MSN Molting Again

Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) plans to revamp its MSN portal for the second time in less than two years, in the latest sign of its determination to boost its presence on the Web.

The MSN overhaul is being guided by feedback that the Redmond, Wash.-based company is getting from advertisers. Microsoft, which last redesigned its U.S. homepage in February 2005, also is going to tinker with how it packages the articles on its portal to make the content more attractive to advertisers.

"Conducting this research is an ongoing and continuous process that is used to understand the needs of advertisers globally," a Microsoft spokesman says. "We are also using this research as a means to determine how to best meet advertising needs in Windows Live, while at the same time providing consumers a useful, entertaining online experience."

This underscores Chief Executive Steve Ballmer's drive to compete more aggressively with Google (GOOG Quote - Cramer on GOOG - Stock Picks) in search, as well as with portals such as Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) and Time Warner's (TWX Quote - Cramer on TWX - Stock Picks) America Online.

Indeed, none of Microsoft's competitors likely is taking much solace from the latest comScore data, which show that MSN lost market share in both search and the portals market. Google Chief Executive Eric Schmidt recently said that Microsoft is the competitor that worries him the most.

"Yahoo!, AOL and Google all realize that Microsoft is very determined, very patient and very rich," says Jeff Lanctot of aQuantive's(AQNT Quote - Cramer on AQNT - Stock Picks) Avenue A/Razorfish business. "They have the resources to invest in new products, to buy market share. They aren't underestimated by anyone."

Though MSN represents a small part of Microsoft's business, its importance is growing, particularly with the launch of Windows Live, a service that lets people access services such as email, instant messaging and news from one location. MSN and Windows Live are designed to be complementary. MSN is going to be a portal like Yahoo! or AOL, with links to articles on subjects such as finance, dating and sports. Live.Com, which is in beta testing, will be a homepage for users to add whatever articles interest them.

So far, advertisers are liking what they are seeing. Microsoft is trying to convince advertisers that they will be able to more precisely target their advertisements over its network of Web sites than they could by going to their competitors.

"The key is traffic and reach and access," says Chuck Richard, an analyst with Outsell, a research firm. "They still have to build that up."