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Microsoft Network (MSN) - Msn Works To Find Its Focus

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In an attempt to shore up its loses, eight months after its debut, in March 1996, Microsoft inaugurated the first of a series of major makeovers at MSN. Microsoft put the entire "closed" service on the Internet. MSN still had a full range of features, including shopping, news, business and finance pages, chat rooms, etc—but made them available free of charge. The facelift was intended to make MSN more attractive, but one of the signals it and later changes sent was that Microsoft really had no vision for MSN, that it was merely reacting. The change to the Internet had another serious short-term impact. It alienated most of MSN's 400 information providers, companies like NBC that spent millions of dollars to develop material for the old MSN. The switch to Web-based operations meant they had to go back to the drawing board to design product offerings for the new MSN. The transition to the Web was completed in October 1996.

In April 1996, MSN made a huge advance in terms of brand-name content, when Microsoft announced a major partnership with NBC. The two firms intended to produce a variety of news, sports, finance and entertainment products for the Web and cable TV. Part of NBC's contribution was developing a 24-hour, New York-based cable news network to be called MSNBC. Microsoft built a large newsroom at its headquarters in Redmond, Washington, and with NBC began generating news content which would be posted free on MSN.com.

The alliance with NBC pushed MSN into its second large-scale makeover at the end of 1996, just two months after its transformation to a Web-based service. The Microsoft Network as newly conceived would radically expand the model of a standard Web portal and Internet service provider. While it continued to develop what would later be considered "traditional" online content—the series of arts and entertainment guides for various American cities called Sidewalk, the Internet Gaming Zone, or the MSNBC news stories—MSN would at the same time begin morphing into a full-blown media company. A production studio, Microsoft Multimedia Productions, was founded for it where some 20 online comedies, dramas, and soap operas went into production. MSN introduced Slate, an upscale online magazine modeled on the New Yorker or Vanity Fair. MSN hoped its radical new focus would pump up its subscriber base to 3 million by summer 1997 and enable it to overtake CompuServe as the number two online service.

Only two and a half months later, however, the strategy seemed to be failing. Microsoft announced the layoff of hundreds of part-time workers who had been hired to develop content for the new MSN. It cancelled half the newly formed MSN programs. New programming was on the way, the company said, that would be "light years better," a blunt reflection on the quality of the cancelled content. Things were falling apart on all fronts in April 1997. MSN was plagued by apparently irresolvable billing problems. Worse, overloaded servers shut down its email system on various occasions, depriving MSN subscribers service for days at a time. E-mail remained MSN's Achilles tendon until January 1998 when it purchased Hotmail, the free email service, for about $395 million. The purchase gave MSN a tried and true email technology along with instant access to nearly ten million Hotmail subscribers. By that time although MSN had 2.3 million users, it was still number 3. According to reports, MSN was not making money on subscriptions or advertising, and had lost hundreds of millions of dollars. One effect of the Hotmail acquisition was to put an end to a buzz in the online industry that Microsoft intended to cut its losses and sell MSN off once and for all.

Whatever, MSN's difficulties, the power of Microsoft was enough to make it attractive attract new corporate partners. AltaVista Search Service, Infoseek Corp., Lycos Inc., and Snap Internet Portal Service chipped in $60 million for the right to be the featured search engines on MSN. Barnes & Noble Booksellers allied with MSN in hopes of catching Amazon.com. One effect of these partnerships, combined with the new popularity of service-oriented Web sites such as Yahoo!, was to nudge MSN back into its previous incarnation. In August 1998 it abandoned its attempt to become an online entertainment powerhouse altogether and transformed itself back to a simple Web portal, offering news, information, email, bulletin boards, and online shopping. The change increased traffic at the MSN site, but further distanced advertisers who were losing confidence in Microsoft to develop and stick with a plan for MSN.

If advertisers suspected a lack of vision at MSN, they may have been right. MSN redesigned its entire site again, first in 1999 when it shifted its direction to focus on online communications, and again in early 2000, when the service returned to Microsoft's functional roots in software and set itself up as a toolkit for the Internet that assembled resources to make Web-based activities, like shopping, investing, and communicating, easier for consumers. MSN launched a series of expensive media blitzes in 2000 and 2001 that included nationwide TV commercials, massive CD-ROM mailings, and even rebates up to $400 on computer purchases to customers willing to commit to MSN service for a year or more. It was a desperate and ultimately futile effort to make headway on AOL. The promotional campaigns added another $1 billion to the $1.5 billion Microsoft had already sunk into MSN, yet by spring 2000 MSN still had only 2.5 million members compared to AOL's 22 million. By the end of 2001, Microsoft Network was once again a basic Internet portal, much like AOL's.

The MSN-AOL competition frequently broke into open conflict. Microsoft's decision to rig Windows in favor of MSN drew a long Justice Department investigation largely at AOL's behest. In 1999 AOL protested publicly and loudly that MSN Messenger, the network's instant messaging tool, had been improperly set up to communicate with AOL's members-only instant message system. What's more, AOL users who had Windows versions that included MSN Messenger found that MSN Messenger ran automatically when they tried to send messages, and blocked or completely disabled the AOL version. AOL also accused Microsoft of planning to program its new Windows XP system so that only MSN would be able to run on it—a threat 19 state attorneys general took seriously enough to jointly bring suit against Microsoft. Eventually Microsoft agreed to allow dealers to place on the Windows desktop any Internet provider as long as an MSN icon was there too.

FURTHER READING:

Andrews, Paul. "Microsoft places $1 billion Net Bet." Seattle Times, October 26, 2000.

Buck, Richard. "Online With Microsoft—Network To Change The Structure Of How Services Operate." Seattle Times, July 24, 1995.

Hansell, Saul. "Where Does Microsoft Want You To Go Today?" New York Times, November 16, 1998.

Healy, Jon. "AOL, Microsoft Continue Battle Over Instant-Messaging Software." San Jose Mercury News, July 29, 1999.

Helmore, Ed. "Web of Legality Over Software Threatens Microsoft's March." Independent (London), August 2, 1995.

Lohr, Steve. "Again, It's Microsoft vs. the World." New York Times, February 13, 2000.

O'Leary, Mick. "Microsoft Goes Online." Online Magazine, March 1996.

Rebello, Kathy. "Microsoft's Online Timing May Be Off." Business Week, July 17, 1995.

"Special Report: The Microsoft Network." Interactive Age, August 14, 1995.

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12 months ago

I am sure that only because of the contributions that are made by Microsoft that we are possible to witness such a wide development made in the field of social networking. Nowadays we can see that more and more people are behind these social networking sites that others.
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