MSN Update Focuses on Free Services

In its latest annual update, MSN has introduced a personal Web page service called MSN Spaces and made improvements to MSN Search, Messenger, and the free version of Hotmail. These improvements focus exclusively on free, advertising-supported services, unlike MSN’s previous two annual updates, which included updates to subscription services, such as MSN Premium. The shift reflects a changing competitive landscape and MSN’s increasing reliance on advertising dollars.

New Competitors, Evolving Strategy

In the last two years, the business landscape for MSN has changed in several important ways:

AOL no longer main target. Until recently, MSN viewed AOL as its main competitor. As AOL released a new version of its client software every fall or winter, MSN responded with an identically numbered release (e.g., MSN 7, MSN 8). These releases almost always included new or updated fee-based services that were intended to draw paying subscribers away from AOL.

But since approximately 2003, the business interests of Time Warner (which owns AOL) and Microsoft have diverged. Time Warner is now focused on selling content and has become less interested in selling software, while Microsoft is less interested in chasing AOL’s consumer subscription business (although the two companies compete for online advertisers). In May 2003, the companies settled a lawsuit and have since begun to follow through on their promise to cooperate on certain technologies, such as systems for preventing unauthorized use of copyrighted content.