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| The Future of MSN | ||||
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By Matt Rosoff [bio]
The following is the full text of an article published by Directions on Microsoft, an independent research firm focused exclusively on Microsoft strategy & technology. More samples of our content, as well as a list of upcoming articles and reports are also available. Despite the emphasis that Microsoft is placing on its new Live initiatives, the MSN brand is too valuable to discard completely: several MSN sites are among the traffic leaders in their categories, making them important to Microsoft's goal of capturing more online advertising revenue. Moving forward, Microsoft hopes to convince users of each MSN site to spend more time on other MSN sites by linking them better and improving content, and to help advertisers target specific demographic groups more accurately. MSN could also be the focus of new advertising-supported business models for Internet access. MSN: What's Left of the Brand? For almost 10 years, MSN was the umbrella brand for Microsoft's consumer-oriented Web sites and online services. Since Oct. 2005, however, Microsoft has rebranded many MSN sites as Windows Live or simply Live—for instance, Hotmail became Windows Live Mail, MSN Messenger became Windows Live Messenger, and MSN Search became Live Search (without "Windows"). In addition, most of Microsoft's new consumer online services, such as Expo (an online classified advertising service), use the Windows Live brand. In addition, the business segment formerly known as MSN—one of five segments for which Microsoft reports quarterly financial results—has changed its name to Online Services. Nonetheless, Microsoft continues to apply the MSN brand to more than 20 Web properties, some online services for mobile users, and all of Microsoft's Internet access services. (For a complete list of MSN and Live sites and services, see the chart "MSN vs. Live".) Comparing MSN and Live According to MSN General Manager John Nicol, who returned from sabbatical in Feb. 2006 to lead all of Microsoft's MSN-branded businesses, Microsoft draws the following distinctions between MSN and Live: Editors vs. users. On many MSN sites, content is compiled or created by editors who are employed by MSN or an MSN content partner. In contrast, Live or Windows Live sites help users find and aggregate content from any online source. For instance, the MSN.com home page (the current default home page for Internet Explorer 7 on Windows XP) includes headlines compiled by MSN from a limited selection of partner sites, while the newer Live.com home page (the current default for Internet Explorer 7 on Vista) allows users to aggregate headlines from any site or service with an RSS feed. Destination vs. platform. An important long-term goal with Live and Windows Live is to create services that other Web sites and software can access and recombine. MSN has no such goal—it's meant merely to be a set of destination Web sites that users visit regularly, for extended periods of time. However, these distinctions are not rigorous. For instance, MSN Travel recently added content posted by end users rather than professional editors, Soapbox for MSN Video makes it simple to repost video content from the service to third-party sites (making it more of a Live-type online platform), and both MSN and Windows Live have nearly identical comparison shopping services. In addition, Microsoft's own Web sites don't always use the correct brand names—for example, the Microsoft Online Services home page at join.msn.com still advertised MSN Search more than a month after the launch of its replacement, Live Search. This lack of clarity in branding could hobble Microsoft's online services—for example, a user who wants to visit Microsoft's mapping site would be hard-pressed to guess that it's called Live Local and can be found at local.live.com—and create confusion among advertisers. Further branding changes are likely, and some duplicate services will probably be eliminated. MSN Goals Nicol defines the following goals for MSN: Increase stickiness. Several MSN sites are among the leaders in their categories and attract millions of users, such as the following:
However, Nicol acknowledges that MSN gets fewer page views per user than many of its competitors, suggesting that many users visit one particular MSN site, but don't see it as part of a larger network, or don't value the content on other MSN sites. MSN hopes to change this with intelligent integration among MSN sites and between MSN and Windows Live. For example, to guide users to the new Soapbox video-posting site, MSN won't merely rely on a new link in the left-hand navigation bar, where it will be buried among more than 20 other links, but it will also select relevant Soapbox videos to repost to other MSN sites—for example, an interesting video featuring cars might be posted on the MSN Autos home page. In addition, Nicol hopes to hire more editors to create a more consistent and interesting editorial tone across MSN sites, although this could be difficult given that much of MSN's content is provided by partners. Target advertising. An important goal of the Online Services group is to help advertisers better target their messages to interested buyers, which will lead to more sales for advertisers and let Microsoft charge more for each advertisement. Because most MSN content sites focus on a specific subject, MSN will be particularly important in this quest: for example, a manufacturer of car stereos is more likely to reach qualified buyers on MSN Autos than on a general-purpose Web portal. Improve reputation. Many users and prospective advertisers have a negative impression of the MSN brand. This stems in part from past problems with MSN's Internet access business, which according to a 2001 Consumer Reports survey ranked last in customer satisfaction among major ISPs. The brand may also have been hurt by overuse—at various times, "MSN" has referred to Internet access, free and subscription-based Web sites and online services, and a widely varying set of services for mobile users. To improve MSN's reputation, Nicol has pledged to focus more on the end-user experience rather than incorporating new technology for its own sake. For example, an MSN home page redesign was once approved because it used cutting-edge Web technology, but users didn't like the new design and the home page's market share immediately dropped. Improving the quality of the editorial content on MSN sites could also help. Rethink the access business. MSN's dial-up Internet access business, although profitable, has been on a three-year decline as users switch to broadband. Microsoft considered offering DSL access at one point, but quickly realized that the cost of leasing DSL infrastructure from telephone companies was too high for Microsoft to make a profit. As a consequence, revenues from the access business are declining: in Microsoft's fiscal year 2006 (which ended June 30, 2006), dial-up revenues decreased 28% to approximately US$700 million, continuing a steady slide from more than US$1.1 billion in fiscal year 2003. Subscription services such as MSN Premium, a service for subscribers to other broadband ISPs that includes a specialized Web browser and e-mail client, antivirus protection, and parental controls, have not taken up the slack; revenue from these subscription services grew only 9% to US$250 million during the last fiscal year. Although Microsoft is not ready to share details, the company is considering other ways to earn money from Internet access, including advertising-supported free access. Resources Advertisers can learn more about MSN sites and the demographics they reach at advertising.msn.com/msnsites/msnsites. A detailed explanation of Windows Live services and strategy can be found in "Understanding Windows Live" on page 35 of the June 2006 Update. Broad goals for the Online Services segment in FY'07 are discussed in "Five Businesses Head into FY'07" on page 21 of the Sept. 2006 Update.
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