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MS to remove Sidewalk from Road Ahead

It was paved with cash injections, apparently...

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Sidewalk, Microsoft's local information service, is likely to going to be taken over by rival TicketMaster/CitySearch. The deal has been brewing for some months since it became clear to Microsoft that it was unlikely to see a return on its investment - put at $200 million plus - despite refocusing, relaunches, firing staff and cutting back expansion plans. And the performance of Sidewalk has had a negative effect on Microsoft's plans to create a so-called tracking stock that would, it hoped, soar away like Yahoo and Amazon. This has probably influenced Microsoft's plans to cut its losses, and keep a toe in the action by selling Sidewalk for a 9 per cent stake in TicketMaster-CitySearch. This would value the stake at $215 million, based on Friday's market value of around $2.5 billion. Microsoft would have the right to acquire a further 6 per cent of CitySearch. The editorial staff were to be thrown in by Microsoft, but it would appear that the technical and advertising staff were not wanted. The exact fate of Sidewalk is not at present clear: CitySearch has covered 33 US cities since its 1996 launch. Barry Diller, the CitySearch CEO, tried to buy into Lycos earlier this year. His site receives 4.7 million unique users a month, it is claimed. When announced in September 1996 and first rolled out in April 1997 there were great plans for Microsoft to control the message as well as the medium, and for MSN to keep its visitors bouncing from one Microsoft site to another. But that's not the way things happen on the Web, and Microsoft found itself facing heavy competition from local newspapers, nearly all of whom exhibited degrees of paranoia about having Microsoft as a competitor for local advertising. Even Microsoft did not expect quick profits (Chris Hearne who ran the Houston Sidewalk said in January 1997 that Microsoft expected no profits "for five to ten years"), but the rivers of red ink have finally proved too much. Apart from the major US newspaper groups, there was competition from Time-Warner with its City Web service, AOL with Digital City, Yahoo, CitySearch, Cox Enterprises, and others. Some of the non-Microsoft services, set up collaborations with local newspapers - for example, Digital City with the Seattle Times. From the beginning, CitySearch offered a wider range of local news and information. Gates tried in a speech in April 1997 to pitch Sidewalk as a weekly entertainment magazine that was non-competitive with local newspapers, but this was not believed. In January 1998, Sidewalk was relaunched and refocused in an attempt to slow the losses. The changes included buying in less information and having more directory information, in order to make the service a cross between Yellow Pages, consumer reports, and a local entertainment guide, as well as firing 36 full-time staff. There were plans to add new non-US cities beyond its Sydney joint venture but the plans were later cancelled. It was very clear that each site was losing several million dollars per site/year for revenue of around the $500,000 mark. Microsoft continued to bluster: "Sidewalk has exceeded initial ad sales projections and internal traffic projections". Matt Kursh, Sidewalk's business unit manager, said that Sidewalk would expand to 50 cities by the end on last year. If this were true, Microsoft would not today be selling the venture. New features were added in March 1998, with usage "exceeding internal projections". A survey of just 413 Sidewalk users was said by pollsters Research Connections to result in 93 per cent of consumers acting on the information they found. What a surprise. In a desperate move last May, Sidewalk transmogrified itself into a dating agency after a survey by Market Facts discovered that Thursday night was for many Americans the beginning of weekend frolics. The consequence was that the Thursday Channel featured "Do it with a friend", and if none was to hand, users could email each other with invitations. A further relaunch in October aimed to give users "a complete solution to making a decision". Evidently they did, and did not for the most part become avid users of Sidewalk. The plan was changed yet again to purchasing local databases, but President Steve Ballmer had evidently had enough. It is amusing to see how some of the financial analysts interpreted this latest example of Bob on the Sidewalk: the WSJ quoted Mary Meeker at Morgan Stanley as saying "It's good to see that Microsoft might be finally trying to monetise its Internet assets." In Microsoft parlance, it was no doubt just one of those non-bottom line impacting tactical recalibrations - or stop-losses as we mere mortals might say. ®

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