Microsoft Takes Aim at AOL With New MSN
Rivals America Online and Microsoft Corp. are unveiling upgraded versions of their online services this week in a growing tug of war for Internet customers.
AOL 7.0, scheduled to be released today, includes a variety of mostly subtle changes to the No. 1-ranked Internet service, including an online radio, Web-based photo albums, enhancements to e-mail and instant messaging and more localized content, such as weather, community news and neighborhood entertainment guides.
MSN, the online service of Microsoft, said Monday that it would counter with a redesigned Web site and new “Net Alerts,” which will begin by sending users real-time e-mails and instant messages about traffic conditions. MSN also announced it will expand its high-speed access through partnerships with Verizon Communications Inc., BellSouth Corp. and SBC Communications Inc.
The new versions come at a critical time for both companies. AOL, a unit of New York-based AOL Time Warner Inc., faces its biggest threat in years from Microsoft, whose MSN service is the nation’s No. 2 Internet service provider and is gaining.
MSN, with nearly 7 million users, has largely copied the look and feel of AOL’s service, using buttons and channels to create a walled garden that integrates e-mail, instant messaging, shopping and other content.
“Every time MSN improves its customer experience, that becomes more of a threat to AOL,” said John Corcoran, analyst at CIBC World Markets in Boston. “It’s a game of tit for tat. They both want to make improvements and step up their offerings, particularly for broadband. But AOL [with 30 million users] still has a commanding lead.”
MSN has made no secret that it’s gunning for AOL’s members. Earlier this year, when AOL announced a rate hike, MSN swiftly launched a multimillion-dollar ad campaign to lure away AOL customers.
Microsoft officials say it’s working. “About 80% of our new customers are coming from other ISPs, and half of that is from AOL,” said Brian Gluth, a senior product manager for Microsoft.
It probably is no coincidence that MSN hastily announced its own updated version, which it calls MSN 7, on Monday, beating AOL to the punch by one day.
Even more worrisome to AOL is that Microsoft is bundling its new Windows XP operating system with the MSN online service and MSN Explorer Web browser, which dramatically will increase the potential reach of MSN. Negotiations to include AOL software in Windows XP broke down this summer without a deal.
“Here’s where I worry,” said Katherine Borsecnik, president of AOL Brand Programming. “What Microsoft can do with its operating system is take AOL off the main highway and move it to a back road. And they’re doing that aggressively.... But we have our own plans. They’ve come at us before.”
AOL is countering Microsoft by cutting deals with computer makers to install AOL on new personal computers. The company also is counting on its recent merger with Time Warner to enable AOL to provide superior content for customers, from CNN to HBO to Cartoon Network.
“The 7.0 platform is really going to turn on the jets in terms of Time Warner content,” said Jeffrey Kimball, executive director of AOL Brand group.
For example, the Time Warner merger has enabled AOL to offer exclusive online chats with singer Madonna and marketing promotions for the upcoming Harry Potter movie.
In AOL 7.0, users can personalize their instant-messaging icon with a picture of Bugs Bunny or listen to the voice of Austin Powers telling them, “You’ve got mail, baby.... Yeah!”
But changes to AOL 7.0 are more evolutionary than revolutionary, Borsecnik said.
The company has learned from past mistakes that it’s best not to change too much, too fast. In 1999, users were so disoriented by the new look of AOL 5.0 that usage fell, though it eventually rebounded.
“We try not to bite off more than we can chew,” Borsecnik said. “In the old days, we were more willing to take a shot in the dark. Now we try to balance comfort [of users] with the new stuff.”
Absent from AOL 7.0 will be the voice-recognition software, which came bundled in version 6.0. The company found few customers used the feature, which enabled users to give voice commands rather than use the keyboard.
And though it remains one of the biggest irritations to AOL users, the new version still will automatically log off customers who are inactive for a certain period.
Because of the company’s growth, Kimball said AOL needs to use the unpopular technology to ensure that other members are able to log on.
AOL plans to promote the new version with a nationwide ad blitz, distributing disks in Time Warner magazines and 30,000 retail outlets.
MSN 7, not available until Oct. 25, will offer a redesigned Home Page that Microsoft officials say will run up to 30% faster and include an improved search tool. Microsoft is promoting the new MSN with a $50-million ad campaign.
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You’ve Got More Features
Here are some new features of AOL 7.0.
* AOL Local Guide: Automatically loaded on the user’s Welcome Screen based on the user’s ZIP Code, the local guide offers weather, news, movie show times, sports scores and an entertainment calendar.
* Radio@AOL: Offers 75 channels in a variety of music genres, from heavy metal to show tunes.
* You’ve Got Pictures 2.0: Expanded version offers online storage to create photo albums, a flat price and direct uploading with digital cameras.
* E-Mail and Buddy Lists: Enhancements allow users to more easily add screen names and e-mail addresses. It does not offer videoconferencing, voice chat or the ability to share files and applications.
* AOL Coach: Part of an expanded Help area, this offers assistance and tutorials for new Internet users, such as tips for sending e-mail and surfing the Web.
* Broadband: The approximately 2 million AOL users who use high-speed connections will find a more integrated programming guide, which was attached to the bottom of the Welcome Screen and other channels.
Source: America Online
