Who Shot Windows Live?

Instead of "Who shot J.R.?" maybe the question should be, "Who shot Windows Live?"

The cast of would-be villains is many, but first, a review of the bodies.

Microsoft is losing two more high-profile Windows Live executives, which leaves one remaining visionary from the old MSN before its life—er, Live—was cut short. Earlier this week, a Microsoft representative confirmed that Blake Irving would leave the company. The same representative wouldn't confirm that Chris Payne also is leaving, although Seattle Post-Intelligencer and Wall Street Journal got unnamed confirmations.

Irving and Payne are both fairly high-profile executives responsible for Live—or is it MSN, not that it's clear anymore which is which? Irving is in charge of platform development, which is supposed to be the future of Live. Payne is the top search executive and the chief advocate for Microsoft's developing its own search technologies.

Last summer, Martin Taylor—one of Microsoft's rising star executives—left under mysterious circumstances. Taylor, who had led Microsoft's "Get the Facts" campaign against Linux, was the go-to man for combating the Google threat.

David Cole is yet another casualty. While technically on leave, his fortunes fell with a September 2005 reorganization that put three presidents over Microsoft divisions and Cole answering to one of them, Kevin Johnson. Previously, Cole reported directly to Microsoft CEO Steve Ballmer.

Under the leadership of these men and Yusuf Mehdi—the only remaining executive from MSN's golden era—Microsoft's online division prospered and profited. After seven years of losses, MSN posted a profit in Microsoft's 2004 fiscal first quarter (Microsoft's fiscal year runs from July to June). The division maintained profitability until fiscal second quarter 2006—the first full quarter of results following the massive September 2005 reorganization that sent MSN executives and the division tumbling. In that quarter, MSN revenue declined 125 percent year over year, and 266 percent in the next quarter.

In fact, Microsoft's online group went from profitability to unprofitability, in the three to six months following the reorganization and announcement of Live.

If profitability is any measure of success, Microsoft's online division was better off dead, not Live. But Microsoft's measure of success would appear to be something else: competing with Google and turning online services into infrastructure supporting Office and Windows.

Microsoft would probably argue that the switch to MSN AdCenter and investment in supporting marketing and sales infrastructure is real reason for the turnabout in profitability. If so, why reorganize and rebrand during a crucial transition that already could upset customer confidence?

Mehdi is the last man standing. When—or if—he goes, Microsoft's online division will be bereft of the talent that turned around MSN. While the online group made nowhere near the same profits as Windows, the leadership had charisma, conviction and creativity. Now where is it?

By the way, Mehdi is Microsoft's chief advertising strategist. We haven't spoken for awhile, but I've got to wonder about his role in Microsoft's advertising success. While Microsoft's Online Services group may trail Google in search and advertising, display advertising brings the largest chunk of the division's revenue.

The question remains: Who shot MSN—or is it Windows Live? There may have been multiple shooters, in a free-for-all of Second Amendment rights.

Johnson is a candidate, because his ascension to president of the Platforms & Services division knocked down Cole and led to ongoing changes to MSN/Live.

The unnamed architects of Windows Live certainly played their role. When I worked as an analyst, I regularly spoke to the aforementioned MSN honchos. But once Microsoft started talking Live—months before the launch—I had like zero interaction with them. What internal coup led to their misfortune?

If Steve Berkowitz is a shooter, he's a recent one. The former Ask CEO has been at the center of some of the branding controversy and some of the personnel shuffling on the marketing side of the Online Services group. He's a leading candidate to plug a few more holes in Live, while trying to breathe some new life back into MSN.

Then there are the MSN four: Cole, Irving, Mehdi and Payne. Each played some role in MSN's 2003-2005 resurgence. At Microsoft, though, success breeds enemies. While MSN couldn't touch the revenues of Office or Windows, it could have branding impact. The division once ridiculed for being on the red side of the Microsoft campus had made it to the black, by taking real risks that paid off. Success was the undoing, methinks, of the MSN four and the online division.

MSN started as a subset of Windows 95—an integrated online service for trampling AOL. Windows has taken it back, and it is the final shooter. Bang. Bang.