Monday, October 30, 2000		Article

Microsoft’s $-1-billion endeavour to topple AOL

Microsoft is to spend $ 1 billion relaunching its Web-based services in an attempt to topple America Online as the world’s leading Internet service provider, according to GNS.

The group said the global marketing campaign was designed to make MSN, its online brand, as well known internationally as Windows, the operating software used on more than 90 per cent of the world’s computers.

Few other companies have spent as much on advertising their online products, although few are as wealthy as Microsoft. The company has cash on hand of almost $ 24 billion after gaining $ 3 billion from operations in the past three months alone.

Analysts were sceptical about the company’s ability to improve dramatically the popularity of MSN by spending huge amounts of money on a marketing campaign.

"They want to close the gap (with AOL) and so they’re throwing money at it,’’ said one. Shares in Microsoft fell slightly in a difficult market for the hi-tech sector.

Microsoft has just 3.5 million subscribers compared with AOL’s 25 million. The MSN also ranked third in the September Web league tables compiled by Media Metrix, the online data group, behind AOL and Yahoo!

The company came relatively late to the Internet with its Internet Explorer Web browser. Wall Street has also blamed the legal battles with the US government for hampering its expansion plans. As the company’s anti-trust trial moves into the appeal stage, one analyst said yesterday: "They have no choice but to step up their growth prospects."

Some $ 150 m of the marketing campaign will be used on television advertising across North America, Europe and Asia. The first advertisements, designed to show how the Internet can improve home life, were aired last night.

Microsoft has also fitted out a Manhattan loft with the latest company products. The "Microsoft home" in Tribeca is an attempt to show how the company’s Internet-friendly devices can "simplify daily tasks, keep us connected, and help us have fun and relax in the home".

The rest of the $ 1 billion will be spent over the next year on partnerships with retailers, cross-promotions, rebates and other marketing campaigns.

The initiative, which includes a new multicoloured Internet browser, is designed to make it easier to swap services from software to the Internet. As such, it is part of the company’s new strategy, .Net, which was introduced in June.

Deanna Sanford, product manager for MSN marketing, obliquely positioned the new-look services as a direct challenge to AOL by saying: "We are making the MSN the easiest way to get online, not only for new users but also for those users out there who for whatever reason are unfulfilled."

— Jane Martinson