Services upgraded in fight for customers

Providers: America Online and Microsoft Corp. release new versions of their online services to win over users.

October 29, 2001|By Edmund Sanders | Edmund Sanders,SPECIAL TO THE UN

Rivals America Online and Microsoft Corp. are unveiling upgraded versions of their online services amid a growing tug of war for Internet customers.

AOL 7.0, released this month, includes a variety of mostly subtle changes to the No. 1-ranked Internet service provider, including an online radio, Web-based photo albums, enhancements to e-mail and instant-messaging and more localized content, such as weather, community news and neighborhood entertainment guides.

MSN, the online service of Microsoft, has redesigned its Web site and offers new "Net Alerts," which begin by sending users real-time e-mails and instant messages about traffic conditions. MSN also announced it will expand its high-speed access through partnerships with Verizon Communications Inc., BellSouth Corp. and SBC Communications Inc.

The new versions come at a critical time for both companies. AOL, a unit of New York-based AOL Time Warner Inc., faces its biggest threat in years from Microsoft, whose MSN service is the nation's No. 2 Internet service provider and is gaining.

MSN, with nearly 7 million users, has largely copied the look and feel of AOL's service, using buttons and channels to create a walled garden that integrates e-mail, instant-messaging, shopping and other content.

"Every time MSN improves its customer experience, that becomes more of a threat to AOL," said John Corcoran, analyst at CIBC World Markets in Boston. "It's a game of tit for tat. They both want to make improvements and step up their offerings, particularly for broadband. But AOL [with 30 million users] still has a commanding lead."

MSN has made no secret that it's gunning for AOL's members. Earlier this year, when AOL announced a rate increase, MSN swiftly launched a multimillion-dollar ad campaign to lure away AOL customers.

Microsoft officials say it's working. "About 80 percent of our new customers are coming from other ISPs, and half of that is from AOL," said Brian Gluth, a senior product manager for Microsoft.

It probably is no coincidence that MSN hastily announced an updated version, which it calls MSN 7, to match AOL's.

Even more worrisome to AOL is that Microsoft is bundling its new Windows XP operating system with the MSN online service and MSN Explorer Web browser, which will increase the potential reach of MSN. Negotiations to include AOL software in Windows XP broke down this summer without a deal.

"Here's where I worry," said Katherine Borsecnik, president of AOL Brand Programming. "What Microsoft can do with its operating system is take AOL off the main highway and move it to a back road. ... But we have our own plans. They've come at us before."

AOL is countering Microsoft by cutting deals with computer makers to install AOL on new personal computers. The company also is counting on its recent merger with Time Warner to enable AOL to provide superior content for customers, from CNN to HBO to the Cartoon Network.

"The 7.0 platform is really going to turn on the jets in terms of Time Warner content," said Jeffrey Kimball, executive director of AOL Brand group. For example, the Time Warner merger has enabled AOL to offer exclusive online chats with singer Madonna and marketing promotions for the Harry Potter movie. In AOL 7.0, users can personalize their instant-messaging icon with a picture of Bugs Bunny or listen to the voice of Austin Powers telling them, "You've got mail, baby. Yeah!"

And though it remains one of the biggest irritations to AOL users, the new version still will log off customers who are inactive for a certain period. Because of the company's growth, Kimball said AOL needs to use the unpopular technology to ensure that other members are able to log on.

AOL is promoting the new version with a national ad blitz, distributing discs in Time Warner magazines and 30,000 retail outlets.

MSN 7, which was unveiled with Windows XP on Thursday, offers a redesigned home page that Microsoft officials say runs up to 30 percent faster and includes an improved search tool. Microsoft is promoting the new MSN with a $50 million ad campaign.

Edmund Sanders is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

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