Blog slayer: Microsoft and the future of SixApart

Filed as General on April 26, 2005 11:57 am

by Duncan

bill and menaDuncan Riley> On 2 December 2004, software giant Microsoft entered the blog market with MSN Spaces, a free, simple to use blog tool that allowed Microsoft users and others world wide to get their blog up and running within a matter of minutes. Despite its simplistic approach to blogging and limited customisation options, big media took notice and within the first month leading computer magazines were giving the still beta service the thumbs up.

In its first month, Microsoft’€™s Bill Gates claimed that Spaces had 1 million users.

In February Microsoft properties including MSNBC announced built in functionality exclusive to Spaces users.

In early April 2005 MSN Spaces is officially launched with the news that the service now has 4.5 million blogs and Volvo is signed up as the first major service sponsor. The official launch includes the integration of the ability to post to Spaces through the MSN Messenger program, used by an estimated 150 million users world wide.

By the third week of April, reports in the Wall Street Journal indicated that Spaces now had over 7 million blogs as was increasing at around 100,000 users per day. At its current rate of growth Spaces will become the first (predominately) English speaking blog service to officially reach 10 million blogs hosted by the middle of May 2005, and still this figure will be less than 10% of all MSN Messenger users.

But why is this all relevant to SixApart, the company behind MovableType, TypePad and LiveJournal? think Netscape.

Microsoft does not enter markets to come second. Microsoft only enters markets with the intention of not only becoming the leading vendor, but the dominate vendor as well. In 5 months Microsoft has gone from 0 blogs to over 7 million blogs and counting. In the same period (29 Nov 04-26 Apr 05) SixApart’€™s LiveJournal increased their number of registered users by 1.7 million yet its active user count increased by only slightly over 300,000. A potential 1.4 million users stopped using LiveJournal during that period, and potentially went elsewhere. Given the fickle nature of the teen market, the core market that is targeted by both LiveJournal and Spaces, that looks more at popularity and the latest ‘€œin’€? thing, it’€™s fair to presume that the growth in MSN Spaces, and the integration with the popular MSN Messenger, is not unrelated to the loss of active users from LiveJournal.

The continued growth of Spaces risks the long term future of LiveJournal. Any blog player that reaches in excess of 10 million users, as MSN Space’€™s is about to do, will surely reach a point of critical mass in its particular market where it becomes the dominate blog player of choice. Differentiation may work in niche markets, but in the teen market this is not the case. With more and more of their peers signing up, teens through out the English speaking world will be wanting a Spaces blog, just like they want an iPod or a mobile phone.

But sure, LiveJournal, and its predominately teen market, is only one of SixApart’€™s three blog markets, and is arguably the least profitable. Its demise alone would not see the end of SixApart, with MovableType providing some income to the company and TypePad being the major driver of revenue.

TypePad is the next most vulnerable service in the SixApart line up, and it’€™s any challenge to TypePad that would see the eventual collapse of the empire that Mena built. Already TypePad competes in a crowded market place that favours free blogging over paid services, but it has successfully carved out a profitable niche amongst commercial businesses that seek to join the blogosphere, businesses that have deep pockets and predominately use Microsoft Windows and Office in the workplace.

Microsoft exec’€™s will have seen how easy it is to take over the Blogosphere: they are on the edge of doing so in the teen/ journal market now. If its this easy to take over one market, it would be natural to conclude that Microsoft would be seeing the potential of doing so in the business market, because at the end of the day, Microsoft is still the dominate player on business desktops around the world, which gives them a massive head start. The threats to TypePad are two fold:
1. Microsoft may well consider a new, low cost business blogging service either as an extension of Spaces or a standalone blog hosting product; personally I think that standalone is probably they way they would go. Naturally this product would come with integration features into Windows and Office
2. Longhorn, the next version of Windows, is already said to have RSS reading features integrated, and like XP will ship with MSN Messenger as well, but naturally the latest version with Spaces support. What if it ships with blogging software? What if the next edition of Frontpage actually came with built in blogging options (like Adobe products now do for TypePad and MT) including the ability to post from within the software to a blog? Suddenly, within 12 months 25% of the PC world has Microsoft blogging software and utilities, 2 years = 50% etc’€¦.

There is money in blogging. SixApart’€™s Venture Capitalists wouldn’€™t have invested in it otherwise. But if Joi Ito and others are smart enough to see dollar signs in blogging, surely someone at Microsoft will also see the same thing. And when they come, the power of the Microsoft marketing machine will end up crushing SixApart like, well’€¦.Netscape. Everyone will gripe for several years about how SixApart had the better product, and a few die-hards may hold out, but the Microsoft machine will reign supreme.

The only future for SixApart, in a standalone capacity, may actually be in its past. MovableType made SixApart and MovableType may well be its only hope in the future. Whilst I can’€™t see Ben and Mena Trott open sourcing MT any time in the near future, there will always be a niche market for DIY blogging, but it will always be a niche compared to the rest of the Blogosphere.

There is one other choice.

I sincerely believe that Google and Yahoo! will become the number 2 and 3 blog providers within the next year (Google is already in the top 3). The provision of blogs is becoming just another commodity in the conglomeration of content and service provision. Google bought Blogger from Pyra Labs because it saw the worth in having millions of users signing into a service it owns and hosts. Indeed, Google has recently introduced a Google login for its services (expect to see Blogger included soon in the universal login) and is reported to be developing a Google browser amongst other activities. Yahoo! has launched 360 in an attempt to fill a gapping hole in its content rich delivery of services and features to its users. Despite its shortcomings and its still invite only beta test, expect the Yahoo! team to make some big changes before its official launch and do great business (signups) when it becomes universally available. The minnow that is SixApart cannot, and will not be able to compete in a market dominated by the three biggest Internet names in the world.

The future for SixApart is in its intellectual property, and its sale to a bigger player. And for this there are two, or maybe three likely suitors. Yahoo! is the obvious choice. Yahoo! has a history of buying companies in areas in which it lacks expertise and wishes to acquire additional users in a particular field (Broadcast.com and Geocities spring to mind). The time period for SixApart to remain attractive to Yahoo! is limited as Yahoo! continued to develop its own blogging platform. The last two potential suitors have the financial backing and brand exposure that would allow SixApart to continue to compete against the big 3.

IAC/InterActiveCorp recently purchased search engine Ask Jeeves (which also owns Bloglines) and has brands including Expedia, Ticket Master, Home Shopping Network, Match.com and CitySearch. The second potential suitor is the NY Times company, that recently purchased About.com and owns a long list of media titles. Both potential suitors provide synergies across their brands that would complement SixApart’€™s products and would allow them the exposure and support they need to have any hope of defending themselves against the big 3.

Now, I know some people will point to my personal dislike of some of the people at SixApart as justification to rubbish what I have just written, but I must say I would be sad to see the end of SixApart. Diversity is what makes the Blogosphere a great place, and I fear that mediocrity that is often the result of reduced competition may change the Blogosphere we have all come to love. The players behind SixApart have some serious choices to make over the coming months, choices that will either result in a strong bright future for the house that Mena built, or the eventual death of a company and its products that have become icons in the blogging industry.

There is no doubt that the future of SixApart, and the money the venture capitalists have pumped into it, is at risk. Very few people fight Microsoft and win.

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  1. Moore's LoreApril 26, 2005 at 10:26 pm
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  4. By Dudu Mimran posted on April 30, 2005 at 2:40 am
    Want an avatar? Get a gravatar! • You can link to this comment

    Hi Duncan,

    I agree that competition with Microsoft is tough still I think that different rules are governing this new competitive landscape. See my full comment on
    http://www.strategicboard.com/weblog/pivot/entry.php?id=172

    Thanks,
    Dudu

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