September 25, 2002 1:54 PM PDT

Microsoft puts a price on IM features

Microsoft is preparing a version of MSN Messenger with new features that will be available exclusively to paying subscribers of the MSN 8 online service.

The Redmond, Wash.-based company plans to release the new instant messaging client, MSN Messenger 5, simultaneously with the launch of MSN 8. That launch could happen as early as October, which should also see the release of version 8 of online service software from AOL Time Warner's America Online unit. AOL unveiled the latest update to its popular AOL Instant Messenger product, version 5, last week.

Microsoft plans to offer two versions of MSN Messenger 5, one as part of MSN 8 and another as a separate standalone product. But some of the best new features will only be available to MSN 8 customers, who must pay a fee to use the service. An additional feature will be available exclusively to Windows XP users.

Offering exclusive, paid IM features dovetails with Microsoft's retrenchment of its consumer Web services strategy. Rather than offer a broad set of à la carte services as envisioned under HailStorm, Microsoft plans to offer beefed up services to consumers subscribing to MSN 8. HailStorm, later renamed .Net My Services, would have delivered online calendaring, contacts, location and other services over the Web, mainly through MSN.com. Now many of those services will be funneled into subscription-only MSN 8.

Like its major rivals, Microsoft will continue to offer a free version of its IM software. Still, the strategy of charging for enhanced features marks a major shift in the world of consumer IM products.

"Historically we haven't seen a tiered approach, where you pay more and get more features," said David Card, a Jupiter Research analyst. "You haven't seen a paid client from the major players like AOL or Yahoo."

If anything, standalone IM products have generally offered more features than their Web-based or online-service cousins. "Ironically, AOL's AIM version is better than the version that comes with the (online) service," Card said.

As the Web matures, some studies are concluding that consumers are becoming more willing to pay for extras such as online content. According to an Online Publishers Association and ComScore Media Metrix study, consumer spending for online content, mainly in the form of subscriptions, rose 155 percent during the first quarter over the same period last year. Real.com ranked No. 1, followed by The Wall Street Journal's WSJ.com. MSN.com placed No. 15 on the list of top 25 Web destinations ranked by consumer content revenue.

With ad sales declining, online giants such as America Online and Yahoo are pushing exclusive content and services in a bid to drive subscriptions. Earlier this month, Yahoo launched a co-branded high-speed access service with SBC Communications that comes with add-ons such as free online file storage. AOL Time Warner has started betting the future of its ISP (Internet service provider) on the creation of high-quality content, following the model of its flagship HBO premium cable TV channel.

MSN goodie bag
One of the major MSN Messenger 5 features available exclusively to MSN 8 subscribers are enhanced parental controls, which can be applied to online service client and e-mail features.

"There's kind of a differentiation between what people will get with MSN 8 vs. the non-MSN 8 version" of MSN Messenger 5, said Larry Grothaus, lead product manager for the IM client. "If I'm on MSN 8, I'll be able to apply parental controls to MSN Messenger as well."

Parents could use the controls to restrict who their child communicates with, either individually or in chat rooms. The restrictions would follow the child even to other computers.

The settings are stored up in the cloud, meaning the server backend," Grothaus said. "So if I as a parent set those through MSN 8, and my child goes to a friend's machine, and they log on with their ID to a non-MSN 8 machine, the controls will be applied there as well. MSN 8 would act as kind of your control center for those parental controls."

No such controls would be available with the standalone version of MSN Messenger 5.

"The parental controls could be really big for MSN," said Paul-Jon McNealy, an analyst at research firm Gartner. "Microsoft has done some interesting work with parental controls."

But Jupiter Research's Card remained skeptical of how much the parental controls would help Microsoft woo subscribers to MSN 8 and the enhanced version of MSN Messenger 5.

"The parental controls are something they've beefed up quite a bit, but we'll see how much people use these things," he said. "Historically people don't use them, except AOL users. That may be a combination of how aggressively AOL markets them and the ease of use of them."

Still, a few MSN 8 features will filter down into the standalone messaging client, including a new pop-up information window.

"For customers that are using the standalone version of MSN Messenger 5, there will be a version of MSN Today for them," Grothaus said. "Basically, they'll have a customized version that will pop information and links for content they have specified. MSN 8 will have that as an integrated part of the product."

Other new MSN Messenger 5 features include an improved address book, with the capability of sharing Hotmail and MSN contacts. It also packs new member directory location features and the ability to flag buddies who are online using a mobile device such as a cell phone.

XP exclusives
Microsoft isn't giving all the extras to MSN 8 subscribers; Windows XP users should see some differences, too. When MSN Messenger is installed on an XP machine, the product gives access to video conferencing and other features not typically available with the MSN version and not available on other versions of Windows.

Another big change is planned. "We're going to have co-existence with MSN Messenger and Windows Messenger on XP," Grothaus said. "If I'm running, say, Windows Messenger in my corporate environment, I'll also be able to run MSN Messenger 5 and be logged in as a separate Passport. Today, you can't." Passport is Microsoft's online authentication service.

That feature also would set MSN Messenger 5 apart from competitors' products, analysts say.

"That would definitely be another differentiator for them," Card said. "But I'm trying to puzzle out what the user experience would look like if you're logged on twice using two separate accounts."

New features on tap that would separate MSN Messenger from its Windows XP cousin again emphasize the benefits for paying customers. CNET News.com observed a recently leaked beta, or test version of MSN Messenger 5 on a Windows XP PC. Many new features are not available on Windows Messenger.

For example, MSN Messenger 5 offers a feature called "Browse the Web together" that was not activated in the beta. The client also offers access to the user's history of .Net Alerts, which serve up traffic, stock, auction and other tracking information in IM. Furthermore, the contact search appears in MSN Messenger 5 but not in Windows Messenger.

"Most of the features I have described are not going to be in Windows Messenger," Grothaus said of the changes to MSN Messenger.

 

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