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MSN upgrades service

Microsoft Network officially launches the next version of its system software, complete with revamped email, more free content, and its own search engine.

The Microsoft Network officially launched the next version of its system software today, complete with revamped email, more free content, and its own search engine.

The upgrade couldn't come at a better time, as complaints about MSN's billing methods and email service are on the rise.

The online service is so anxious to have its customers upgrade to the latest version, dubbed 2.5, that they're offering a "Million Dollar Madness" sweepstakes game to those who install the upgrade. It also is telling members of its rival CompuServe (CSRV) that if they join they'll get a free T-shirt.

While Microsoft (MSFT) executives emphasized style, games, and flash last year during the launch of MSN's Web version, this year they're emphasizing the basics: speed, content, and reliability. What's perhaps most telling is that MSN increasingly will be looking to move its proprietary content from behind the firewalls where it can be accessed by service members and nonmembers alike.

This is MSN's way of responding to criticism over a faulty mail system, cumbersome graphics, and a confusing interface. "We spent a lot of time getting it right," said MSN product manager Jessica Ostrow.

The No. 2 online service (now that America Online (AOL) intends to buy CompuServe's consumer unit) also is responding to what industry analyst Peter Krasilovsky calls a poor investment in its content. MSN's own users spend only about 20 percent of their total online time on proprietary content--most of which is made up of expensive online shows--while perusing the Web the rest of the time, Krasilovsky said. The opposite applies to America Online. Its users spend about 80 percent of their time on AOL content and only 20 percent outside of it.

The usage patterns are significant because both services are relying more on advertising, online sales, and transactions to make money. Perhaps that is why Ostrow and other MSN executives decided to stop releasing member numbers.

Executives said that won't release their numbers until they find a good way to count members. From its launch until now, MSN had simply been counting paying customers, just as AOL does. But now that the service is bringing more properties out from behind the firewall onto the open Internet, execs say that counting paying customers only tells part of the story, as others are using MSN but aren't members.

MSN is "hoping to get more users and be able to attract advertising and ultimately commerce dollars," Krasilovsky noted. "The revamped MSN will be competing directly against other primary home page directories by offering unique content plus the best of the Web. It's going to integrate Yukon, its new search service. I think it's a very intelligent reorganization."

The revamped mail system, the simpler sign-up procedure, and leaner graphics will all make the service more attractive as an ISP. But those changes in and of themselves won't be enough, according to Mark Mooradian, online analyst for Jupiter Communications.

MSN, he said, will have to stop focusing almost exclusively on Microsoft products, such as Expedia and MSNBC. Instead, it has to branch out to become an aggregator of content to which many users can be drawn.

"[MSN's] biggest weakness is the fact that it looks like it's showcasing Microsoft properties and not much else," Mooradian added. "Whether you're a search engine or you're an AOL, you're going to somehow be pointing people to the best content out there. That's something that MSN hasn't been doing. They've been pointing back to themselves. If MSN wants to succeed in its current version, it has to get over that."

Ostrow said that Microsoft understands that people who log on through MSN want seamless access to the entire Internet, which she said MSN will provide with Internet Explorer 4.0 as its browser.

As far as content is concerned, Ostrow added it will be much more focused on the basics and "how-to." New areas, for instance, might focus on how to get a job; there will also be a continuing emphasis on forums, the heart of the community area.

"People are using the service, in a large part, to get connected and to go to the Internet--that's where we're going," she said. "We're totally focused on Internet basics."