Microsoft Revamping MSN.com in Attempt to Catch AOL, Yahoo
Microsoft is frantically trying to catch up to Internet rivals America Online and Yahoo by reshaping its lackluster MSN Web portal in hopes of finally establishing a major consumer presence on the Net.
In the last three months, the Redmond, Wash.-based software giant has signed alliances with retailers Best Buy and Radio Shack and offered discounted online access with other retailers and shopping malls in hopes of winning more Internet business from its rivals.
But AOL and Yahoo both recently completed a flurry of similar partnerships with brick-and-mortar retailers to try to connect more households with the Internet.
So for all of its efforts, Microsoft’s rivals are still picking up more customers. AOL, which is the largest Internet service provider, announced in December that it had signed up its 20 millionth subscriber, and for all of 1999 it added 5 million subscribers. And Yahoo, which calculates its online traffic differently, said orders to its e-shopping site were up 385% over last holiday season.
Although the race to sign the most subscribers is important, another key is controlling the entry gate to the Internet. By doing so, Internet service providers have the first crack at customers before they click to somewhere else on the Web.
And Microsoft hopes its new consumer-friendly MSN.com will persuade subscribers to move from its Web page to other Microsoft service sites such as bCentral, its new small-business portal, or CarPoint, its car-buying service, among many others.
MSN.com is central to the company’s strategy to maintain a formidable position as the industry shifts away from Microsoft’s dominance in the personal desktop and packaged software business over to mainframe servers, hand-held personal organizers and smart cell phones.
In this new “Post-PC” era, Microsoft has much to lose because it threatens to curtail the value of its traditional flagship product: Windows for the desktop.
“The software industry is relying more on Web sites to establish and maintain [customer] relationships, drive sales volume and enter new markets,” said Dwight Davis, industry analyst for Summit Strategies. “MSN is a very critical part of Microsoft’s strategy.”
So Microsoft executives want to offer a clear set of services for what consumers want to do on the Web: communicate, shop, manage personal finances and search for information.
“Our group is committed to making MSN services even easier to use and much more integrated, so when the consumers visit the MSN.com portal they have a great experience and want to come back,” said Rick Belluzzo, group vice president of Microsoft’s consumer group, who is spearheading the MSN turnaround.
In the past, Microsoft tried to make MSN a proprietary system and a broad-based entertainment network, which it found many consumers didn’t want.
Microsoft will continue to expand its MSN content through strategic alliances, such as with WebMD on the Health site, Career Builders on the Career site, or Ford on CarPoint.
“We want to be wherever the consumer wants to buy,” said Steve Schiro, vice president of retail sales for Microsoft.
Because of Microsoft’s recent $200-million investment in Best Buy, the consumer electronics retailer will promote in its stores MSN Internet access, and Microsoft will advertise BestBuy.com on its Web portal. And its Radio Shack alliance will promote Microsoft products and MSN Internet access through in-store boutiques.
Microsoft also aims to make MSN available any time on any device. From its WebTV interactive television service to its Web Companion--a simple Internet terminal--to MSN Mobile, Microsoft wants to be the “complete Internet solution,” says Deanna Sanford, lead product manager for MSN marketing.
And Brad Chase, an MSN executive, recently boasted that MSN would attract more new customers next year than AOL.
Chase also clicked off several recent accomplishments:
* Use of the new search engine on MSN.com has jumped 75% since it was launched in September.
* Traffic on eShop is up more than 600% compared with last year.
* Its Hotmail e-mail service now has 52 million subscribers.
* Its new MSN Messenger Service has 5 million users.
Said Chase: “We’re executing big time.”
But, then again, so are AOL and Yahoo.
The success of AOL and Yahoo is based partly on their ability to leverage their large audiences through commerce, advertising fees and other paid services.
“The portal provides the leverage and sells the access” said Chris Le Tocq, industry analyst for GartnerGroup Dataquest. “Today, it’s very important in this growth phase because companies have to capture those seats. You have to get the eyeballs.”
For Microsoft, even with its deep pockets, wresting market share from AOL or Yahoo will be a challenge.
“At AOL, the consumer gets more. It’s better organized, it provides a wider range of services and there is a sense of community. I’m not sure an MSN person really gets that feeling,” Le Tocq said.
