What Microsoft Could Have Been in Local Search

Back in 1999, Microsoft sold a small business called Sidewalk because it didn’t fit into its core software business at the time. In a lengthy story in Sunday’s New York Times, Microsoft CEO Steve Ballmer admitted: “but Sidewalk was really aimed at what we now call local search. Sidewalk is one (business) we should not have gotten out of.”

It is interesting to speculate what the Web would be like today if Microsoft had not sold Sidewalk. The Kelsey Report’s Program Director at the time, Dan Miller, founder and senior analyst for Opus Research, described MSN Sidewalk as “Microsoft’s private labeling of the Internet. It includes pure access, a home page, personalized utilities (including your favorites) and both technical and generic customer support for all of Microsoft’s products and services.” The relaunch of Sidewalk.com (a stand-alone city guide) to MSN Sidewalk (an online guide) took a page out of the Yellow Pages songbook by calling itself the place that brings buyers and sellers together.

Microsoft executives described e-commerce as “find, choose, buy.” By 1999, Microsoft claimed 4.7 million unduplicated visitors each month to the more than 70 Sidewalk cities with more than 6,000 local businesses participating as advertisers and paying an estimated $26 million for space on MSN Sidewalk. MSN Sidewalk was highly complementary to Microsoft’s core business of selling and supporting software (think a platform for distributing software upgrades, providing free e-mail  hotmail  and sustaining dialogue with its development community). TKG believed that the only downside to Microsoft was that this business required a long-term investment. In October 1998, Dan wrote, “We’d like to go on the record right now saying that MSN Sidewalk, as an Internet Yellow Pages or buyer’s guide, might fail  in the near term there probably isn’t enough traffic on the worldwide Web to justify its advertising rates.”

He further questioned the depth of local sales relationships and the dearth of merchants with transaction processing infrastructure to support “a stand-alone business. That’s just the point. Microsoft does not treat its Internet-based operations as a stand-alone business. It is very much its core operation and is becoming more so as operating systems and applications programs are distributed across IP-based networks,” Dan wrote.

So it was not surprising to read the New York Times article about Steve Ballmer regretting the decision to sell Microsoft Sidewalk in 1999. We thought it was a mistake at the time (although when the Internet bubble burst not too long afterward it didn’t seem wrong). But Ballmer is wrestling with the same issues today that he was then because the company stepped back from making that long-term investment. If they hadn’t, MSN might be in the same position that Windows and Office are.