riskit
Aug 29th, 2009, 05:28 PM
microsoft and bell no longer sympatico
matt hartley, financial post (http://www.financialpost.com/story.html?id=1942346)
microsoft corp. Is pulling the plug on its online partnership with bce inc., bringing an end to a deal that created one of the most visited websites in canada in the wake of the dotcom bust, but that quickly became outdated with the rise of the online advertising industry.
At 12:01 am et on tuesday, sympatico. Msn.ca--the internet portal jointly operated by the world's largest software company and the canadian telecommunications giant -- will go offline. In its place, each company will launch its own individually branded portal sites: Sympatico.caand msn.ca.while the dissolution of the agreement is more of a separation than a full-fledged divorce -- the two sides have agreed to continue partnering over issues such as traffic sharing and search technology -- it highlights the radical shift in microsoft's global internet strategy as the software giant attempts to build out its online advertising business to challenge google inc.
For microsoft, it's a chance to reinvent itself as a growing power in the canadian online ad market without the restrictions of a deal its executives say soured quickly after it was signed five years ago.
"if you look at the things that can have a significant impact on our stock price, advertising is one of the very few," said owen sagness, microsoft canada's vice-president and general manager of its consumer and online group.
"because of the size of the company ... We need to be a serious player [in the online advertising space] in order to drive increased earnings growth for the company. Msn.cais one small component of that." for bell, the challenge will be to ensure its users continue to use sympatico.caas their entry point to the worldwide web. When the two sides originally brokered the deal in 2004, the dot-com bust and the collapse of the nascent online advertising industry were still fresh in everyone's memories. Google was still in its infancy and the web remained an unproven medium for marketers.
Before their merger, msn.caand sympatico.cawere the most popular web portals in canada. By bringing the no. 1 and no. 2 portals together under one umbrella, the two sides created a site that would be the first stop on the web for more than 20 million canadians every month. At the time, microsoft's global strategy relied on the belief that the way to make money on the web would be through selling subscriptions to services such as msn premium, which included email services, anti-virus software and parental-control technologies, through telecom partners.
Users, however, proved largely reluctant to pay for such services. Instead, similar services that were free to consumers, but supported by advertising, began to take hold.
Because of the way the deal's revenue-sharing plan was structured, microsoft soon found itself delivering more than 90% of the advertising page views through its hotmail and msn messenger properties, but still handing 55% of the revenue to bell, mr. Sagness said.
"the old deal was based on financial forecasts that just never materialized because of the shift back to the online advertising world," he said.
With bell having handled advertising sales and a large portion of the editorial content for the joint portal, microsoft canada has had to add nearly 60 new employees over the past year, including building an advertising department from the ground up.
Kevin crull, bell's president of residential services, agreed that strategies toward making money online have changed since the deal was signed.
"we probably thought that there would be more value-added service revenues from developing unique online destinations and tools and content," he said. "internet providers all over were working to monetize those things, sort of like how we monetize smartphone touch services in the phone business where we'll sell you voicemail for $7.95 a month, or whatnot. The big evolution is that those are widely available for free and they're advertising-supported."
as part of the new three-year agreement between the two companies, microsoft will direct a certain amount of traffic to bell's sympatico portal, while supplying the telecom giant with the underlying technology to run its advertising service. In return, bell will continue to use microsoft's new search engine, bing, as its exclusive web query tool.
Both sides felt it was time to operate their own portals and bell plans to apply the advertising and technical expertise it gained from the deal to its other core businesses, such as wireless, mr. Crull said.
"in our portfolio, the portal is a neat little business," he said. "it's high-growth. If it ever were valued ... Portal assets get much higher multiples than telco assets and so as it continues to grow, we hope that investors will start to look at it as the sum of the parts, and credit the revenue generated from the portal with a higher multiple."
© 2009 the national post company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.
:-0
matt hartley, financial post (http://www.financialpost.com/story.html?id=1942346)
microsoft corp. Is pulling the plug on its online partnership with bce inc., bringing an end to a deal that created one of the most visited websites in canada in the wake of the dotcom bust, but that quickly became outdated with the rise of the online advertising industry.
At 12:01 am et on tuesday, sympatico. Msn.ca--the internet portal jointly operated by the world's largest software company and the canadian telecommunications giant -- will go offline. In its place, each company will launch its own individually branded portal sites: Sympatico.caand msn.ca.while the dissolution of the agreement is more of a separation than a full-fledged divorce -- the two sides have agreed to continue partnering over issues such as traffic sharing and search technology -- it highlights the radical shift in microsoft's global internet strategy as the software giant attempts to build out its online advertising business to challenge google inc.
For microsoft, it's a chance to reinvent itself as a growing power in the canadian online ad market without the restrictions of a deal its executives say soured quickly after it was signed five years ago.
"if you look at the things that can have a significant impact on our stock price, advertising is one of the very few," said owen sagness, microsoft canada's vice-president and general manager of its consumer and online group.
"because of the size of the company ... We need to be a serious player [in the online advertising space] in order to drive increased earnings growth for the company. Msn.cais one small component of that." for bell, the challenge will be to ensure its users continue to use sympatico.caas their entry point to the worldwide web. When the two sides originally brokered the deal in 2004, the dot-com bust and the collapse of the nascent online advertising industry were still fresh in everyone's memories. Google was still in its infancy and the web remained an unproven medium for marketers.
Before their merger, msn.caand sympatico.cawere the most popular web portals in canada. By bringing the no. 1 and no. 2 portals together under one umbrella, the two sides created a site that would be the first stop on the web for more than 20 million canadians every month. At the time, microsoft's global strategy relied on the belief that the way to make money on the web would be through selling subscriptions to services such as msn premium, which included email services, anti-virus software and parental-control technologies, through telecom partners.
Users, however, proved largely reluctant to pay for such services. Instead, similar services that were free to consumers, but supported by advertising, began to take hold.
Because of the way the deal's revenue-sharing plan was structured, microsoft soon found itself delivering more than 90% of the advertising page views through its hotmail and msn messenger properties, but still handing 55% of the revenue to bell, mr. Sagness said.
"the old deal was based on financial forecasts that just never materialized because of the shift back to the online advertising world," he said.
With bell having handled advertising sales and a large portion of the editorial content for the joint portal, microsoft canada has had to add nearly 60 new employees over the past year, including building an advertising department from the ground up.
Kevin crull, bell's president of residential services, agreed that strategies toward making money online have changed since the deal was signed.
"we probably thought that there would be more value-added service revenues from developing unique online destinations and tools and content," he said. "internet providers all over were working to monetize those things, sort of like how we monetize smartphone touch services in the phone business where we'll sell you voicemail for $7.95 a month, or whatnot. The big evolution is that those are widely available for free and they're advertising-supported."
as part of the new three-year agreement between the two companies, microsoft will direct a certain amount of traffic to bell's sympatico portal, while supplying the telecom giant with the underlying technology to run its advertising service. In return, bell will continue to use microsoft's new search engine, bing, as its exclusive web query tool.
Both sides felt it was time to operate their own portals and bell plans to apply the advertising and technical expertise it gained from the deal to its other core businesses, such as wireless, mr. Crull said.
"in our portfolio, the portal is a neat little business," he said. "it's high-growth. If it ever were valued ... Portal assets get much higher multiples than telco assets and so as it continues to grow, we hope that investors will start to look at it as the sum of the parts, and credit the revenue generated from the portal with a higher multiple."
© 2009 the national post company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.
:-0