Illustration by Simon Wan

FEBRUARY 4, 2000 VOL. 26 NO. 4

Thinking Smaller
Microsoft adapts its Net strategy for Asia
By JIM ERICKSON

Amorphous and constantly mutating, the Internet affords few opportunities for seeing the future with clarity. The fog lifted briefly last month when America Online and Time Warner (Asiaweek's parent) announced a merger that would establish what many analysts said represented the archetype for emerging e-businesses. With a potential combined audience of more than 100 million (including AOL's loyal Net subscribers), a geyser of content from Time Warner's magazine, movie and music companies, and a guaranteed broadband pipe into millions of U.S. homes through Time Warner's cable-TV properties, the marriage between the two corporate giants should spawn a whale with the clout to be an Internet pacesetter rather than a shuttlecock.

Not, however, in this backyard. The deal may appear a watershed in the U.S., but in Asia similar mega-mergers are simply impossible, for a number of reasons. There are no established pan-Asian online brands such as AOL (which in Asia is a pipsqueak, as is Time Warner's online presence). In most of the region's countries, Internet useage remains relatively low, and Asians have less money to spend on luxuries like movies on demand. Markets are fragmented by languages and cultures. Although some countries are opening up telecommunications markets to competition and foreign investment, the region's infrastructure as a whole remains tightly controlled by governments and closed monopolies, says Sandra Ng, a communications analyst with International Data Corp. That makes it difficult to build a cross-border network on the scale of U.S. cable systems.

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Those obstacles are stamped all over Microsoft's recent overhaul of its Microsoft Network (MSN) Asian Net portals. While the software titan goes toe-to-toe with AOL/Time Warner in the States (Microsoft has secured mass broadband delivery right-of-way through a $5 billion investment in AT&T, among other partnerships), in Asia its efforts are less ambitious, taking into account restrictions such as the lack of availability of broadband connections. "I'm not sure the AOL/Time Warner model is applicable in Asia," says Stephen Wu, general manager of Microsoft's regional consumer group. Instead of creating a monolithic media company, "we're looking at how we build a truly Asian service that is relevant in the local marketplace," Wu says. MSN's new "Everyday Web" theme stresses personalized information and Web-based utilities such as Microsoft's Hotmail e-mail service, not mass-market content.

Among other moves, MSN is boosting local-language offerings such as news on existing sites in Japan, Korea, Hong Kong and Taiwan. Service is also being extended to Singapore, Malaysia, India and eventually China. MSN's instant messenger service, meanwhile, is being made available in Japanese, Chinese and Korean. Wu says the company is actively scouting for content partners to make each site relevant to the users it is supposed to serve. The improvements are hardly akin to a blowout buyout like AOL's acquisition of Time Warner. In Asia, "there's no single entity one could partner with," says Wu.

To be sure, Microsoft is spending money to develop high-speed Net services and content in Asia (it is teamed with Hong Kong's major phone company on a broadband portal). The company also holds stakes in Asian telecommunications companies planning to deliver broadband and wireless net access, among them a joint venture with NTTDoCoMo in Japan and Korea's Thrunet.

But Wu says Microsoft has no designs on dominating Asia's broadband infrastructure as new networks are developed. He characterizes deals as strategic, aimed at improving the availability and adoption of new technologies. In Asia, where far more people carry cellphones and watch TV than surf the Net, the investments also acknowledge that Internet content will in the future be accessed over different types of wired and wireless networks and on various devices, not just computers.

"This stuff is going to develop differentially, based on a country's [telecommunications] infrastructure, GDP and other factors," says Wu. "Coming up with a lot of broadband content and services in India would be putting the cart before the horse. One size does not fit all." Nor is extra large the only size on the shelf.