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WebTV targets members with direct promotions

The television-based online service unit of Microsoft says it has begun sending promotional emails to its subscribers from online marketing firm Digital Impact.

WebTV is opening up its membership to direct marketing in an effort to raise much needed cash.

The television-based online service unit of Microsoft said today it has begun sending promotional emails to its subscribers from online marketing firm Digital Impact.

Digital Impact will deliver DealMail, an email service that will offer shopping coupons and weekly or biweekly offers to WebTV subscribers. About 85 percent of WebTV recipients opened the DealMail email in a preview of the campaign, with a click-through rate of 22 percent for individual offers, the companies said.

DealMail will be an opt-in subscription, meaning that members must agree to receive the pitches, unlike spam, or unsolicited email. Digital Impact, which is a member of industry privacy group TRUSTe, also works with Dell Computer, and Hewlett-Packard.

Financial terms of the deal were not announced. WebTV executives were not immediately available for comment.

This is the latest move by WebTV to drive revenue from its 1 million subscribers. The service, which was the first to offer Internet access through a TV set-top box, has struggled to define its business strategy since its launch and subsequent purchase by Microsoft in 1997.

In the last year, WebTV has sought to reposition itself as a provider of enhanced TV services rather than simply of Web access. But as a dial-up service, WebTV cannot offer the same type of rich graphics and multimedia Web content available through broadband services, some of which are powered by Microsoft TV, its parent company's cable offering.

Further, some of its earlier subscribers have resisted this strategy shift, using the service mainly for Internet access rather than for playing interactive Jeopardy. In addition, they have complained when promised upgrades to include support for standard Web technologies, such as the latest version of RealNetworks' streaming media player, never arrived.

Over the last few months, the company has appeared to be experimenting with new ways to raise its revenues.

The market for so-called Internet appliances, which includes TV set-top boxes, handheld computers and gaming consoles, is expected to grow from 11 million units shipped in 1999 to 89 million units in 2004, according to market research firm International Data Corp. The market will grow from revenue of $2.4 billion last year to $17.8 billion in 2004.

In February, WebTV announced a promotion to give away two months of its service to new subscribers in an apparent attempt to boost subscriptions. WebTV has steadily, if slowly, added new members and now hovers just above 1 million users. The service's growth has been far outpaced by the growth of the Internet as a whole and will soon face challenges from America Online's AOL TV.

The service giveaway was followed by a plan to tack on banner ads to email pages, which was scrapped after an outcry by WebTV subscribers, who pay up to $25 per month for the service. Last month, WebTV said it was implementing a $5 surcharge to members paying by check.