An awakening giant?

Among the online services, Microsoft Network is ranked third. But don't let that fool you.

MSN is out to conquer the online world, or at least share the power with market leader AOL, and it's got the resources and patience to do it.

Microsoft Network, a latecomer into the online market, grew to 1.6 million members in its first year--with almost no marketing at all. That's because it had its very own icon on any computer with Windows 95 software installed on it, and also because it was, simply, Microsoft (MSFT).

But the days of quiet growth are over. MSN is rolling out a revamped service modeled on television, and the service is based totally on the Web. Subscribers can pay for proprietary content tucked behind a firewall, but anyone can enter several advertising-based sites.

MSN is also promoting the new service with all the subtlety of Madonna on a late-night talk show. The company is pouring $100 million into marketing this year alone, with the goal of doubling its membership by June. Microsoft does not break out figures for MSN.

The service started the current pricing war among the top four online services, announcing first that it would offer flat-rate pricing. AOL and Prodigy followed shortly.

Of course, MSN has some problems to overcome. While the new service has generally gotten good reviews, many members don't like the new graphics-intensive, television-like environment. It has been criticized for its speed--or lack thereof. Users also need 28.8-kbps modems, CD-ROM players, and Windows 95 to use the service.

On top of that, MSN still has to figure out a basic part of its business: how to bill its customers. In a major recent snafu, many MSN members were billed several months late and some not at all, raising the question of how customers would react once they have to pay for the service.

But those problems are short term, and MSN is "in this for the long haul," said Mark Mooradian, an analyst with Jupiter Communications. "They're obviously prepared to take a loss for a number of years on this venture."

That means that MSN will remain a strong challenger to AOL. And because it's Web-based, also could give Internet service providers a run for their money. 

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