Huge MSN Ad Blitz Planned by Microsoft

Microsoft Corp. today will unveil its largest-ever marketing campaign for its MSN online network, hoping to narrow the wide gulf between it and online leaders America Online and Yahoo.

In the next three months, Microsoft will spend $40 million on TV, print and direct-mail advertising to elevate MSN’s image and offer discounts that include six months of free Internet access for consumers who sign up for MSN.

Microsoft is even borrowing a chapter from AOL, mailing more than 13 million MSN CDs to targeted consumers. “We’ll take what AOL has done quite well and try to perfect it,” said Yusuf Mehdi, MSN’s marketing vice president.

MSN’s retail partners--Office Depot, Best Buy and Radio Shack--also will launch separate promotional campaigns in their stores to sign up new subscribers to MSN.

The marketing push comes several weeks after Microsoft unveiled a $150-million advertising campaign that includes print and broadcast.

The new campaign kicks off as MSN’s online portal has seen its subscriber base grow by 25% in three months, climbing to 2.5 million from 2 million.

The numbers still pale to AOL’s more than 20 million subscribers, but Mehdi said MSN is growing at a faster rate than AOL and Yahoo. He cited new figures from Media Metrics, which show that MSN’s subscriber base has grown 12.5% from last July through February.

During the same period, AOL lost 3% of its subscribers and Yahoo grew by 4%, according to Media Metrics.

“I feel confident we have the momentum and the trends,” Mehdi said. “These are the first signs we are starting to understand the customers.”

But most experts say it will remain an uphill struggle for MSN to match AOL or Yahoo. For starters, MSN has had trouble keeping subscribers, said Chris LeTocq, an analyst for the Gartner Group.

“The strength of AOL is that they get people, they are happy as a clam and they don’t go anywhere else,” LeTocq said. “MSN is trying, and slowly they [MSN] are getting it.”

The challenge Microsoft has always faced, he said, is that its internal vision is skewed in its belief that technology will solve all problems. That is sometimes incompatible with what people want.

“MSN needs to make the site simple, make it effective and make it stick,” LeTocq said.