Online Giants Face Off with New Releases

America Online, with 33 million subscribers, has just released AOL Version 8.0 of its software, with a plethora of new features. Not to be outdone, Microsoft's MSN, with 9 million subscribers, will release Version MSN 8 of its software within the next ten days. Microsoft claims that it has spent $500 million creating Version 8 and $300 million on its advertising campaign.

MSN 8 reportedly will feature improved filtering of "spam," or junk e-mail, with an enhanced e-mail program. Microsoft has also made its new browser more customizable, and has incorporated additional parental Internet controls that AOL featured before. AOL Version 8.0 will reportedly allow users increased customization and a greatly enhanced e-mail program, even though its e-mail program is still not as savvy as MSN's. We tried to examine AOL Version 8.0's features, but couldn't get past the required registration page, and there was no additional information posted on the AOL home Web page about 8.0's new features.

Customer retention appears to be a key factor as to how well, or whether America Online and MSN pass the other or how well either survives against the competition. There are other players now, such as Earthlink and Yahoo and local broadband providers, to contend with that cost far less than MSN and AOL. True, MSN has the seemingly endless Microsoft well to draw from, but it has yet to show a profit after 7 years of existence. A recent report conducted by Forrester Research reported that MSN retained 43% of its subscriber base from 2000 to 2001, while the report claims American Online retained 79% of its subscriber base. Microsoft disputes the validity of the data in the Forrester study.

Price is certainly a factor. MSN subscribers will pay monthly fees of $9.95 for a "bring your own access" plan, i.e., connecting through another Internet service provider; $21.95 for a dial-up connection; and between $39.95 and $49.95 for broadband connections, depending on the users' location. AOL will charge monthly fees of $14.95 for bring your own access, $23.90 for a dial-up connection, and $54.95 for broadband.