WebTV yanks email ads

In a twist on direct-mail marketing, Microsoft began including banner ads in incoming emails as a way to increase advertising revenue on the network. Banner ads started to appear on general Web pages relating to email service on WebTV, but also on top of opened email messages, so that subscribers received ads with their correspondence. WebTV was able to do this because messages are delivered through the WebTV network.

The program began and ended last Friday, according to WebTV representatives.

Although many free email services attach ads to mesages, WebTV users objected to the new practice because of the relatively high monthly subscription fees--$25 per month--the service charges users. In addition, the ads increased the download time of each page over typical dial-up connections, and users feared that they were also hogging space in email mailboxes.

"It's definitely an issue that we are sensitive to, and we have tried to be cautious about not flooding our users with ads," said a WebTV representative. "As the service grows, we are prone to testing things out. We have received some comments on the negative side, so we are checking into that."

WebTV has steadily, although slowly, added subscribers in the three years since it launched the first television-based online service, but some customers say it has generally not lived up to its initial promise. The service has failed to mirror the enormous growth of the Web at large, and it faces looming threats from America Online, which is set to switch on its own television-based service this year. WebTV recently began a free three-month trial for new customers in a move to boost subscription numbers.

The service now hovers around 1 million users. The ad controversy highlights how WebTV has struggled to distance itself from its role of an online service deriving its revenues solely from subscription fees, into a provider of enhanced television applications, bringing in incremental revenues. WebTV has also been hamstrung by Microsoft's hiring troubles in Silicon Valley, which is notorious for its tight labor market.

"They constantly shoot themselves in the foot with their own insensitivity to us users," a WebTV user wrote in an email to CNET News.com, threatening to leave the WebTV service for one of the so-called free PC companies. "As it is, we Webbies pay a high ISP fee. Most other ISPs of this expense assume their customers have more to do than wade through ads."

WebTV's small but vocal user group has been outspoken in its complaints, asserting that the company has forgotten promises to include support for standard Web technologies such as Java and multimedia players while charging ahead into new business ventures. These users say that the decision to include ads is another example of the company's careless attitude toward users.

For its part, WebTV says it already serves ads on other areas of the service and that the new ads were merely an attempt to create a new revenue stream. Representatives also note the ads were taken down as soon as the service was aware of the complaints. Although there is a chance the ads will not come back, the problem lies in miscommunication with members more than anything else, a WebTV representative said.

For example, the ads were never embedded in outgoing email, and the company is working to make sure the ads will not be included in printouts of incoming messages, the company says. Meanwhile, WebTV is also considering decreasing the rotation of the ads so they are not as intrusive.

"Right now it is confusing to people, and we have to figure out how do we make it more clear," the representative said, conceding that the company did not do a good enough job of informing users about the new ads. "It's a tough thing because email is one of the most-used places. It's a great place for the advertisers, but we are sensitive to the fact that it might be intrusive."