September 16, 1997 2:25 PM PDT

MSN has uphill battle

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When America Online (AOL) announced its plans to acquire CompuServe (CSRV), the Microsoft Network's world changed.

Overnight, it went from being a third-place competitor hedging on second to being a distant runner-up with the leader sprinting so far ahead that many are wondering how MSN is ever going to catch up.

Today, the company The selling of CompuServe announced that it has swiped two popular forum managers and a top-level vice president from CompuServe. Bruce MacNaughton, a senior vice president and senior architect at CompuServe who quit a month ago, will run MSN's communications technology.

In addition, forum managers Don Watkins and Ron Luks, who ran popular technology forums on CompuServe, will go to MSN.

While this may not seem like a huge coup, forums are the heart of any online service, and MSN is no exception. Computing forums are the most popular on the Microsoft Network, according to Liz Longsworth, producer of computing for the online service. "They're bringing ten new forums to MSN," she said. "It increases by a third the forums we already have."

But the move won't affect CompuServe as much as one might think. CompuServe spokesman Steve Conway said the two forum managers in question left in July and were immediately replaced. "The forums were immediately taken over. Those forums were not the most heavily trafficked computing forums."

In addition, he stressed that the forum managers were contractors, not employees of either company.

"By hiring these guys, we've taken them off CompuServe," countered Longsworth at MSN. She said that the move would hurt CompuServe and AOL, because if people want to go to those forums with those leaders, they will have to migrate to MSN.

The move underscores MSN's fighting attitude, even if it doesn't really wound CompuServe and AOL. Expect that this will be the beginning of a targeted push, with more slings, arrows, and announcements coming from the two major players.

"I think the merger definitely was a setback for Microsoft because AOL became much more important and much harder to compete with," said Youssef Squali, an analyst with Laidlaw and Company.

However, "MSN will have to become a lot more aggressive in its position in the market," he added. "All of a sudden it sees its two main competitors joining ranks. Every time that happens, the third or fourth player feels left behind."

AOL and MSN already are planning splashy releases of their new system software. Both will brag about how their new interface and features make them superior. But MSN has an uphill battle against the world's largest online service.

"What I would suspect is that MSN would strike back, either in terms of more acquisitions, or going alone and opening more PoPs...maybe trying to attract some brain power from the AOL-CompuServe venture," said Squali.

 

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