RealNames Deal Ends

Microsoft will not renew its contract with RealNames, a company that created technology for users to navigate the Web by typing simple “keywords” rather than URLs. As of June 28, 2002, Internet Explorer and MSN Search will stop supporting RealNames’ technology and the company will cease to exist. (For more details on what RealNames offered, see “‘Internet Keywords’ Promise to Simplify Web Search” on page 21 of the May 2000 Update.)

In exchange for supporting RealNames’ technology, Microsoft received a 20% equity stake in the company and a guarantee of US$40 million in two cash payments, according to former RealNames CEO Keith Teare. When RealNames was unable to launch a public stock offering, it had insufficient cash for the second payment (US$25 million) which came due in May 2002.

Even if RealNames had lived up to its financial obligations, Microsoft would probably not have renewed its contract because its technology no longer served Microsoft’s aims. Microsoft would prefer to have keywords bring up an MSN Search page, as this increases traffic to MSN and offers direct revenue opportunities, such as targeted advertising and paid placement in search listings. In addition, because RealNames was unable to sell many keywords, interface inconsistency was a problem: typing a RealNames keyword (“CNN”) would lead users to a Web site with a RealNames banner across the top, while other words would simply redirect users to the relevant site via MSN Search (“Ford”), or display a full page of MSN Search results (“computers”).