Microsoft's Mehdi maps aggressive plan for MSN

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Microsoft corp.'s MSN service will "leapfrog" over America Online, the 800-pound gorilla of consumer Internet service providers.

Come again?

The "leapfrog" maneuver is Yusuf Mehdi's ultimate goal, as well as providing consumers with integrated services. Mr. Mehdi, MSN's hyperkinetic VP-marketing, is charged with shaping and executing Microsoft's vision for MSN. But there's no denying the obvious question: With only about 3 million subscribers, how can MSN--perennially behind since its fumbled 1995 launch--catch up to AOL services' base of 25.8 million? MSN's goal is nothing new.

"Since MSN launched, they've made numerous attempts to overtake competitors. This has been an ongoing mission for them," said Allen Weiner, VP-analytical services, NetRatings. "They're actually better positioned today to move up the ranks than they were in the past," noted Mr. Weiner in citing MSN's strength in applications and content.

Mr. Mehdi and his team are armed with a plan plus a recently launched $150 million marketing campaign by McCann-Erickson Worldwide, New York and San Francisco. It includes ads plus retail and promotional hooks (AA, Feb. 14). MSN's latest offer: six months free for users who sign up for a year.


MSN's consumer vision is "The everyday Web," the campaign's theme, "which is shorthand for making the Web indispensable and relevant to every person, every day," Mr. Mehdi said. "We want people to touch it, use it the same way they pick up the phone."

Currently, he said, Web users searching for information get "spoon-fed" a few Web pages and conclude their visits. "It's not the full experience. We have a very aspirational view of what the Web can deliver." MSN's strategy is to provide what Mr. Mehdi called "best-of-breed" services, such as e-mail, search functions, personal finance and shopping.

MSN offers these services, but not to the extent it plans to through applications it's developing.


A valuable user, Mr. Mehdi said, is someone who comes to the Web every other day, uses two or more MSN services, is registered and uses the network a minimum of an hour per month.

"Our goal from the business standpoint is to have the largest base of valuable users, meaning that they spend a lot of time online, spend money and therefore they're monetizable," Mr. Mehdi said.

Marketplaces are the key to nabbing valuable users. For example, MSN subscribers shopping for a new car may link on MSN's CarPoint, to a joint venture with Ford Motor Co., where they can conduct the entire car-buying process and establish a maintenance schedule.

Ford has a similar service that's a partnership with Yahoo! Autos. For MSN, a financial control center linked to MoneyCentral will let consumers make car payments, pay other bills and conduct other financial transactions. CarPoint applications, explained Mr. Mehdi, will segue into Microsoft's forthcoming "Next-Generation Windows Services" initiative via its Passport secure e-commerce, calendar and messaging services.

Additional marketplaces planned for MSN include travel via Microsoft spinoff, health with WebMD and real estate by way of Home Advisor. Online auctions are also planned.

Microsoft, which includes MSN, is the No. 3 Web property in traffic from home users, behind AOL and Yahoo!, according to Nielsen/

NetRatings (see NetResults, Page 64).

But MSN remains in the shadow of AOL, known in the market for its clean integration of consumer services, and Yahoo!, which long ago moved beyond its search roots to become a content-rich portal. Mr. Mehdi, however, doesn't see what others see in his competition.

"The marketplaces are a huge differentiator," the long-time Microsoft executive explained, arguing that Yahoo! and AOL are driven by content and lack the degree of integration that MSN will offer.

But even if MSN could catch AOL, "That's assuming that Yahoo! is going to stand still and Yahoo! hasn't stood still in any way, shape or form," Mr. Weiner said. While he called Microsoft's attitude "hubris," he also said, "I admire the fact that they believe so much in their product."

Besides integration, Mr. Mehdi said MSN will deliver on the promise of "anywhere, any device, anytime" via broadband content and services. MSN will deploy via WebTV; MSN Companion, a Web appliance set for fall launch; and MSN Mobile 2.0, which will run on any operating system with any browser.


Mr. Mehdi said during the last three to four months, MSN added 500,000 new subscribers. He hopes to have 1 million more subscribers by the end of June.

Mr. Mehdi said, the key to catching AOL or even getting close is in the "run rate," or how many new people join the service. That's a tall order given that AOL added 1.7 million new subscribers in each of the past four quarters.

"I think we're going to scale and catch AOL," Mr. Mehdi said.

He said that will be done by luring new users and people who switch from other services plus drawing on 39 million people who visit at least once a month and 60 million users of Microsoft's free HotMail e-mail.

MSN has labored since 1995 through various strategies, but Mr. Mehdi contended Microsoft now has a winning formula.

"MSN will leapfrog AOL by turning users into valuable users," he said.

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