October 23, 2002 10:00 AM PDT

AOL, MSN stumping for Net software

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That noise you hear--and it's likely only to get louder--is America Online and Microsoft beating the drums for the latest upgrades to their Internet access software.

The two tech giants on Wednesday took great pains to one-up each other ahead of Microsoft's Thursday launch of MSN 8 in New York.

The fun started with a study from Usability Sciences, a research company based in Dallas, which found that customers prefer MSN 8 over AOL 8.0. The study was "commissioned by Microsoft in an effort to understand how the two services appealed to the general audience of Internet users."

Not to be outdone, AOL announced that version 8.0 of its namesake software has already been downloaded 5 million times, just two weeks after it was first made available online.

And the battle is just beginning, with both companies touting their respective applications as big upgrades. On Thursday, Microsoft Chairman Bill Gates will officially unveil MSN 8 in New York's Central Park. AOL held its own star-studded event last week, hosted by AOL Time Warner Chairman Steve Case and comedian Dana Carvey, in New York's Lincoln Center to launch AOL 8.0.

AOL executives last week stressed that the company developed its version 8.0 with an ear attuned to subscriber feedback. In a surprising move, Jonathan Miller, CEO of the AOL unit, said that third party pop-ups would be eliminated to improve the service for its members.

Meanwhile, Microsoft has been on its own publicity blitz, emphasizing MSN 8.0's new software features, including enhanced parental controls, a new e-mail client, a better spam filter and improved instant messaging. Microsoft executives said they spent $500 million in research and development to improve MSN 8.

AOL and Microsoft are also unleashing multimillion-dollar marketing and advertising campaigns. AOL is launching new television ads, which have a softer tone than the company's previous commercials and pitch the service as a way of life. Microsoft plans to spend $300 million on its own ad campaign, which will run through the middle of 2003. While the advertisements fill the airwaves and newspapers, retail outlets across the country will overflow with free CD-ROMs.

To date, AOL has been the market share leader. According to the latest returns, it has 35 million subscribers, while MSN has 9 million.


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