|Microsoft messaging tactics recall browser wars |
By Jim Hu
Staff Writer, CNET News.com
June 7, 2001, 4:00 a.m. PT
The battle over today's instant messenger market is vintage
Microsoft, whose strategy enemies call "the three E's" in a parody of the company's marketing mantra: Embrace a rival's technology, extend it to work best with Windows, and extinguish the competition.
Regardless of how it is characterized, a familiar cycle is being
accelerated by a confluence of seemingly disparate
events--the momentum of Microsoft's
federal antitrust case, contract
negotiations with archrival AOL Time Warner, and the pending release of new operating
system Windows XP. Instant messaging has emerged as the nexus this
week as Microsoft prepares a test version of XP that will include a
powerful new form of the communications software.
The software giant on Monday announced Windows Messenger, a text, chat,
video, audio and telephony service that will be integrated with Windows XP.
The feature has until now been a relatively muted part of the roughly $200
million marketing blitz for the new operating system. But its new multimedia features and its central role in the planned
integration of Microsoft's Internet properties elevate the software well
beyond a vehicle for text communication.
Analysts said Microsoft views instant messaging--a key element of Windows
Messenger--as glue for its new Internet services such as Passport and
HailStorm. Such services promise to simplify Web surfing by giving people
a single online identity and providing secure access to personal
information such as credit card numbers with one click.
"Instant messaging is a potential platform for advertising and for things
to piggyback onto it," said Gartner analyst David Smith. "It's also a
carrier of the screen name, and Microsoft wants people to use Passport and HailStorm."
Microsoft has long used its ubiquitous Windows operating systems to distribute related products or effectively shut out competing technologies--thereby stifling innovation, in the view of
In the case of instant messaging, Microsoft has embraced America Online's
|Gartner analysts Michael Silver and David Smith say Microsoft's enhanced version of Messenger, which the company intends to integrate into Windows XP, adds new technology to wrestle the messaging lead from AOL Time Warner.
popular services for sending short text messages and extended the
communications technology to work directly with its operating system.
No one is suggesting that the final "E" will materialize anytime soon. But
Microsoft is putting new pressure on AOL just as it is struggling to
digest Time Warner.
Windows Messenger, due out in October with the release of Windows XP, is
threatening to force AOL to make its IM networks interoperable with competing instant messaging services, an outcome that could seriously erode its market leadership.
"What Microsoft is doing here is leveraging its monopoly on the desktop and
extending it onto the Internet," said Mark Cooper, research director for
the Consumer Federation of America.
Microsoft faces a markedly different opponent in AOL Time Warner, hardly
the kind of start-up with limited resources that the software giant has commonly left in its wake. And the launching pad for its messaging weapon is an operating system that is shaping up to be the highest-profile product
release in the company's history, making the much-hyped Windows 95 debut pale in comparison.
Although Microsoft has added enhancements in recent months to its
current instant messaging client, MSN Messenger, its latest move takes the
important step of embedding the software directly into the operating
system, making it far more
difficult to separate the two products. It is this tactic that triggered the
landmark antitrust investigation and lawsuit by the U.S. Justice Department, which accused Microsoft of unfairly using its dominance in operating systems to foist other products on customers.
"It's 1996 all over again," said Ed Zander, president of Sun
Microsystems, a longtime mortal enemy of Microsoft. His remarks, made Monday at his
company's annual JavaOne conference, were directed at parallels he sees
between Microsoft's current strategies and the beginning of its assault on the Web browser
market that eventually buried rival Netscape Communications.
The resulting government lawsuit focused on the linking of Windows 95 to
the Internet Explorer browser, but Microsoft has long used its operating
systems to promote its products in many other areas, including word processing, desktop databases, multimedia streaming, music downloads, content and Internet access.
Andy Gavil, a professor at Howard University School of Law, said
Microsoft's integration of instant messaging with new features in Windows
XP recalls the same well-worn practice.
"I think it does have a déjà vu quality to it based on Netscape and all the
issues that are very alive in the government's appeal of Microsoft," he said. "The question is, if Microsoft folds these features into the
operating system so we all get them like we got IE, will that destroy the
separate marketplace for these small software programs? Will it allow them
to compete better with AOL, or to push AOL off the desktop?"
Some consumers also expressed worries about Windows' growing footprint.
"I know how aggressive they are. I'd like them to back off a bit," said Tom
Wesson, a computer programmer in Schaumburg, Ill. "I think they'd be more
successful if they showed a little more respect and didn't try to dominate
Some also see evidence of an urge to dominate in Microsoft's forthcoming Windows XP operating system. A feature called Smart Tags could give the company some control over consumers' access to sites, content and services on the Web.
Yet for all of Microsoft's critics, the legal assessment of its
competitive practices remains anything but clear, and some antitrust
experts even give the corporation good odds to win its pending appeal in
federal court. That may encourage Microsoft to push harder with plans to
tightly integrate its instant messenger and other software with the XP
Microsoft spokesman Jim Cullinan concedes that the integration of an instant messaging technology within Windows XP has some parallels to the company's approach in integrating Internet Explorer with Windows 95. But he offers no apologies.
"It's about business decisions and technology," Cullinan said. "When Netscape was on top of its game, it tried to build a Java browser and 50 other things that didn't work. Those were business decisions that had nothing to do with Microsoft. In this case, AOL was the leader in instant messaging for years and did nothing with it."
Microsoft could be further emboldened by contract negotiations with
AOL involving the new operating system. As it has with previous Windows
versions, AOL would prefer its software to be packaged with XP. But in this tenuous relationship, it has always been suggested that Microsoft has the upper hand.
An AOL spokesman downplayed the importance of the talks. "If we don't come
a deal, then that's fine," he said, adding that the company is confident
it can compete on the merits of its products.
Analysts were more skeptical. "Long term, these negotiations matter. Windows XP effectively embeds many components of the online service directly into the operating system," Internet analyst Henry Blodget wrote this week in a report for Merrill Lynch. "It would obviously not help AOL over the long term if these features gained a significant amount of traction."
Indeed, the timing of this week's XP announcements appear more than
just coincidence. But history has shown that Microsoft rarely
bluffs when it senses even a hint of a threat to its operating system
The reason for the software empire's paranoia is simple: Microsoft knows
how easily a leader can be toppled because that's precisely what it did
on its way to the top of the operating system market, first with IBM and
later with Apple Computer. In a telling 1996 interview that
remains insightful today, Microsoft's Steve Ballmer explained why his
company seemed obsessed with Netscape's
Navigator browser at the time.
"Let me tell you a story. Once upon a time there was a piece of software
that was an extension of an operating system, and it had a nice little
user interface and it had some programming interfaces and people kind of
liked it, and over time they built on top of it. One day, the thing that
it was built on top of wasn't all that important anymore," said Ballmer,
a close friend of Microsoft Chairman Bill Gates, who would later become
chief executive. "I'm telling you, of course, the story of Windows 95,
Windows and DOS. And when we tell the story about what's happening
today with browsers 10 years from now, I want the thing that replaces
Windows to be Windows."
To understand the motives behind HailStorm, one needs only to substitute
messaging for browsers in that statement. The communications software is but the latest potential encroachment on Windows, and for more than a decade Microsoft has had one primary goal: protect the operating
system's dominance at all costs.
If the company wants to make sure that Windows is the first thing a person
sees and uses when turning on a computer, it is understandable why
Microsoft is so aggressively competitive. In case after case, the
company has thwarted or slowed the success of technologies that could
conceivably sit on top of the operating system, much the same way
Ballmer said Windows did with DOS: word processing (Corel's
WordPerfect), calendar (Lotus Development's Notes), e-mail (Qualcomm's
Eudora), directory services (Novell's NDS), Web browsers (Netscape's
Navigator), audio and video streaming (RealNetworks' RealPlayer and
Apple's QuickTime), and, of course, competing OS products (Apple's Mac
and IBM's OS/2).
Nor has Microsoft been shy about using its considerable war chest to buy
successful competitors such as Hotmail or purchase
companies just to keep their technologies out of the hands of rivals. In
1996, Microsoft became so concerned with Sun's Java
programming language that it sought to acquire or partner with several
companies to "take mind share away from Sun," according to internal
Microsoft documents. Among
those companies were Metrowerks, Apple, Hewlett-Packard and Fujitsu.
AOL is well aware of this track record and does not want its Instant
Messenger to be the latest entry on any listing of the software company's
conquests. That is why it has gone to such great lengths to combat
Microsoft on this front,
going so far as to block
repeated attempts by the architects of MSN Messenger,
Messenger and other rivals to connect their subscribers with AOL members
through the various communications networks.
Some in the industry believe that the controversial blockade, which drew
criticism as an affront to the open philosophies that founded much of
the Web, may have backfired on AOL by limiting
its growth potential. Market research commissioned by Microsoft
indicated that the gap between MSN Messenger and AOL Instant Messenger
narrowed significantly last year.
At the same time, instant messaging has become increasingly important to the HailStorm project and the company's overall .Net initiative, which aims
to make all Microsoft software and services available through the Web to
any type of computing device, handheld organizer or cellular phone with
the company's Passport security technology. The initiative is one way
Microsoft hopes to maintain the dominance of Windows as the world moves
beyond the traditional desktop PC for its technological needs.
Moreover, Microsoft intends to charge for this service, making it a
major test to determine whether people will be willing to pay to use the
Web. All online companies are watching the experiment closely for clues
to their own future now that advertising revenues alone have proven insufficient to sustain many
"The trend is towards charging for services as opposed to giving
consumers a free lunch," Gartner's Smith said. "HailStorm and Passport make that easier by offering a standard for enabling transactions. That will help accelerate the adoption of payment technologies such as single sign-on and micropayments."
Talk like that is exactly what Microsoft wants to hear. After years of
losing billions of dollars on various online services, executives at the
company compound outside Seattle in Redmond, Wash., are more than ready
to start making some money. And if that can be done at the expense of
AOL, it will be that much sweeter.
As group product manager for the Microsoft Network, AOL's main but distant
competitor in the dial-up Internet access market, Bob Visse is one such
executive. He is spearheading MSN's effort to lure disgruntled subscribers
from AOL since the service raised its monthly rates.
"The general rule that we're trying to follow is to add value on top of
what people are getting for free," Visse said, such as multiplayer
games, music services and video on demand, as well as the type of
enhanced video and voice communication envisioned through instant
messaging. "We will introduce paid-for services on MSN."
News.com's Mike Yamamoto and Evan Hansen contributed to this report.
Windows XP may steer users' Web choices
Will AOL miss the window for Windows XP?
New Microsoft messenger takes aim at AOL
Microsoft, AOL consider new alliance
Is the ICQ experiment working?
IM poised to become instant information tool
Did AOL shoot the messenger?
With HailStorm, think fee, not free
Microsoft's HailStorm unleashed
Microsoft mulling fee-based services for MSN
Puppet masters: Who controls the Net
Microsoft improving Windows Messenger
Microsoft has an instant message for AOL
Microsoft to embed Messenger in Windows XP
Microsoft takes aim at AIM
The Washington Post
Instant messaging is a bundle for Microsoft
The Industry Standard
Microsoft and AOL discuss linking products
The New York Times--free registration required
Much ado about Windows XP
Editors: Mike Yamamoto, Jeff Pelline, Evan Hansen, Lara Wright, Scott Martin
Art: Melissa Parker, Jeff Quan
Production: Mike Markovich