MS: Where do you want to go for free?

When Microsoft (MSFT) launched its Internet-based online service, Microsoft Network, the focus was on content, which members would pay to see.

But a lot has changed in the last year, especially when it comes to online services. "Free" is the operative word these days--and that's exactly what Microsoft's search engine will be to Netizens everywhere.

The software giant seems to be learning the lesson that it's difficult to get Netizens to pay for services. Right now, the search engine marketplace is full of contenders offering users not only organization but also content aggregated from all over the Web and value-added features such as free email.

If you're going to run a successful Internet business today, you have to offer good content, community, and commerce, all free to users, according to Kate Delhagen, an analyst with Forrester Research.

So Microsoft, while maintaining its subscriber base, is also embracing the current trend of offering its assets free--starting with the Web placement of some of MSN's content and continuing with the anticipated launch of its search engine, code-named Yukon. (See related story)

Since the object of the Web game these days is getting the most eyeballs, Microsoft is setting its sights on garnering advertising revenue and commerce partners, instead of looking to Netizens to pay their way.

Delhagen said Microsoft executives "recognize they've got this incredible asset: MSN.com. They recognize they can do a lot more with it, that people are really reluctant to pay for good content. They're going to start lobbing stuff over the fence [into the free area]. By doing that, they're going to be able to sell more advertising."

Getting the audience shouldn't be difficult. With its hand in so many marketplaces, Microsoft has the ultimate brand recognition among the wired set. A search engine is a natural next step for the company that sells the operating system on which the browser is built in so Netizens can easily reach the channels that lead to the company's many features. With the search engine, Microsoft's Web suite will be complete.

But the company is not the first to offer the online trinity of content, community, and commerce.

Yahoo, for instance, was an early player in reaching beyond its search facility to offer aggregated content. It has gone on to expand into the community sphere with various local sites, classifieds, and, with its recent acquisition of Four11, has piggybacked rival Excite in offering users free email.

Last week, CompuServe (which is being sold to AOL) announced a new Web-based plan that includes a free space featuring chunks of its signature content aimed at business and professional users.

"Everyone's moving towards the central space of content, community, and commerce all in one," Delhagen said. "Everyone's come at this space from a slightly different angle."

That's why so many companies are signing deals with each other these days, trying to leverage each others' strengths.

MSN is expected to announce a distribution deal with Yahoo tomorrow.

"We see a number of deals heating up," Delhagen said. "It's insane now with the number of deals being announced on any one of those fronts. It's really going to come down to seven, probably six major players doing all the work."

No doubt Microsoft will be high up on that short list.