Throwback: Inside MSN (Premium)

MSN, as you may recall, debuted as a traditional dial-up Internet service that was bundled with Windows 95. In fact, this service played a major role in Microsoft’s antitrust woes during the latter half of that decade, with Microsoft narrowly (and temporarily) averting disaster—-and a delayed Windows 95 launch—-by agreeing to also place links to competing online services like America Online and CompuServe in the product.

As it turns out, AOL and its ilk had nothing to fear from MSN. Despite some truly unique and innovative features—-users navigated through MSN using Windows Explorer windows, as if they were navigating their file system—-MSN failed early and often, and Microsoft quickly recast it as a standalone dial-up service that came with its own customized version of Internet Explorer. I actually used and liked MSN for a few years in the mid- to late-90s.

But then MSN evolved again, and this time what Microsoft did made more sense strategically: MSN became the place where Microsoft could ship and quickly update applications that were tied to web services. It could do so outside of the then-lengthy Windows development cycle—-which, post-Windows XP, got quite lengthy indeed thanks to Longhorn—-and allow Microsoft to better compete with web-only companies and services.

With this history as a backdrop, I headed to Microsoft’s Red West campus in Redmond, Washington, to find out why so many key players from the Windows organization had moved over to MSN. And my resulting write-up, called MSN: The Inside Story, contained all the answers.

This is a big one.

MSN: The Inside Story

MSN was birthed in controversy and was then somewhat of a joke in the online community for several years. But about five years ago [in 2000], MSN found its grove. Since then, this Microsoft division has become the most unheralded success story at the software giant, all while consistently nipping away at past perceptions and prejudices. Most important, perhaps, MSN is also making headway against the competition. While online giants such as AOL, Google, and Yahoo! still stand in its way, MSN has unleashed a startling array of integrated products and services over the past year. And this, I’m told, is just the start.

So here is the story of MSN’s rebirth as an Internet services powerhouse. In part one, I quickly examine the convoluted history of MSN, which has been repurposed and re-imagined repeatedly during its decade-long life. In part two, you’ll learn about the internal reorganization that finally put the division on the right path, the new customer-centric mantra that drives all of its product development, and its historic decision to take on Google in search. In part three, I’ll examine MSN’s other services, including MSN Messenger, MSN Spaces, and MSN Music, and Hotmail.

Part One: Beginnings

In the mid-1990’s, Microsoft was at a crossroads as it struggled to reinvent itself during the ascendancy of the Internet. It’s then-upcoming operating system, Windows 4.0 (codenamed “Chicago,” but soon to be renamed as Windows 95), would be the last major product the company shipped that came without pervasive Internet features. Indeed, Windows 95 only included the “plumbing” necessary to drive the Internet: Low-level networking functionality such as TCP/IP.

Outside of the Windows team, however, others realized the potential of the Internet. Microsoft program manager Ben Slivka, for example, saw the need for a Web browser in mid-1994 and started an internal project with two other developers to create a product later known as Internet Explorer (IE). Because of the time crunch leading up to the Windows 95 launch—then expected in early 1995—Slivka and his team licensed browser code from Spyglass. They still didn’t make the Windows 95 launch—IE, instead, was eventually bundled in the add-on Windows 95 Plus! pack instead.

Elsewhere, Russell Siegelman was pushing for Microsoft to create its own online service, dubbed The Microsoft Network, or MSN. These days, it’s hard to remember the online services scene of the mid-1990’s, but suffice to say it was a far different world than that of today. Back then, traditional online services such as America Online (AOL), CompuServe, Genie, and Prodigy ruled the online world, providing subscribers with walled-off content and no easy way to connect with members at other services. The Internet eventually changed all that, and those online services that couldn’t embrace the change would wither and die. The question in 1994, of course, was whether MSN would jump on the Internet bandwagon.

Initially, it would not. From its earliest planning stages, the original version of MSN had one huge advantage over competing services: It would be included with Windows 95 and would offer users an integrated experience. That is, folders for Windows Explorer and folders that represented locations on MSN were virtually indistinguishable. To the user, MSN would be just another thing you could do with Windows 95. As 1994 came to a close, it seemed that MSN would simply be its own proprietary world like all the other online services. The Internet, it seems, would have to wait.

Then came the infamous Bill Gates memo, “The Internet Tidal Wave,” in May 1995. Alarmed by the quickening popularity of the Internet, Gates realized that his upcoming products, Windows 95 and MSN, were woefully unprepared for the coming online age. It was too late. With both products on the verge of shipping, the company turned its attention to the post-Windows 95 world and tried to imagine how it could Internet-enable its product-line to drive demand for new software.

You look Marvel-ous

The middle of 1995 was a fun time for me. My wife and I were living in Phoenix, Arizona and I had just begun writing books, including my first title, about Visual Basic 3.0. Gary Brent, then a professor at Scottsdale Community College (SCC), had taken me under his wing, and we were prepping titles on Windows 95, Excel 95, and Visual Basic 4.0. The betas came fast and furious out of Redmond. We were on the Windows 95 and Office 95 betas, of course, but that spring and summer other betas started arriving, for Plus! 95, and MSN. MSN—codenamed “Marvel”—was particularly intriguing because it didn’t offer its own user interface per se, but was rather integrated directly into the Windows 95 shell. I actually kind of liked it.

Little did I know then that the initial MSN interface wouldn’t last. Even as the first MSN customers started navigating slowly through the maze that was Microsoft’s online service, the company was planning to rip apart all the work it had done on MSN and Internet-enable the service. MSN, naturally, was only part of a larger Internet push. Work had also begun on future versions of IE, the IIS Web server project had started, and plans for future acquisitions (like Vermeer, for FrontPage) and licenses (like that for Sun’s Java) were underway.

What’s most amazing about the first version of MSN, really, is the stir it caused. Competitors such as AOL and CompuServe complained to anyone that would listen that Microsoft’s bundling of MSN with Windows 95 constituted an antitrust violation. Also, MSN was cheaper than competing services. Indeed, the bundling of MSN almost threatened to delay Windows 95. In the end, Windows 95 shipped with MSN included. But competitors had nothing to fear: MSN 1.0 was a dud. It was just the first of several defeats MSN would suffer over the next several years.

MSN Re-imagined

For the next few years, MSN was recast again and again as Microsoft tried to make sense of the Internet. The company tried a Web-based version with a custom MSN browser, all done up in Darth Vader-like black and red colors. Then, Microsoft tried the content route and pushed sites such as Mungo Park, offering viewers a unique combination of “Internet text, audio and video chat.”

There were some high points during this era, however. Microsoft purchased the Hotmail Web-based email service in 1997 and turned it into an extremely popular MSN service, and arguably the largest Web-based email service on the planet. In 1999, MSN introduced its first instant messaging (IM) client, MSN Messenger. And in 2000, the MSN online service was recast yet again as a friendly and safe portal to the Web. That work continues today as MSN Dial-up, MSN Premium, and MSN Plus.

Still, MSN lacked any sense of purpose. Its few truly popular products were free and not integrated in any cohesive fashion. Its online services attracted only a portion of the audience that market leader AOL claimed. And as the Internet continued to grow in importance, it seemed odd that Microsoft couldn’t pull together MSN into an Internet services powerhouse. Clearly, a change was needed.

That change came in the form of two former members of the Windows team, who jumped ship to MSN at a crucial point. The first, Yusuf Mehdi, oversaw the development of IE 1.0 through 5.0, which went from Internet laughingstock to overwhelming market leader under his watch. The second, David Cole, oversaw the Client Windows Division and was responsible for developing Web client technology in Windows. Today, Mehdi is senior vice president of the MSN Information Services & Merchant Platform division at Microsoft, where he controls the global strategy, design, development, programming, and marketing of MSN’s many online services. Cole, meanwhile, is the senior vice president of the MSN and Personal Services Group. He is responsible for the MSN.com Web portal, MSN Internet Access, .NET Alerts and .NET Passport.

Unfortunately, I wasn’t able to speak with Mehdi or Cole. However, I did speak to various other MSN employees who have witnessed the transformation MSN underwent since the dark days of the late 1990’s. Since then, MSN has become a different place, even a special place. It’s the one part of Microsoft that has been able to consistently ship high-quality products, over and over again. For the past five years at least, MSN has been on a roll. And in the past year, especially, this Microsoft division has done amazing work, even to the point of embarrassing the slower moving Windows Division by shipping a desktop search product a year and a half before a similar feature will ship in Longhorn. That’s exactly the kind of gumption and chutzpah that characterizes the new MSN.

Part Two: Alchemy

The MSN division is housed several blocks away from the main Microsoft campus in Redmond, Washington at a place called Red West. The distance between Red West and the main campus has an interesting effect on both visitors and employees. Though it resembles the rest of Microsoft, and is indeed a part of Microsoft, it is also quite clearly a different place as well.

The separation is not just physical, however. It’s clear from my many talks with MSN folk that the division has a completely different vibe from its corporate parent. Part of it is the market that MSN plies. Unlike the slow-moving business market that much of Microsoft serves, MSN competes with fast-paced Internet companies and provides services for consumers that expect constant improvements. As a result, MSN is not hobbled by the hesitancy that grips the Windows and Office groups. And the place just seems more exciting as a result. These are people that get work done. And their customers see the results of that work almost immediately.

“The transformation at MSN started when David [Cole] and Yusuf [Mehdi] came down here [to MSN],” Adam Sohn, the Director of Global Sales and Marketing PR told me. “They were both from the Windows Division, but this was a time when there was a lot more heat going on. We had the browser innovations going on, with new releases every week. Both guys had a very deep understanding of how to live in a very dynamic and changing world. And both guys know how to ship software.”

According to Sohn, Cole is a super-senior technical guy who understood, perhaps better than anybody, what was possible for PC users if you go and exploit the platform. But MSN was a mess at the time with conflicting strategies and non-integrated products.

“I’ll be honest here,” Sohn said. “We still haven’t completely landed where we want to be. There is always this discussion about business models, right? Are we an access business? A subscription business? An ad-funded business? Sometimes the press wants to force somebody in the industry to make a stand and say, ‘this is the answer.’ Because nobody’s been really able to find it yet.”

Reorg

About a year and a half ago, MSN instituted a reorganization of its business in a bid to drive integration. “Our world had grown too silent,” Sohn said. “We had a team building one service over here, another team building another service over here, and a team building a client over here. We had multiple operations teams, multiple security teams, product management was scattered all over the place, and it was hard to actually get anything done.”

It wasn’t efficient. And efficiency is job one at a division that can’t afford to wait two or three years for the next product cycle. The senior leadership, including Mehdi, Cole, and Blake Irving—who runs MSN’s communications services division—started to think a little bit more about the user, go figure. “We started thinking about the user first and the technology second,” Sohn said. “And this is something we now do very well at MSN. And I think other parts of [Microsoft] are getting there. You know Microsoft. Ooh, a problem: Can we solve it with software? Let’s all get in a room and talk about code. Well, that’s fun and some great stuff comes out of it, but … millions and millions of people, especially consumers … when you think about non-technical people, what experience are they having? You have to start organizing yourself to deliver services for those types of people.”

MSN internalized the customer-first mindset much earlier than the rest of Microsoft. And all of the products it’s shipped over the past several months—MSN Search, MSN Music, MSN Spaces, MSN Messenger 7, and Hotmail—reflect this. You can see the start of a really cohesive experience across all of these services, but more importantly, across all of the ways in which actual users would use these services.

Put another way, instant messaging is not the goal. The goal is to facilitate communications between people and the people they care about. “Is it only Messenger?” Sohn asked. “How does email relate to that? How about sharing my photos? How about sharing my blog, if I decided to go and do that? What about searching for stuff? Our software powered experiences are now driven by thinking about the relationships we have or the ways in which we consume information. Then, we look at how software can be applied to enhancing that experience. The alternative is sorting of jamming people into the shape of the software applications that we build.” That, of course, is how much of Microsoft’s software was historically created.

The new MSN organization has three main divisions, or groups, all of which are overseen by Cole. As noted previously, Mehdi runs the MSN Information Services & Merchant Platform. He owns Search, the Music, Shopping, Entertainment and Video, and everything you would think of as information services, like the MSN.com portal and the content channels.

Irving runs the MSN Communication Services and Member Platform group, which oversees tools like Hotmail, Messenger, and Spaces. Because they’re running these huge services, they also own the operational elements for most of MSN as well.

MSN also has a marketing group that spans across both of the other groups. MSN marketing is spearheaded by Jane Boulware, who is described as the steward of the MSN brand. “We have this great feedback loop,” Sohn told me. “The marketing group gets to live across the whole division. We talk to consumers, we do a lot of consumer research that gets fed back into the groups, and no one is siloed anymore. People are working together in a much more interesting way because everyone gets that there is this larger thing that we are trying to do.”

“MSN lives in a world where it’s innovate or die,” Sohn said.  It’s been that way for Microsoft for a long time, of course. But MSN has made this statement into a credo of sorts. “It’s true here on daily and sometimes hourly basis,” Sohn added.

The energy at MSN is palpable. Sohn and Larry Grothaus, a Group Product Manager for MSN, have both recently discussed with me the differences between working for a fast-moving entity like MSN and most of the rest of Microsoft. “Think about enterprise deployments that might take years, or major platform shifts that are absolutely critical for [Microsoft] to be successful, not to mention the millions of ISVs out there, but at the same time, are more deliberate, slower, and more complex processes,” Sohn said. “We’re all about providing software powered experiences to consumers and those things can be done on a much more rapid fire basis.”

“It feels very much like a scrappy, entrepreneurial, freewheeling thing,” Grothaus added. “If you’ve got a good idea, and you want to go do something, you can get the resources to do it. That’s the atmosphere down here.”

Down here. Again and again, without perhaps even realizing it, Sohn and Grothaus highlighted differences between MSN—Red West—and the rest of Microsoft. Clearly, no disparagement was meant, and indeed, both were quite deferential whenever talk of the rest of the company came up. But it is perfectly clear that MSN, in some ways, operates outside of the normal Microsoft way of doing things. That independence and separation is a crucial part of the division’s success. And MSN’s ability to ship product stands in sharp contrast to the never-ending delays facing important products like Longhorn, Visual Studio 2005, and SQL Server 2005.

MSN Search: Answers, not links

Nowhere are the differences at MSN felt more than with MSN Search. Sohn described the atmosphere at Search as similar to that of a start-up company in San Francisco. “You walk down the halls of that place and people are here late, late at night, people are always pushing and challenging each other, and there’s a cachet to working on that team,” said. “We’ve got a lot of ridiculously brilliant people down there that I can’t even stand to be in meetings with because I know I’m not even worthy of being with these guys.”

How important is search? Microsoft Research independently sought out MSN and offered to help. “Think about relevancy ratings, and the kinds of algorithmic math that needs to go on, and how you build out a distributed computing architecture that can handle the query volume and is capable of indexing the Web every single week,” Sohn said. “It’s at 5 billion documents for us right now. There are just some fun computer science problems there.”

Almost two years ago, MSN decided to build its own search engine from scratch. Previously, MSN Search used algorithmic results powered by a company called Inktomi, which was bought by Yahoo! MSN’s advertisements were powered by a company called Overture, which was also bought by Yahoo! But Search became popular enough that people were realizing how much it didn’t meet their needs. “Google showed the world what was possible if you did some innovation around search,” Sohn said. “No one in this division would ever try to take any credit away from those guys. They’ve done some amazing stuff and they continue to drive innovation.”

To compete with search and provide the kind of service that will keep people coming back to its network, MSN needed its own search engine. Otherwise, the division wouldn’t be able to compete for search users or develop a lucrative advertising business. So they met with Microsoft co-founder Bill Gates who, surprisingly, immediately approved the idea. “Bill was like, ‘yeah, come on, let’s go,'” Sohn told me. “It’s just one of those things where he was probably already thinking, ‘why haven’t you guys done this already?'” At the time, Google had been around for several years, and there were various other competitors. MSN clearly had its work cut out for it.

“It became clear to us that this was a place where we had to fix the problem we had caused when we helped the world go digital,” Sohn explained. “I realize that’s a funny way to say it. But there’s been an unbelievable information explosion. You think about all the documents on the Web, or all the documents that you create personally. How do you find things three years later? There is so much information out there. How do we connect people to it?”

“When you think about MSN, you think about this big network of services. In order to make revenue, we have to keep lots of people in our network because we fund it mainly with advertising. So we create a bunch of great services, grow the audience, and then provide great technology for advertisers to connect with that audience in a way that is not intrusive. We don’t do pop-ups anymore, we have more clarity in advertising, and we actually scaled back the number of display ads you’ll see. We do have a good search advertising business, and we’ll continue to invest there.”

Ultimately, people just want to find information that is important to them. Again, it’s not about the software—search in this case—but rather about the people who use the software. “What are they really looking for? How often does digital commerce start with a search?” Sohn asked. “Lots.”

The MSN Search architecture was built from the ground up, which enabled the division to do some unique things. “Everyone wants to compare us with Google, so they do a search here and a search there, and they pick apart the results. Frankly, there are some places where we’re as good or better, and there are a bunch of places where we’re not. And that’s always going to be true. And the day we think we win is when 51 percent of our results are better, and 49 percent of their results are better. But we would obviously want to keep driving that number up, because … we’re Microsoft guys and … we like big numbers.”

Today, the search process is simple but takes too long. Maybe you’re typing away at the keyboard, getting work done and you realize you need to look something up. Many times, that thing is a fact. How many MP3 players were sold in 2004? What is the population of France? There is no way to find facts on Google.

And, as it turns out, there is no way to find many facts on MSN Search either, but they’re getting there. “We did build the infrastructure to do it,” Sohn explained. “We built something we call Instant Answers. We started it with MSN Music and Encarta, because those were two discrete information sources that we had great access to. With Encarta, the innovation we did was we did a bunch of natural language work to help us parse a sentence, and then we did a bunch of database work on the back end that helps us look through the Encarta database, extract things we can label as facts, and then we connect the natural language smarts with the fact list. We’ve done that for Encarta, and we’ve done that for MSN Music.”

If you’re searching on the Web and you type in, “what was the population of France in 1980?”, Google will return numerous results. But at that point, you’d enter what Sohn calls the “spelunking phase,” where we have to go manually search through all of those results hoping that maybe one of them has the fact you need. More often than not, you’ll find articles with related information or something unhelpful.

In MSN Search, this type of query is pushed through the Encarta index and you’ll see the answer at the top of the results list. Or you could type in the name of a musical artist, like Sting, and you see which Sting songs are selling well these days. Links will take you over to the MSN Music site and you can listen to song clips if you want, and purchase music. It’s a seamless experience.

“Now we take this thing, which I call a mini-architecture, and apply it to other databases,” Sohn said, hinting at the future. “Ultimately, we can apply that to the entire Internet. That is impossible to do if we just skin results coming in from another search engine. So what we look at when we think about search is, where are the opportunities to change the game by thinking about what people are really looking for? How do we get the number of abandoned queries down? Answers, not links’ has been our rallying cry.”

What about subscription-based content? For example, many Web sites, like the Wall Street Journal Online, require you to pay a fee to access their content. “We’re also looking at this huge set of information behind subscription walls that’s not generally available to the public through a search,” Grothaus said. “How do you get the partnerships in place so that the Wall Street Journal or Lexis-Nexis is available? Even if you had to pay for it, maybe just a small amount per search.” Sohn added, “We’re going to be pretty aggressive on that. There will be scenarios where we subscribe to services on behalf of the world. Because it’s an ad funded business, we’re able to do that. Abstracts are a great idea too. You may have to pay for it, but at least you’ll know you’ve got the right article before you do.”

MSN Search also includes an innovative feature called Near Me, that gives location-specific search results. “We have varying levels of success with the Near Me results, and I think our guys would be the first to admit that,” Sohn said. “But what’s interesting underneath it all is that we went out and built another architecture. When we crawl Web sites, it’s actually putting some smarts against the data we’re getting back from those Web pages. We add what we call a geo tag to entries in the index. Say I want to find an Acura dealership in Seattle. If I only search for ‘Acura’ and ‘Seattle,’ I’m relying on the hope that the Acura dealership in Lynnewood, a city just north of Seattle, is using the word ‘Seattle’ in their Web site.”

“We’re really looking at those key places where we can up the game a little bit and continue to drive the stuff forward. At the same time, we know there’s a price of admission: We need to be fast, need to be relevant, need to have the right number of documents in our index, and we need to do everything we can to cut back on the number of spam searches.”

UI Matters: Windows Desktop Search

MSN’s recently released Search Toolbar with Windows Desktop Search—a name that was forced on it by the Windows division—takes MSN Search technology to the desktop. “It’s nice and fast, and we did a good job of thinking about fit and finish,” Sohn said. “We want to be the best ISV that develops on top of Windows. We know how to develop on top of Windows. What’s crazy to me is that we built this thing on the Win32 API set. Anyone who’s ever been to a PDC (Professional Developers Conference) gets that [information] in their backpack. It’s not like the Windows team is sending us secrets. It’s one of our advantages: We’re incented to be great platform customers and we understand that UI matters, especially when you’re building for the broad consumer user base. You have to think about how the experience will drive success for people.”

A lot of people are going to be pleasantly surprised by the new Search Toolbar, which features a new preview pane in the search results window and other features that were added after the public beta, an almost unheard of development with other Microsoft products. “We were really focused on responding to the feedback we got,” Grothaus told me. “We don’t just clean up bugs during the beta, which is the traditional way to do things. You’ll see changes in each version we release.”

The new Search Toolbar even lets you designate any search engine. So if you want to use Google to do Web searches, it will do that. You can also choose exactly which toolbars get installed during Setup. Indeed, the entire Setup process is different now. You can choose which folders are indexed, which toolbars are installed, and where to put the search index file.

“This is going to be another great platform,” Sohn noted. “We sort of replumbed the notion of a toolbar here. We’ve got an interesting architecture that we can use to deliver innovations to folks in nice, quick, componentized ways. I think you’ll see the toolbar become a way that we can offer very, very cool innovations to people in a low impact way. When something new becomes available, customers can choose to add it or ignore it. There will be quick iterations of the toolbar in the near future. They won’t be toolbar replacements but just add-ons people might want. It’s a componentized architecture. We’ve been testing the [delivery mechanism] for the add-ons internally. We can notify you when there are updates.”

Grothaus added, “If a new file format comes out next week and becomes really popular, then we can support it quickly. If a corporate customer has a proprietary file format internally, they can write an iFilter extension and then that can be indexed as well.”

Regarding the overall search strategy at MSN, Sohn noted that it was a market ripe for innovation. “We’re on the cutting edge,” he said. “We built our entire [search server farm] on 64-bit Windows, which really enables us to push the platform to the limits. We were able to utilize that architecture to build a very, very cool, high-performance, in some ways self-diagnosing and self-healing infrastructure. Although humans are required. At least for now.”

Part Three: Services that communicate

There’s an almost mythological story about Amazon.com where founder Jeff Bezos made a list of the things he thought he could sell online, and then ordered that list so that the best items to sell would be at the top. Amazon first started selling books, his number one choice, and then moved down the list until it was selling all of the listed items.

At MSN, things didn’t happen quite that logically. The company started as an online service and then moved into the online content business. But by the early 2000s, MSN was starting to gel. It had services like Hotmail and Messenger that were wonderfully popular but offered no true integration between them. Thanks to early work by Blake Irving—described as the “tip of the spear” in terms of the MSN turnaround—and then later by Mehdi and Cole, a more customer-centric approach began to turn things around.

Irving’s early work can’t be emphasized enough. After joining Microsoft in 1992, Irving was responsible for the company’s first Internet video conferencing product and collaboration product, NetMeeting, and worked on Internet phone and Internet mail client software. Moving to MSN, Irving launched the MSN Messenger instant messaging service in 1999. That product is now in use by over 165 million customers every single day. That makes it an ideal outlet for exposing customers to other MSN services.

“When you think about services like Hotmail or Messenger, or Spaces, or the MyMSN home page, those are a few of the services where you actually have to authenticate to the network,” Adam Sohn, the Director of MSN Global Sales and Marketing PR, told me. “We know a lot about what our best customers are doing. And given that we’re at about 380 million unique users a month, that’s a pretty decent sized sample for us to know, in our network, what’s resonating with people.”

MSN also closely watches for integration points across all the experiences it offers. Sohn believes that is an outcropping of the reorganization MSN did, and a shift in the mentality down at MSN, “We’re leading that wave across Microsoft, where you think more about what the user wants to accomplish, rather than trying to jam features into the shape of the application,” he added. “It’s a confluence of those things.”

MSN Messenger and Spaces

The recently released MSN Messenger 7 and MSN Spaces are off to a torrid start. Messenger is now the number one IM service on earth, with over 15 million people using the service simultaneously each day, exchanging over 2.5 billion messages each day. There are over 4.5 million Spaces online, making it one of the largest blogging services on earth. Spaces, overall, gets over 180 million page views each month.

“Since it launched, we’ve been averaging about 160,000 Spaces created each day,” Larry Grothaus, a Group Product Manager for MSN, told me. “Initially, it was about 300,000 a day, and then it leveled off. The important point is that a lot of the discovery [of Spaces] came from Messenger 7. And that’s available for [manual] download today, but we haven’t started the auto-update process on that. As that larger base out there gets it installed, and sees this new [Spaces] button, they’ll [discover that new service].”

Sohn added, “there’s this interesting social phenomenon with Messenger 7. You learn a lot about what’s going on with your buddies before you even start talking to them. So you see a little flashing star—a Gleam—and you think, what the heck is that? And all of a sudden, you’re reading someone’s Space, and it’s like, damn, I want to get one of these. In some ways, that’s a tightly constrained social network.”

It’s predictable that a product like MSN Messenger 7 would do well, as the previous versions were used by so many people. That MSN Spaces has jumped out of the gates so quickly, however, is somewhat astonishing. Not only are people starting up Spaces-based blogs, they’re continuing to add content to them over time. “People are being very active,” Sohn said. “In the beta—and I’m sure the numbers have gone up since then—we were seeing 5 million comments a day, and 1.8 million photos uploaded a day [on Spaces]. So this is something that people are not only starting, but also they’re actually using. It’s just so drop-dead easy to throw photos up there, that if all you want to do is scrapbooking, it’s a great tool.”

“As for the blogging … for once, we’re not too early,” he added. “But we’re just early enough for blogging for the mainstream. The blogosphere likes to say all kinds of things about where blogging is. But people want this level of communication. It’s great just to be able to logon from a vacation and throw some photos up. You’re just enhancing your relationships with people, and you can do that in lots of different ways. Online is one of them. It’s a key component.”

Next generation communications experiences

“This was a big release season for us with what we call the ‘Wave 10’ products, including Spaces, [MSN] Messenger [7], and Hotmail,” Sohn says. “But I think in the next year, you’re going to see us really turn up the volume. Right now, the Search volume is—if I can use a Spinal Tap metaphor—at 11, right? I think we’re at about 9 with the communications services right now, and it’s going to go to 11 over the next year.”

One contacts store to rule them all…

To facilitate the next generation of communications services, MSN is working on a unified contacts store. “Again, we’re thinking like the consumer thinks: There are a bunch of people I have relationships with,” Sohn told me. “So when you get away from Search, which is about your relationship with information, communications is about the people who are important to you. And how do we pivot software-driven experiences around that metaphor?”

“There are people I care about. How do I communicate with them today? Well, there’s email, there’s telephone, there’s instant messaging, there’s in-person stuff. Now how do we drive a bunch of software-powered experiences there? One of the key things we realized was, it’s ridiculous to have an address book in every single application you have, especially when they’re online. If you think about something like Messenger, you can certainly look at your contacts offline, and you have email addresses for all of them, but ultimately, that’s an online service. It works when you’re online. Hotmail, too, is an online service, although there are offline ways to access it through MSN Premium or the [Microsoft Office Outlook Connector] offering. Still, it’s this thing that lives out in the cloud, and it’s always on, always there.”

The unified contacts store is essentially plumbing, but here’s an interesting statistic: MSN has over 8 billion contacts in that database. “Without beating our own chests too broadly, because right now, as a social network, it is one of the biggest social networks on the planet. It might be the biggest. We really don’t know. But in the next year, year and a half, you’re going to see us start thinking about how we can provide experiences that can take advantage of that.”

“We have to be super careful,” Sohn adds. “You know we’re held to a different standard. We have to be super, super careful with anything that even remotely touches privacy or user consent. Also, we don’t want to inundate people with very complex relationship metaphors. For example, my mother should not ever have to think about her relationships in terms of a graph, or think about mesh networking, or peer-to-peer protocols. She should just think, hey, I want to talk to my son.”

Social networking

Over the next year, MSN will also expand the social networking functionality of its communications services. What’s the next-generation communications experience? “If we think about all the ways in which you communicate through MSN today, where we give you the unified contacts store, there’s a bunch of presence information in there … how do we bridge that to the offline world?” Sohn asked. “Is there a scenario where I can say, I just want to contact Paul, and then the network figures out the best way to do that? I see that he’s online, so maybe I want to initiate a video conversation. Maybe down the road somewhere, I want to call you, and you’re not online, but I have all your numbers in my contacts list, and my computer starts calling you.”

“I see a future where my cell phone just becomes a communications device,” he added. “When I’m in the house, maybe I’m doing a wire line sometimes; maybe sometimes I’m doing VoIP. When I leave the house, I’m out on Cingular’s network. Inside the house, maybe there’s something smart enough to tell me when I could be having a VoIP conversation handset-to-handset, handset-to-PC, or PC-to-handset. Or maybe there are times when it just makes sense for me to have a wire line conversation, and then that cell phone just becomes a cordless phone. Today, I have my cordless phone at home, I have a cell phone, and I have whatever it is I use with my PC. I have no one stored in my cordless phone, but I have six hundred contacts in my cell phone, and more than 150 people in my [MSN] buddy list. How do I unify all that and pivot the communications experience around what I’m doing? The next year is going to be about relationships between people and how to make those relationships more meaningful.”

The future of MSN Music

MSN remains committed to MSN Music and promises to ratchet up the volume on that in the coming year as well. “We’ve got PlaysForSure on the platforms side,” Sohn said. “You literally see a logo on a box and you know it’s just all going to work. That’s actually been a pretty successful campaign so far, but what it’s done is really set the stage for unchecked device innovation. You’re going to see, over the next year, the device guys come out with some very cool stuff. And we’re going to continue to drive cool features into the music service.”

What about the competition? Today, Apple’s iTunes continues to dominate the online music world, despite recent advances from MSN, Napster, Yahoo! Music, and RealNetworks Rhapsody.

“We made a choice,” Sohn told me. “It’s a rapid-fire innovation choice. If Apple wants to push out a bunch of new features in iTunes, they have to go and touch every client. We just have to change some things in the service. We’ve already done that a bunch of times. We’ve added the ability to gift people songs, now that just shows up. We added download cards. We just keep churning the innovation wheel and we can just deploy stuff on the site, and boom, new features appear.”

MSN portal prototypes

MSN has also been working on interesting prototypes that might turn into next-generation versions of its MSN portal. Not coincidentally, Google’s announcement last week about adding personalization to its own Web site looks suspiciously similar to some of this work.

“We have some prototypes, stuff we’re just throwing over the wall, in order to see how it works,” Sohn said. “There are some very interesting information-driven experiences if you go to start.com/1 or start.com/2. We’ve done some interesting work there. In that set of experiences, we’re thinking about how people think about the information that’s important to them in their lives.”

Gathering data

“One of the most interesting things I saw when I first came back over to MSN was a design ethnography going on,” Grothaus told me. “We have anthropologists and ethnographers on staff dedicated to going into home environments, and looking at everything people are doing, not just with computers. They see how people are using their PCs.”

“That is just indicative of this mentality of just understanding how people want to relate to other people and how people want to relate to information,” Sohn added. “Then we go back and figure out what role the PC can play today, what role it can play tomorrow, and what partnerships we need to establish with device makers. This idea of having anthropologists around, they’re not computer scientists at all. They just understand people. They drive a deep understanding of what people are trying to get accomplished. And then we figure out how we can use software to help them.”

“We believe in that. You’ve covered Microsoft long enough that you probably roll your eyes when you hear the various iterations of our mission statement… Realizing your potential. But ultimately, that’s been true forever. We just believe that software can make a lot of stuff better. But I think we’ve gotten much smarter about understanding how that is. If you take a PhD in computer science that’s been at Microsoft for 14 years, the ability that they have to really understand what a baseline consumer wants is—maybe to connect with their grandkids via video—[is zero]. You need something to bridge that gap. Our ability to do that is just awesome.”

Elsewhere at Microsoft, other groups are just starting to think about users the way that MSN does. The Windows team, for example, has really institutionalized this concept by coming up with a set of prototypical users, called personas. “If you’re a program manager writing a spec, you’ll have to explain which persona you’re targeting, like Abby [an inexperienced user] or whatever,” Sohn said, alluding to the personas posters that adorn the walls around the Windows division offices. “This is a shift the company is making. But MSN is on the frontlines with the consumers, we’re the online business for the company, and we’re just leading that charge. There are other pockets of interest too. Robbie Bach and the Xbox guys get the consumer for sure.”

MSN and advertising

MSN is even trying to innovate with advertising, if you can believe that. For a customer-centric division like MSN, of course, advertising is a fine line to walk. You need the revenue, but you don’t want to alienate customers with in-your-face pop-up windows and other annoyances.

“There are a couple of interesting trends going on in advertising,” Sohn mentioned. “Number one, if you look at search advertising and even display advertising, the experience that advertisers have interacting with these networks today are horrible in terms of how they buy across these big networks, and how they track campaigns. So we piloted this thing called Ad Center. We realized that this was a big horizontal problem for our customers where software could make a difference. As you know, that’s the kind of thing we get excited about. So we build a system. Today, we do that with a partner called Overture, which is now owned by Yahoo!, and we think that partnership with continue. But we also think that there are places where we can add a lot of value.”

“The other thing that’s interesting on the ad side is that there’s been a shift in thinking away from the big brands. When [advertisers] think about their online mix, they think about banners, and keywords in search, but they’re also thinking more about branded entertainment experiences. We actually took one of our ad sales units and gave them a charter where they became branded entertainment experiences, and if you’ve seen the Sprite stuff inside of Messenger 7. It’s a branded experience, powered by Sprite. Is it an ad? I mean, to us, it’s an ad. But it’s also a software-powered, fun experience that builds a relationship between that consumer and the brand, but doesn’t interfere with what they’re doing, and in fact can actually enhance that interaction.”

Another example of these new branded entertainment experiences is the VW Spin Cycle, which links the Volkswagen brand with mood-based music playlists like “back roads,” “morning commute,” and “bad hair day.” VW aficionados can watch VM advertisements, sign up for a newsletter, or even shop for a new car. On the road of life, Volkswagen says, you need a great soundtrack. It’s an interesting concept that combines a beloved brand with consumers in a non-painful way.

Conclusions

When I speak with people from the Windows division at Microsoft about new product releases, there’s always an unspoken assumption that I won’t see these people again for many months or even years. With MSN, it’s sort of a running joke that I’ll often be speaking with them just days later. They just have so much going on.

“It’s a very exciting time,” Sohn said. “This is a Bill Gatesian thing to say about MSN, but as fired up as I am about the stuff we’ve done in just the last year or two, I feel like we’ve just finished laying the foundation across all of our services so that we can do the next wave of super cool stuff. I feel like the whole MSN division is inhaling, and as soon as that ends …. If people think we’re fast now, or people think we’re spry and nimble, you just wait. The next year is going to be just awesome. We’re going to floor people over the next 12 months. We’re ready to rock.”