Browser underdog Opera fights for survival

OSLO, Norway--Opera Software, the scrappy Norwegian browser maker, today faces arguably the biggest competitive threats of its 15-year history.

The first challenges are on personal computers. Right after Google's Chrome burst onto the scene two years ago, Opera slipped from fourth to fifth place in browser usage worldwide. And longtime archrival Microsoft is no longer the punching bag of the browser market; its forthcoming IE9 is a serious attempt to match rivals in performance and support for new Web standards.

Second, in Opera's other domain, Apple's iPhone and now Google's Android are rewriting the mobile browsing rules. Their browsers are adapted for phones more like miniature desktop computers than the small-screened, candy bar-shape models that prevailed when Opera's mobile browsing business began.

And yet the Oslo underdog has adapted to crises before and appears to be adapting to the present changes as well.

In a series of interviews at its headquarters here, Opera executives showed they suffer no illusions about the competition. They also made a credible case that Opera, while not about to dethrone its bigger rivals, will continue to defend its turf with a profitable business.

A new mobile strategy
One cornerstone of its confidence comes from a major shift in its mobile strategy in response to a dark, unprofitable patch in the second half of 2009. Opera shifted its alliance efforts from phone companies to the powerful network operators who see their future threatened by the new generation of smartphones and services.

"We're taking bigger bets on operators because they need us more than bigger handset operators," said CEO Lars Boilesen. Phone makers' expansion into operating systems, applications, and app stores threaten to demote carriers to mere "dumb pipes," but Opera's software can help maintain those carriers' customer relationships.

And so far, the shift is paying off for the browser company. For one thing, Opera has more engineers to devote to the core products--Opera Mini and Opera Mobile--because the company is delivering the same branded browser to carrier partners rather than variations of an unbranded browser to phone makers. For another, the carriers pay recurring fees based on active users, not the one-time, up-front payment of phone makers.

The result: revenue from operators has increased to $9 million in the second quarter of 2010, up from about $7.1 million two quarters earlier.

Revenue from Opera's desktop browser, which runs on Windows, Mac OS X, and Linux and comes with a money-making search box leading to Google or other search engines, helped prop up the finances during the mobile transition. And a newer business--browsers on Net-connected TVs and set-top boxes--also is increasing.

Overall, the company's second-quarter net income was a $3.3 million--less than a rounding error at its competitors but enough profit to keep the company in its niche.

A 15-year Opera
Opera was founded June 22, 1995, though its roots extend to a research project begun in 1994 at Telenor, Norway's largest telecommunications company. It remains in the same Oslo building that's housed it for years, even as its neighbors--search company Fast Search and Transfer, developer toolmaker Troll Tech, and video conferencing specialist Tandberg--sold to Microsoft, Nokia, and Cisco Systems, respectively.

It's very far from the U.S. software industry--geographically and culturally. Even with fierce competition from overseas rivals, several Opera employees took pride in a work-life balance at odds with the Silicon Valley ethos.

And yet it's not only eked out a living, persisting as browser efforts from IBM, Symantec, Sun Microsystems, and Netscape fell by the wayside, it's actually won a measure of influence.

Opera helped keep the fires of Web development burning during the dark years when Microsoft's Internet Explorer grew dormant after winning the browser wars of the 1990s and when standards groups were fruitlessly focused on dead-end XHTML technology. It won a band of loyal users who help to promote the browser, eagerly pointing out that innovations such as tabbed browsing, a built-in search box, Web page thumbnails on the new-tab page originated at Opera. It's secured some helpful geographic strongholds such as Russia. And its mobile browser products top the market even as the headlines go to Apple.

Partly through its standards-group work, Opera punches above its weight in the industry. Its independent support can help new technology such as Google's WebM for video streaming or Mozilla's Web Open Font Format get off the ground, for example. And its chief technology officer, Håkon Wium Lie, worked with Web founder Tim Berners-Lee and founded the Web formatting technology called Cascading Style Sheets (CSS) that's now one of the hottest areas of Web design.

Perhaps surprisingly, the company now employs 700 people, and 80 percent of them are engineers. The vast majority of people don't use Opera's products, but those who do now number more than 140 million.

Those engineers are working on cramming features into Opera. Its new version 11 for desktop machines, though still in alpha testing, will be an important test as pinch-to-zoom and scrolling work smoothly on capable phones overwhelmed its servers.

Carriers like it the turbo service because it gives them precise visibility into statistics such as how people use the Net, for example letting them gauge how likely people are to need more lucrative higher-end data subscription plans.

"We give them precise analytics of Opera users on the network," Boilesen said.

Also, through a 2010 acquisition of Californian mobile ad network AdMarvel, Opera has the ability to feed ads efficiently into the billions of Web pages it delivers through its servers. It's not a lot of revenue today, but Opera expects growth.

But Opera still needs to work on its turbo mode, Boilesen said--starting with visibility.

"We have not really successfully launched turbo," he said. "We don't need to relaunch it, but we need to get people to try turbo on phones."

In the big picture, being a gateway to tens of millions of people's usage of the Web is indeed a powerful position. The company just needs to figure the best way to accommodate Web applications, avoid abuses of its privileged role, and extract money from the role most effectively.

"I think it's interesting times for Opera," Boilesen said. "We have something nobody else has."