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Sidewalk now concrete

Analysts say newspapers and other publications should be worried about Microsoft's chain of city guides. Very worried.

Microsoft (MSFT) cut a very thin slice of the local content cake when it launched its much-anticipated Sidewalk service today. But observers say it just might turn out to be the richest piece.

The first of the Sidewalk guides launched today in Seattle. The next cities will be New York, Boston, San Francisco, and the Twin Cities, which all will launch by June, said Gayle Troberman, consumer marketing manager for Sidewalk. By the end of the year, Sidewalk will have been launched in 10 to 15 cities worldwide, including Washington, San Diego, Houston, Denver, and Sydney, Australia.

So far, the other major contenders in the local content arena such as CitySearch and America Online's Digital City have launched sites that purport to offer one-stop shopping for all The software experience local information--from restaurants and entertainment listings to information about local women's shelters.

But Microsoft has decided to focus exclusively on entertainment, offering services such as restaurant reviews written by a staff of top reviewers, concerts, show and movie listings, and extensive maps that help users check on real-time traffic conditions and parking.

Larry Cohen, group product manager of the Microsoft Network, said he has set up Sidewalk to automatically email him every time one of his favorite bands comes to town. The idea is that the reader can use Sidewalk to not only find a restaurant but also to plan a whole evening.

Analysts say competitors--that is, newspapers and other online city guides fighting over billions of dollars in advertising revenue--should be worried. Very worried.

"They did a good job," said Bill Bass, an analyst with Forrester Research. "It's slick. For entertainment, this is a better product out there than anything else."

Kingston resident Michael Kulish tried out the service this morning and loved it, though it was a big sluggish on his 14.4-kbps modem connection.

"The categories are great," he said. But he was disappointed that he couldn't find ferry information in the traffic reports. He also noted that not all the restaurants he visits were listed. But all in all, he was impressed enough to use it again.

"You can find things that you would never go looking for in the Yellow Pages or you wouldn't stumble across if you were out and about" he said.

Ironically, added Peter Krasilovsky, an analyst with Arlen Communications, Sidewalk's strength lies more in its "excellent journalism" than its technology. "You'd expect Sidewalk to have the very latest in all kinds of computer functionality. It isn't as functional as other services but it is useful."

All in all, although he had some criticisms of Sidewalk, such as its lack of local feel, Krasilovsky generally liked the site. "I think Sidewalk's very nicely executed."

Does that mean the cash will start rolling in immediately? Microsoft doesn't expect it to. With its very deep pockets, it can wait for the market to mature. For Microsoft, Sidewalk is only the beginning.

The localized service will link to Microsoft's other new MSN properties, such as its Expedia travel service or its CarPoint car-buying service. Sure, advertising will be an important source of revenue for the service. But Krasilovsky, for one, thinks the real money lies in the promise of online transactions.

"Sidewalk is the anchor of [Microsoft's] interactive services group," he said. "Microsoft is hoping you'll get onto Sidewalk and then go to Expedia...and then go to the bank, and so on. It's the online transaction part of the business that's really likely to make things go."

Microsoft has said Sidewalk will not sell classified ads, the bread and butter of traditional newspapers. But Krasilovsky notes that it has promised no such thing for its other services. "Sidewalk may not be going to classified ads, but it's going to be linking to sites that do."

That's why he thinks Microsoft will continue to be a major threat to newspapers and alternative weeklies.

According to Bass at Forrester, local ads in newspapers and yellow pages generate about $66 billion a year. About a dozen or so major players are fighting for at least some of that.

But newspapers have been generally slow to protect those ad dollars by embracing the Web, said Mark Mooradian, an analyst with Jupiter Communications.

"It's the newspaper's market to lose," he said. "The strongest candidate for arts and entertainment information on the Web is definitely the newspapers. They have the brands. The good thing for Sidewalk is they have the opportunity to get up online with a compelling service before any of those people do."

And Microsoft is like a basketball player who is eight feet tall. When someone that big walks on the court, the other team pays attention. If it turns out the player's a great athlete, then opponents are in big trouble.

"Any time Microsoft comes into your market, I don't care what it's doing," Bass said. "You need to pay attention."