favicon.png vs favicon.ico – why should I use PNG instead of ICO?

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Other than the fact that PNG is a more common image format, is there any technical reason to favor favicon.png vs. favicon.ico?

I’m supporting modern browsers which all support PNG favorite icons.

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replaced (and turned Community Wiki) due to numerous updates and notes from various others in this thread:

  • ICOs and PNGs both allow full alpha channel based transparency
  • ICO allows for backwards compatibility to older browsers (e.g. IE6)
  • PNG probably has broader tooling support for transparency, but you can find tools to create alpha-channel ICOs as well, such as the Dynamic Drive tool and Photoshop plugin mentioned by @mercator.

Feel free to consult the other answers here for more details.

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