MS messaging tactics recall browser wars

Microsoft's rivals say the software company is using its 3E strategy on its new Windows Messenger service: embrace, extend and extinguish
Written by Jim Hu, Contributor

The battle over today's instant messenger market is vintage Microsoft, whose strategy enemies call "the three Es" in a parody of the company's marketing mantra: embrace a rival's technology, extend it to work best with Windows, and extinguish the competition.

Regardless of how it is characterised, a familiar cycle is being accelerated by a confluence of seemingly disparate events -- the momentum of Microsoft's federal antitrust case, contract negotiations with archrival AOL Time Warner, and the pending release of new operating system Windows XP. Instant messaging has emerged as the nexus this week as Microsoft prepares a test version of XP that will include a powerful new form of the communications software.

The software giant on Monday announced Windows Messenger, a text, chat, video, audio and telephony service that will be integrated with Windows XP. The feature has until now been a relatively muted part of the roughly $200m marketing blitz for the new operating system. But its new multimedia features and its central role in the planned integration of Microsoft's Internet properties elevate the software well beyond a vehicle for text communication.

Analysts said Microsoft views instant messaging -- a key element of Windows Messenger -- as glue for its new Internet services such as Passport and HailStorm. Such services promise to simplify Web surfing by giving people a single online identity and providing secure access to personal information such as credit card numbers with one click.

"Instant messaging is a potential platform for advertising and for things to piggyback onto it," said Gartner analyst David Smith. "It's also a carrier of the screen name, and Microsoft wants people to use Passport and HailStorm."

Microsoft has long used its ubiquitous Windows operating systems to distribute related products or effectively shut out competing technologies -- thereby stifling innovation, in the view of opponents.

In the case of instant messaging, Microsoft has embraced America Online's popular services for sending short text messages and extended the communications technology to work directly with its operating system.

No one is suggesting that the final "E" will materialise anytime soon. But Microsoft is putting new pressure on AOL just as it is struggling to digest Time Warner.

Windows Messenger, due out in October with the release of Windows XP, is threatening to force AOL to make its IM networks interoperable with competing instant messaging services, an outcome that could seriously erode its market leadership.

"What Microsoft is doing here is leveraging its monopoly on the desktop and extending it onto the Internet," said Mark Cooper, research director for the Consumer Federation of America.

Microsoft faces a markedly different opponent in AOL Time Warner, hardly the kind of startup with limited resources that the software giant has commonly left in its wake. And the launching pad for its messaging weapon is an operating system that is shaping up to be the highest-profile product release in the company's history, making the much-hyped Windows 95 debut pale in comparison.

Although Microsoft has added enhancements in recent months to its current instant messaging client, MSN Messenger, its latest move takes the important step of embedding the software directly into the operating system, making it far more difficult to separate the two products. It is this tactic that triggered the landmark antitrust investigation and lawsuit by the US Justice Department, which accused Microsoft of unfairly using its dominance in operating systems to foist other products on customers.

"It's 1996 all over again," said Ed Zander, president of Sun Microsystems, a longtime mortal enemy of Microsoft. His remarks, made Monday at his company's annual JavaOne conference, were directed at parallels he sees between Microsoft's current strategies and the beginning of its assault on the Web browser market that eventually buried rival Netscape Communications.

The resulting government lawsuit focused on the linking of Windows 95 to the Internet Explorer browser, but Microsoft has long used its operating systems to promote its products in many other areas, including word processing, desktop databases, multimedia streaming, music downloads, content and Internet access.

Andy Gavil, a professor at Howard University School of Law, said Microsoft's integration of instant messaging with new features in Windows XP recalls the same well-worn practice.

"I think it does have a deja vu quality to it based on Netscape and all the issues that are very alive in the government's appeal of Microsoft," he said. "The question is, if Microsoft folds these features into the operating system so we all get them like we got IE, will that destroy the separate marketplace for these small software programs? Will it allow them to compete better with AOL, or to push AOL off the desktop?"

Some consumers also expressed worries about Windows' growing footprint.

"I know how aggressive they are. I'd like them to back off a bit," said Tom Wesson, a computer programmer in Schaumburg, Ill. "I think they'd be more successful if they showed a little more respect and didn't try to dominate everything."

Some also see evidence of an urge to dominate in Microsoft's forthcoming Windows XP operating system. A feature called Smart Tags could give the company some control over consumers' access to sites, content and services on the Web.

Take me to Part Two of the Microsoft messaging special report.

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