MSN Now A House Divided

  |  October 29, 2003   |  Comments

Citing a need to tidy up, Microsoft's online presence will split intotwo divisions. Does this mean the end of Microsoft's ISP ambitions?

A perennial dog for years when it comes to profitability, Microsoft's MSN is splitting into two divisions, according to a report in Reuters.

It's essentially a split between its communications services (dial up and DSL , Hotmail, Passport and MSN Messenger) and its information services (MSN portal, search function and e-commerce) an area Microsoft is more comfortable with and where the Redmond, Wash., company sees future growth.

According to the report Yusuf Mehdi will take over operations on the software side while Blake Irving will head the communications side. Both will report to MSN's senior vice president in charge of MSN, David Cole.

In its quarter ending March 31, MSN lost $92 million, and only accounted for eight percent of Microsoft's total sales numbers.

MSN was created in 1995 to counter the threat of AOL (the ISP formerly known as AOL Time Warner and now known as a division of Time Warner) and its millions of dial up Internet subscribers. The company also grew a robust online portal at the same time, a marketplace and community area built along similar lines as AOL's own portal.

While the ISP business did well initially, MSN came nowhere near the numbers AOL had under its belt. And as Americans turn more and more to the possibilities of broadband, MSN found it could not keep the profit margins it needed with DSL or cable. Despite a $300 million marketing campaign last year for MSN 8.0, the division lost 400,000 customers.

Today, MSN sells a branded broadband service called MSN Premium through the telephone and cable companies but doesn't market as much as in the past.

It's online presence, however, is doing very well. Internet advertising, after hitting its nadir during the dot-bust period seems to be making a rebound and officials boast its ad sales are doing better than those of rival portal Yahoo

In August, Microsoft dumped LookSmart and looked at building its own search engine to rival the success of Google; in the interim, Overtu re is providing paid search listings for MSN's portal until 2005.

Reportedly, Microsoft has hired Overture's former chief technology office, Paul Ryan, to head up Microsoft's search engine development.

At nearly the same time, it started charging fees for some of its online chat rooms while many dumping others, in what many saw as a cost-cutting measure.

The signs seem to point to increased confidence in the viability of MSN as an online portal and decreased faith in MSN as an ISP. Does this mean the split is the precursor to selling off its dial up and broadband customers to another provider?

Earlier this year, research outfit IDC predicted that this is exactly what's going to happen.

An ironic twist would involve AOL, a company that experience a lot of growth through acquisition, buying up MSN's customer base.

ClickZ Live Toronto Twitter Canada MD Kirstine Stewart to Keynote Toronto
ClickZ Live Toronto (May 14-16) is a new event addressing the rapidly changing landscape that digital marketers face. The agenda focuses on customer engagement and attaining maximum ROI through online marketing efforts across paid, owned & earned media. Register now and save!


COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.



Featured White Papers

ion Interactive Marketing Apps for Landing Pages White Paper

Marketing Apps for Landing Pages White Paper
Marketing apps can elevate a formulaic landing page into a highly interactive user experience. Learn how to turn your static content into exciting marketing apps.

eMarketer: Redefining Mobile-Only Users: Millions Selectively Avoid the Desktop

Redefining 'Mobile-Only' Users: Millions Selectively Avoid the Desktop
A new breed of selective mobile-only consumers has emerged. What are the demos of these users and how and where can marketers reach them?


    • Contact Center Professional
      Contact Center Professional (TCC: The Contact Center) - Hunt ValleyLooking to join a workforce that prides themselves on being routine and keeping...
    • Recruitment and Team Building Ambassador
      Recruitment and Team Building Ambassador (Agora Inc.) - BaltimoreAgora,, continues to expand! In order to meet the needs of our...
    • Design and Publishing Specialist
      Design and Publishing Specialist (Bonner and Partners) - BaltimoreIf you’re a hungry self-starter, creative, organized and have an extreme...