The MSN strategy, announced at Microsoft's (Nasdaq: MSFT) annual analysts' briefing this week, is a complex maneuver aimed at consolidating the traffic from all of the software company's online properties into one monolithic network. That will, Microsoft hopes, have the effect of increasing traffic across all the sites as well as creating a more cohesive database of user profiles to offer advertisers.
"This allows them to do a little consolidation from a brand standpoint, and to drive more traffic through, which is always good," said Peggy O'Neill, an industry analyst at Dataquest. "It's very logical."
The centerpiece of all this is a site formerly known by the code name Start, now renamed MSN Start, but to be finally renamed MSN.com by the end of the year.
MSN.com will adopt many of the key features of the Internet gateways from Yahoo! Inc., Excite Inc., Netscape Communications Corp. and others: free e-mail, instant messaging, an MSN-branded search engine, customized news and weather, for beginners.
But where other gateways aggregate services and information from third parties, Microsoft already owns a variety of Web services, including travel agency Expedia, car seller Carpoint, free e-mail provider Hotmail and the Sidewalk city guides. Visitors to the site will be guided to the appropriate service, or, for categories where Microsoft doesn't have an offering, to content from a third party.
Traffic will initially come from three sources. MSN Start, at home.microsoft.com, is the default home page for the Internet Explorer browser, which controls nearly half of the browser market. MSN.com, formerly a separate Web site, will be combined with MSN Start. And finally, users of the MSN Premier online service, which competes with America Online Inc., will be sent to MSN Start as well.
The No. 1 contender
Microsoft has the potential to be a dominant player in the portal space. More than 27 million unique visitors came to the microsoft.com and msn.com domains in June, according to RelevantKnowledge. That beats Netscape and AOL.com and nearly matches the Web's most popular site, Yahoo! (see chart).
"I think that at the end of the day, having the browser launch into the site is a huge advantage," said Alexis dePlanque, an analyst at Meta Group Inc. "It's the default start page for half of the market." A study from Zona Research found that only 33 percent of IT professionals alter their browser's default start page, with the number among consumers is likely to be much lower.
On top of that, Microsoft says it plans to spend more than $100 million this year to promote the MSN brand. Observers predict that could draw many of the users who would otherwise have gone to Excite or Infoseek.
"This site has been out there, it's not something that's been kept under a curtain for years, locked away," pointed out Ron Rappaport, an analyst at Zona Research. "It's the branding that's new, that's the gift wrap. But it's very important gift-wrap... why would you go to MSN and not Excite? It's all about reaching out and getting that brand recognition in front of newbie users."
A play for TV, too
But ultimately Microsoft doesn't want to just be the dominant portal. Experts characterize portals as TV-network-like content distributors, high-profile showcases of programming made in other "studios."
With WebTV, Microsoft already makes the TV set, and it's positioning itself to be the network and the studio too, experts said.
"Microsoft is an interesting portal phenomenon," said Zona's Rappaport. "It's both the portal site, and it happens to offer some very well-regarded Web properties. Microsoft happens to be in control of all of that."
Content is king
That makes MSN Start's mission much simpler than that of the other portals. Where Yahoo!, for example, depends on extra features and services to keep users on the site and sell advertising, all MSN Start has to do is funnel them to where they want to go -- which will usually, the company believes, be another Microsoft site.
Where it comes to popularizing its brand, MSN will face stiff competition from Infoseek Corp., which has investments from The Walt Disney Co., and Snap! Online, which has partnered with NBC.
"This is a company that does have quite a bit of money it can spend on real-world marketing, but at the same time, they could always be outspent," said Rappaport. "That real-world reach is what will make the difference."
Still a money-loser
In any case, observers said, the outcome of Microsoft's portal strategy will probably have little impact on the corporate bottom line, or even on the future of Microsoft's Web services.
"We have a lot of other ways of getting to the things we want on the Internet [other than portal sites]," said Dataquest's O'Neill. "The content will end up dictating it more, where [users] stay, or go to regularly."
At the analysts' meeting, Microsoft's chief financial officer, Greg Maffei, said the MSN properties will continue losing money for some time, with greater losses in 1998 than last year.