It’s interesting to read about how it actually happened, but it does seem like one of those inevitable features that would’ve been added sooner or later.
And I don't remember seeing favicons of random web sites in the URL bar, which is how they were otherwise prominently featured when introduced.
So if anything, I would say their existence was short-lived but their demise was inevitable ;)
More interesting feature that was introduced with IE (3 I think) was link hovering, and Netscape only caught up with 4.0 which took ages to come out. That has changed the accepted styling for hyperlinks forever and was the first instance of smooth non-JS "animations" in wide use!
Another interesting thing was the "active desktop" that came out with IE4 I think, though that never caught on. It was still fun to put a web page as your desktop background on NT4 which I used during that time before moving full time to GNU/Linux.