmarking systems, to filtering objectionable content, to automatic form fillers, and just about anything one can imagine. Instead of just piling all these features into the core browser (causing bloat and poor performance), users could easily pick the ones they want and install or uninstall as they chose.
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What Happens Next?
The biggest barrier to Firefox passing IE's market penetration is the simple fact that IE comes pre-installed on every Windows PC. Unless a legal ruling forces Microsoft to also install Firefox, or at least remove IE, odds are that barrier is not going away. But internet users are becoming more savvy, and momentum continues to grow. If IE continues to lag behind in performance and features, it is very likely Firefox will eventually win this round of the ongoing Browser War.