Blog Post

Why MSN is Splitting?

It is a curious move (see below), but if you think about it, it makes sense: from the looks of it, the information unit will be ad-driven, while the communication-unit will be subscription-driven. The margins of the first make it a consumer media business, and hence scale needed. The margins on the second (typically higher) make it more subscription-amneable (ad-targeting is also a difficult in communication-related services). “I think this comes down to consolidating leadership over MSN’s subscription services, which have not performed well over the past year,” said Rob Helm, an analyst at Directions on Microsoft. Some earlier attempts to create a business for MSN, such as producing video content for broadband customers, “are things that are not Microsoft’s forte,” said Yusuf Mehdi of MSN. “We’ve now settled on two areas that are close to our soul – what we’re good at on the web.” These both relied heavily on Microsoft’s core strength in software, he added.

InternetNews: The signs seem to point to increased confidence in the viability of MSN as an online portal and decreased faith in MSN as an ISP. Does this mean the split is the precursor to selling off its dial up and broadband customers to another provider?…An ironic twist would involve AOL…buying up MSN’s customer base.