[Infowarrior] - The hard side of Mister Softie

[Richard Forno]

The hard side of Mister Softie

By Josh Quittner

http://techland.blogs.fortune.cnn.com/2008/01/18/the-hard-side-of-mister-sof
tie/

Ah, Microsoft. Nothing gets the knickers of Silicon Valley startup guys more
twisted than signs that the world¹s largest software company is
over-reaching again. The latest outrage? Some of my friends at the Valley¹s
best-known social networks and Web 2.0 companies are privately grousing that
emissaries from Redmond are trying to ³strong-arm² (their term) startups
into giving special treatment to Messenger, Microsoft¹s (MSFT) answer to AIM
and other instant messaging programs.

The problem typically arises when a social network, say, offers its users
the ability to import the list of contacts they¹ve accumulated on Microsoft
Hotmail.

Since the summer, my friends tell me, Mister Softie has been sending
cease-and-desist letters to startups that try to do this. These nastygrams
are typically followed up by a meeting with Microsoft reps, who then try a
couple different approaches to get the startup to integrate Messenger into
their service.

If the company wants to offer other IM services (from Yahoo, Google or AOL,
say), Messenger must get top billing. And if the startup wants to offer any
other IM service, it must pay Microsoft 25 cents a user per year for a site
license.

If, however, the startup decides to use Messenger exclusively, the licensing
³fee will be discounted 100 percent.²

Such a deal!

Or not. The standard Microsoft term sheet being shown around the Valley also
instructs  startups that if they want to offer search at any point in the
future, they must agree ³to negotiate in good faith for a period of sixty
days exclusively with Microsoft on the terms under which Microsoft may
provide such search service functionalityŠ²

Naturally­and no one is complaining this is unfair‹Microsoft also demands
reciprocity of contacts. They say, in effect, we¹ll show you our Hotmail
contacts, but you have to let your users share theirs when they sign up for
Microsoft¹s Windows Live services.

None of the folks I spoke to agreed to talk on the record for fear of
reprisals. So I will refrain from blind quoting some of their more
incendiary remarks. Well, all but one: ³This is a great example of why
Google is the leader in the Net ecosystem and Microsoft is not,² an angry
entrepreneur (who does not work for Google) told me. ³Microsoft is the
anti-data-portability company.²

Google (GOOG) and Yahoo (YHOO) routinely allow users to take their contacts
with them when they join new social networks. So why doesn¹t Microsoft? Just
who owns that data anyway?

We put the question to Brian Hall, general manager for Windows Live. ³We
want the user to be in control of their stuff,² he told me. ³We believe
strongly that it¹s the user¹s data, it¹s the user¹s choice.²

Hall said he was unaware of any Messenger tie-in being a part of a signed
contract, but didn¹t rule out the possibility. ³I don¹t know of any contract
we¹ve signed that has those terms,² he said, pointing out that the term
sheets that are being passed around merely represent what Microsoft
wants‹not what it will ultimately get in each instance.

Aside, that is, from the social network Bebo, which in August announced an
alliance with Microsoft that would bring Messenger in house for its users.
In exchange, Bebo and Windows Live users are now able to exchange contact
information to invite their friends to their respective services. (Hmmm,
will Facebook‹in which Microsoft is a minority investor‹be next to make
Messenger it¹s official IM client?)

Hall did say that in situations where Microsoft was dealing with a tiny
company with few users, Redmond might be looking for a more favorable deal
simply because the exchange of contact lists was so lopsided.

³Let¹s say you are a startup and we offer to do a reciprocity deal where you
can access contacts for our 410 million [Hotmail] users and I have access to
your zero users,² he said, noting that it took Microsoft 12 years to amass
its enormous user database. Why should it simply allow that data to flow in
one direction, without getting a little something back?

But wait a second. If I¹m a Hotmail user, aren¹t all the contacts I amass
mine? Can¹t I take my friends with me?

Hall said that Microsoft¹s main concern, and the reason it sent out Big Foot
letters in the first place, was security. ³If you look at what a number of
sites are doing, they¹re asking for your Hotmail login info, They¹re storing
your identity, which is not a best practices [approach] for anyone¹s data
from a security standpoint. We want to make sure our data is kept between
our users and our servers.²

The thrust of the term sheets, he said, was to create a process whereby
Hotmail and other Windows Live data could be shared securely with third
parties. Added Hall: ³There are models for federation where you can trust
other services‹and that¹s what we¹re trying to do with our partners.²

Thats what doesn¹t make sense to me. If this is such a security problem, why
do Google and Yahoo let their users take their contacts with them?

Disclosure: Time Warner (TWX) is the parent company of Fortune and AOL,
which competes with Microsoft via its AIM messenger service and other
services.