In February, a small company from Williamstown, Massachusetts, called Tripod eschewed overtures from Microsoft and sold itself to Silicon Valley powerhouse Lycos for $58 million. Tripod built its customer base (and subsequent fortune) by providing free personal Web sites and easy-to-use tools to build them. Revenues come from advertisers eager to reach Tripod's 1.6 million online households. (The other major personal Web-site provider is GeoCities, which hosts more than 2 million member-built sites and recently filed papers to launch a $72 million initial public offering.)
Now Microsoft is entering the fray. "The ability to create and host personal web pages has been a key missing feature of [the Microsoft Network] since its launch in August 1995," reads an internal Microsoft summary of the new and yet-unannounced service, code-named Diablo. "We have lost points in the press and have suffered in reviews due to missing this feature. While 13% of Internet users have [personal web pages] today, a full 38% have expressed an interest in having one."
Diablo may be the most technically ambitious (and secret) component of the company's latest new-media strategy, which abandons earlier efforts to provide subscriber-based premium content like Slate. The new "portal" approach reverses Microsoft's costly media-mogul gambit and aims to capture masses of Webheads with a set of slimmed-down services, including e-mail, search, news clips, and now Web page hosting—all of which will combine for a handy online home base.
Two weeks ago, Microsoft released a beta version of the first piece of its portal, called "Start," which will eventually replace hub sites like MSN.com and come installed as the default home page for Windows 98. (Big Brotherphobes may reset their home page to the site of their choosing.)
Although Microsoft declines comment on Diablo, the internal report explains, "The business model will be based on advertising.... [Diablo] will be a strong device for drawing traffic to the Portal—both by being a desired application and by acting as 'tentacles' that draw users in from the Internet at large." Part of the advantage of personal Web page hosting is that each member markets his or her own site, either as a business or to friends and family. Microsoft hopes to support 1 million Web sites for 10 million members.
As with even the most "successful" online ventures, Tripod and GeoCities included, profits are scarce. According to GeoCities' IPO filing, the company grossed more than $2 million in ad revenue for the first quarter of this year, but carried an accumulated deficit of $15 million. Diablo can't help its chances in the long run. After signing with Lycos, Tripod (which won't release its financials) partnered with Barnes & Noble and CDNow to generate middleman transaction revenues for both the company and for members who opt to sell books or CDs from their personal sites. "We respect all our competition," says Tripod's Kara Berklich, "and when Microsoft comes into the field, you have to respect that." Then, politely alluding to the MSN debacle, she adds, "But Microsoft has a mixed track record— especially in new media."