Sympatico and MSN break up, but stay friends

After five years operating the joint portal, Bell Canada Enterprises Inc. and Microsoft Canada Co. have decided to go their separate ways and launch independent sites. The two new portals, and, launch today.

But the ties aren’t completely broken. As part of a new three-year agreement between the companies, both portals will continue to use Microsoft’s Bing search engine, assist each other through traffic sharing and sell Windows Live Hotmail and Messenger ad impressions.

“We will be fighting for ad dollars … but it’s a co-opetition,” said Gary Anderson, vice-president of

The two portals won’t share content, but they will re-direct to each other through various channels, depending on their areas of strength. “There were channels where we were clearly number one in the market and there were channels where Microsoft was clearly number one in the market, so sending people back and forth between those channels would be a benefit to both parties,” said Anderson.

Visitors to, for example, will be re-directed to when they click on the games channel. “We are not going to try to compete with Microsoft’s Games Zone,” he said.

The intention behind the traffic sharing is to ease the transition for both organizations into stand-alone portals and make it easier for consumers to find some of the content they’ve grown accustomed to, said Owen Sagness, vice-president of Microsoft Canada.

But Bell’s ability to re-enter the market will be tougher than Microsoft’s, according to Sagness, because they don’t have as many owned and operated entry points as Microsoft. A lot of the traffic that comes to Microsoft sites is from users engaged in other online properties such as Hotmail, Messenger, Internet Explorer and Bing, he explained.

Microsoft and Bell are splitting roughly 4 billion display ad impressions and each will continue to offer Windows Live Hotmail and Messenger inventory to Canadian advertisers. “There was enough inventory there for both of us to be comfortable in the market,” said Anderson.

Microsoft is setting a limit on the number of ad impressions Bell will be allowed to sell every month, Sagness pointed out. Allowing Bell to resell ad impressions will provide them with a bit of a buffer, he said.

The decision to separate is a great idea for two reasons, according to Sagness. “For consumers, we can bring the latest and greatest innovation from Microsoft’s sites around the world. For advertisers, we can provide a depth and breadth of audience that they haven’t been able to access before in Canada,” he said.

“Today is a big day and I can see the place is hopping around here. I haven’t seen this buzz for a long time,” said Anderson.

Bell first entered discussions with Microsoft in 2003 when the online media business in Canada was still very small and roughly worth $500 to $600 million, Anderson explained. “It made sense at the time to put the two portals together to drive the market faster, to increase the profitability of both companies in the short run and to leverage … subscription revenue,” he said.

But the subscription revenue stream didn’t pan out, the portal business grew and strategies changed. The online media business became a top strategic priority for Microsoft and Bell wanted to remain in it, so the companies began discussing how they could structure a new partnership that was a win-win for both, Anderson explained. “I think that’s what we’ve done,” he said.

Coming out of the dot-com bust, Microsoft thought the Internet advertising market was dead and we should monetize our Internet audience through subscription-based services, said Sagness. “That turned out not to be true,” he said.

“We gave up a lot of control and we gave up a majority of the revenue from an advertising revenue stream in order to get more subscription services … We were in an arrangement with Bell where Microsoft was providing the majority of the advertising impressions,” he said.

“Advertising is certainly a much bigger part of our strategy today as a company, but also the agreement we had with Bell just wasn’t strategically aligned and it wasn’t a good economic deal for us and given it was a very unique business model that we had in Canada, it was also operationally less efficient,” said Sagness.

“There’s no real clear loser here,” said George Goodall, senior research analyst at Info-Tech Research Ltd. “The only real winner here is Microsoft.”

The previous relationship had been very much to Bell’s advantage, according to Goodall. “Bell is taking more of the AOL approach, for better or worse, and Microsoft is fast following on to what Yahoo or Google have really always done,” he said.

Goodall sees the two companies pursing very different models and doesn’t anticipate a lot of competition from a consumer perspective. “I think both of these services have really profited largely from user apathy and the fact that we take whatever we are given with the lowest degree of effort,” he said.

“Microsoft can really benefit from its Hotmail and Bing strategy, Sympatico just because of its landing pages for Bell subscribers, so really the issue here I don’t think is about content, quality or service delivery. It’s largely how to profit from user apathy,” said Goodall.

The new resembles but with a few more bells and whistles and a slightly cleaner user interface, noted Sagness. Users can expect more global technology and assets, which Microsoft couldn’t really provide under the old agreement, he said.

“Bell was in control of those things. We haven’t been able to leverage the global scale and some of the really exciting innovations that we’ve been making in the space in the last few years,” said Sagness.

One interesting feature is the ability to access your Hotmail inbox and Messenger user interface from the homepage, Sagness pointed out. A new music channel allows visitors to build their own radio station and link it to their Hotmail IDs.

Microsoft’s news content providers include the BBC, MSNBC and CBC/Radio-Canada.

Visitors can also follow the portal on Twitter, their mobile phones through msnmobile.caor join the portal’s Facebook fan page.

The new

As part of the agreement, the portal will permanently re-direct to

Other than removing MSN branding, the homepage for the new portal will appear exactly the same as the former site. “Over time, it will start evolving and will change,” said Anderson.

Minor changes work best, according to Anderson. “We’ve had a history over the last 14 years where we’ve made changes to the homepage on a number of occasions. What has worked best is not doing complete version changes,” he said.

Focusing on both the English and French market, the portal contains Canadian content as well as U.S. and international news relevant to Canadians. News partners include CBC and CTV.

“Our strength has been for the last 14 years to offer and partner with the best Canadian content properties and providers and then to partner with U.S. content providers, but ensure that when we present, it’s relevant and in context for a Canadian audience,” said Anderson.

The portal includes all of its former channels and has introduced four new sections – Autos,, and Best Health – to total 22 channels.

The Best Health channel is the result of a partnership with Reader’s Digest. Bell worked with the Internet Movie Database (IMDb) to create the new InMovies channel, which allows visitors to purchase movie theatre tickets.

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