Microsoft to let it fly with MSN 8

Microsoft this week will unveil a $300 million ad campaign to promote its MSN 8 Internet service, kicking off what some analysts are calling the "battle of the eights."

The software giant will give a peek at the ad campaign on Monday, one day before AOL Time Warner's America Online division officially launches AOL 8.0. America Online quietly released AOL 8.0 to subscribers last week.

Starting Oct. 24, the official MSN 8 launch date, Microsoft will blanket the Web, print publications and television with ads. The most intense promotion will occur during the first five days. But the new campaign, the largest ever for MSN, will run through the middle of 2003.

Redmond, Wash.-based Microsoft will kick off the ad campaign in Superior, Wis., and in Times Square, where a billboard will count down to MSN 8's New York launch. Microsoft Chairman Bill Gates will preside over the Oct. 24 event, which will take place in Central Park.

"We are kicking off our campaign in Superior today to let consumers know that we've heard their complaints about other Internet services and that we're confident MSN 8 is superior to any other Internet service on the market," Bob Visse, director of MSN marketing at Microsoft, said in a statement.

The ad campaign, dubbed "It's Better with the Butterfly," will focus on new features--spam filtering, instant messaging and richly formatted e-mail, among others--that Microsoft hopes will woo away AOL users. While the first ads don't necessarily attack MSN's rival, they do try to cajole people to switch from AOL.

"The overarching theme of the campaign is their butterfly (logo), which, I believe, they introduced with version 6.0," said Forrester Research Jim Nail.

McCann-Erickson of San Francisco developed the TV ads, which feature a butterfly assisting people with everyday Internet tasks. In one spot, world attention is galvanized around the appearance of giant cocoons. When the first cocoon finally opens, a man in a butterfly costume drops out. "A whole new Internet service has landed," the narrator says.

In another TV spot, a postal carrier battles letters spitting out of a mail slot. Inside the house, a woman dressed in a butterfly costume is pushing mail back out the slot. "There's junk-mail protection, and then there's junk-mail protection with new MSN 8," the narrator says.

"It's a very cool, innovative way to introduce this and other new features," Nail said. "I think that would be an effective part of the campaign."

Lenny Kravitz's "Fly Away" provides the background music for the television spots.

Seattle-based Avenue A developed the Web ads, the majority of which will run during the first five days of the campaign and reach an estimated 90 percent of active Internet users, said Avenue A President Clark Kokich.

The main component of the Web campaign is "a home-page Flash commercial," he said. "It carries the basic 'butterfly 8' from the television commercial onto the Internet."

Battle of the eights
Microsoft on Monday also will reveal that the service has topped 9 million subscribers, or about one-quarter of AOL's more than 35 million users. That's a modest increase from a few months ago, when Microsoft revealed it had 8.7 million MSN subscribers.

Besides trailing in subscriber numbers, MSN also lags behind in usage. AOL accounts for more than 25 percent of the time people spend on the Internet compared with about 9 percent for MSN, according to Jupiter Research.

But MSN's greater challenge may come from Wall Street and not its competitor. On Thursday, Microsoft will for the first time break out revenue for MSN when the company reports results for the first quarter of its fiscal 2003. Since it launched concurrently with the Windows 95 operating system seven years ago, MSN has lost money.

"MSN obviously as an entity will have to behave because there will be a lot of light cast on it as a business," said Jupiter Research analyst David Card. "The scrutiny that MSN will now get, now that they're revealing their revenue--I don't think it's much different than the scrutiny they would get from (CEO Steve) Ballmer and the board."

Microsoft is taking no chances in its attempt to make MSN profitable and finally start gaining on subscriber behemoth AOL.

Microsoft has "added some very cool, new functionality that puts MSN on par with AOL and, in some categories, ahead of it," Nail said. "One of those is the spam filtering."

Besides new consumer-friendly features like the spam filtering, MSN also sports goodies brought in from Microsoft software such as Money and Encarta. Subscribers also will get at no charge the extras that MSN.com surfers must pay for, such as online bill paying.

In its battle with AOL, Microsoft hopes to exploit its rival's weak broadband strategy. The vast majority of AOL's subscribers are dial-up customers, many of whom could defect as broadband adoption expands. In a surprise move, AOL 8.0 will drop broadband satellite support.

So far, AOL has benefited from lackluster adoption of broadband services, but that could change at any time. In a September report, the Commerce Department found that only 11.2 million U.S. households have broadband Internet access, even though high-speed cable access is available to 75 million households.

MSN, by contrast, is rapidly making broadband accessible nationwide and encouraging customers to use the bigger pipes. The company also is attempting to fortify its MSN broadband strategy by offering subscribers discounts on goodies such as wireless networking gear. In addition, Microsoft is attempting to marshal music and video services through its Windows Media Player 9 Series aimed at making broadband more attractive to consumers.

More than anything else, MSN 8 will become the repository for Microsoft's consumer Web services. The software titan backed away from an ambitious strategy for selling a la carte Web services to consumers and now plans to pump those into MSN for paying subscribers only.

One analyst, however, took issue with Microsoft's representation of its Web services push.

"It's my opinion that MSN 8 actually represents a significant retreat from the whole notion of offering Web-based services or hosted services for a subscription or monthly fee," said Directions on Microsoft analyst Matt Rosoff.

"If you look at it, nearly all the new functionality of MSN 8 is delivered in client software," Rosoff said. "There's a new e-mail client, but you don't have to use it with MSN e-mail or Hotmail. It'll work with any (Internet service provider)...There's spam protection in the client--it works with any ISP. That's software, not a service."