Wanted: Dead or Live

The omission—stark contrast to his last public speech—forebodes about Windows Live's future as a brand. The substantial content of the Goldman Sachs presentation is similar to Ozzie's talk during Microsoft's annual financial analysts meeting last July. But in the earlier speech, Ozzie mentioned "Windows Live" about 20 times. During this week's presentation, he mentioned Windows Live not at all.

The question is, why?

Under one scenario, Ozzie could be holding back, given that Microsoft's MIX07 is about two months away. He is lead keynoter. Strange thing, only three event sessions deal with Windows Live, and the other two keynoters—Robbie Bach and Scott Guthrie—are not directly charged with Windows Live.

Adam Sohn, Microsoft's global sales and marketing PR director, said that Ozzie unabashedly is hardworking on infrastructure that's not ready for disclosure.

"The plumbing stuff is something Ray is going to talk about sometime in the future," Sohn said. "It will blow your mind."

Under another scenario, Live's future as a brand really is uncertain. Branding confusion between Live and MSN is ongoing. Last month, Microsoft rebranded Windows Live Mail as Windows Live Hotmail. Several new services, such as Soapbox, carry the MSN brand and some Live services—Shopping, for one—are MSN-branded again.

"We expect Windows Live will be gone by the end of the year," said Paul DeGroot, an analyst with Directions on Microsoft.

Sohn disagreed. Contrary to analyst, blogger and reporter pundits death speculation about Live's future, "It's not dead," he asserted. "It's not going away. This is is our service on top of Windows."

A Tale of Nine Lives
Whatever Live's future, or not, changes are clearly coming. There is branding confusion, and it will continue until Microsoft decides which services will permanently stay in which bucket.

Live started with branding confusion from Day One. Microsoft already had Office Live Meeting, Live Communications Server and Xbox Live when it introduced Office Live and Windows Live. Two of the existing Live products were arguably services, but not the other.

Other new Live products or services rolled out, with some uncertainty about their role in the uber-brand, such as Dynamics CRM Live and XBox Live Marketplace. Microsoft also opened the Zune Marketplace, with no Live or MSN branding, but using the same "points" currency as Xbox Live Marketplace; Microsoft plans to use points elsewhere in Live and MSN. Both marketplaces, which are Microsoft shops, are different in character from Windows Marketplace, which showscases partner and some Microsoft products.

While some branding decisions are confusing or contradictory, Live's basic role appears unchanged from its November 2005 launch: To enhance the value of the larger products, whether Office, Windows or Xbox.

Hitherto, in the consumer markets, Live and MSN trekked overlapping but fairly defined paths. Microsoft had positioned MSN as the place where consumers went for programmed content—hence the portal's continuation—while Live was the place for more self-programmed content. Microsoft may be finding there are a whole lot more couch potatoes out there than program directors. Also, programmed content is a whole lot easier to sell advertising against.

Google has found a best-of-both-worlds scenario. It sells advertising against search, which in one sense is self-programmed but from another perspective programmed. Google advertisers know fairly clearly what they are marketing against.

By contrast, Microsoft has lost significant search share, during the Live rebranding and technology switchover to MSN adCenter. In November 2005, Microsoft's U.S. search share was 14.2 percent, according to Comscore. Top-ranked Google had 39.8 percent search share. In January 2007, Microsoft's search share was 10.6 percent compared to Google's 47.5 percent.

Some Live rebranding back to MSN may reflect what Microsoft is learning about what content or services work better being pre-programmed or self-programmed.

Live By the Numbers
If branding were the only problem, Microsoft eventually could triumph through marketing. In fact, from an advertising spend perspective, Windows Live is one of Microsoft's most visible brands. For example, Windows Live Search sponsors several popular TV shows, such as Fox's "24."

While Sohn concedes Microsoft has plenty of work to do, there is plenty of evidence that the Windows Live strategy is working:

• 40 percent to 45 percent increase in Live ID accounts in 2006
• Creation of 20 billion relationships between Windows Live blogging, e-mail and instant messaging services
• 250 million Windows Live Mail users, every day
• 250 million Windows Live Messenger users, every day
• 450 million unique visitors to MSN and Windows Live, every month

Sohn touted other investments and announcements that demonstrate Microsoft's commitment to Live, such as new Windows Live Mobile products announced last month.

Referring to the unique monthly visitors: "That's not a number that suggests a business is dying," Sohn said.

Traffic is only one measure of success. Another is profitability, an area where Microsoft's Online Services division comes up short; the group posted a $155 million loss in Microsoft's 2007 fiscal second quarter. Office and Windows—the major products supported by Live—bring in the bulk of Microsoft profits.

Microsoft Eats Its Young
What happens if Live products should prove really successful, and what would the impact potentially be on highly profitable products?

Xbox Live and Xbox Live Marketplace both exist in a closed network that Microsoft tightly controls. Both arguably add value to Xbox. However, Office Live and Windows Live risk cannibalizing sales—for Microsoft and its partners—from the very products they supposedly support.

Office Live is clearest example of Microsoft's risk.

During the Goldman Sachs event, Ozzie responded to a question about services cannibalizing software sales. He acknowledged that "at the fringes there will be some substitution of one thing versus another." He used the example of a small business adopting Office Live rather than purchasing Small Business Server. He acknowledged some lost channel sales, but generally downplayed any major risk to Microsoft or its partners.

"You can't talk about Office Live and say it's just the fringe," Degroot rebutted. "Office Live replaces not only Small Business Server, it's also a replacement for SharePoint and collaboration for workgroups. It does a lot of things [in areas] where a lot of teams at Microsoft see their potential."

Based on Directions of Microsoft analysis, a company with 20 employees would get as much value out of Office Live Premium, which costs $39.95 a month, as investing in Microsoft desktop and server software.

"If Office Live is really successful, there are two outcomes for Microsoft," DeGroot said, "and neither of them is good. One, they don't make much money. Two, there is substitution."

If You Build It, Will They Come?
Microsoft's Live challenge is fundamentally about platforms.

Google and Microsoft are both platform companies. The core Microsoft platform is the operating system, while Google's platform extends information through search and contextual advertising. Google and other Web platform companies give away stuff for free or sell services by subscription. By extending APIs, Web platform companies actually extend their development resources. Web 2.0 Company A can pull resources from B, C and D, and visa versa.

Six Apart's Vox blogging service is an example. Vox taps into APIs that let subscribers easily import photos from Flickr or videos from iFilm and YouTube. By contrast, Windows Live Spaces is more insular, with Microsoft providing tools designed more for its own products or services.

Directionally, Office Live and Xbox Live and the Xbox Marketplace foreshadow Microsoft's fundamental approach to Web services.

Microsoft built Office Live around SharePoint technologies, with tight integration to other Microsoft products. For example, Internet Explorer is the required browser, and Windows Live Mail, which runs on Microsoft server software, is the e-mail service. Office Live subscribers can create their Web sites using Microsoft's SharePoint Designer, while SharePoint developers can extend site capabilities.

If Office foreshadows the future, then Microsoft is building out a tightly integrated infrastructure—the "plumbing" as Sohn described it—for delivering its own services and extending them to third parties. But the approach will be very much like the desktop, of tight integration. Whereas many Web platform developers are taking a loosely coupled approach, Microsoft will push out integration from the desktop to the Web.

The process is slow, simply because Microsoft is building out so much on its own, while Web platform companies benefit from the resources of a kind of collective mind. Microsoft's approach and the time needed to build infrastructure is another reason that to outsiders Live might appear to be in chaos.

As for the future, Live isn't dead. But it's not vital, either.

Related Posts:

• What Is Microsoft's Services Platform?, Microsoft Watch, March 1, 2007
• Ray Ozzie Speaks Out, Microsoft Watch, Feb. 27, 2007
• Ray Ozzie's 20 Questions, Microsoft Watch, Feb. 26, 2007
• What Ray Ozzie Needs to Say About Microsoft Live Versus Google, eWeek, Feb. 26, 2007
• Why Google Matters to Microsoft, Microsoft Watch, Feb. 22, 2007
• Google and Long Tail Computing, Microsoft Watch, Feb. 22, 2007
• Google vs. Microsoft: How many $50 Apps Premier Licenses Does It Take to Equal $12B in Annual Sales?, Google Watch, Feb. 22, 2007
• Live Hotmail is Too Hot, Microsoft Watch, Feb. 8, 2007
• Ouch! You've Been Live Branded, Microsoft Watch, Feb. 2, 2007
• MSN/Live Search Declines 10%, Is the Only Search Service Shrinking, Google Watch, Feb. 2, 2007
• Microsoft Flubs Live branding, but Google Ain't Exactly a Marketing Genius, Google Watch, Jan. 30, 2007
• Why I Killed Office Live, Microsoft Watch, Dec. 30, 2006
• Sorry, but Live Isn't Dead, Microsoft Watch, Dec. 12, 2006
• It's a Shame About Ray, Microsoft Watch, Dec. 8, 2006