Did Microsoft Miss the E-Commerce Boat?

Contrary to what Microsoft's (Nasdaq: MSFT) .NET spin doctors would have users believe, the software powerhouse is not likely to dominate e-commerce the way it now rules the desktop.

".NET will not radically change Microsoft's position within e-commerce," Giga Information Group analyst Andrew Bartels told the E-Commerce Times. "It will not be a breakthrough."

Microsoft entered the e-commerce space years ago with portal and shopping sites and commerce servers, but the company has yet to rise above also-ran status in the industry. And pundits said there is no reason to think .NET will dramatically improve Microsoft's e-commerce rank.

Been There

As it stands, Microsoft's MSN portal -- replete with consumer products and services for sale -- is one of the Web's most-visited destinations, as are its small business e-commerce site, bCentral, and other related properties.

In fact, the company's Web sites drew more than 79 million unique visitors in February, second only to AOL Time Warner sites, according to Jupiter Media Metrix.

What is more, in the e-commerce server industry, Microsoft claims ownership of 20 percent of all server license fees, Giga's Bartels noted.

"Microsoft is already a player in e-commerce," he said. ".NET just extends these existing models."

Passport Control

Both .NET and the Passport single sign-on system could serve as effective customer analysis and marketing tools for Microsoft, according to Morningstar.com analyst David Kathman.

"Data collected on customers [through Passport] potentially could be valuable for e-commerce," Kathman told the E-Commerce Times. "After all, customer data is Amazon's (Nasdaq: AMZN) greatest asset."

But e-commerce probably will not become Microsoft's stomping grounds, as the operating system space did.

"It will be impossible for any one [e-commerce] vendor to do what Microsoft has done with desktops," Bartels said. "By that measure, Microsoft is not going to achieve the position in e-commerce that it has achieved in desktops."

Ahead of Its Time?

Standing in the way of Microsoft's consumer e-commerce ambition is the reality that Web services -- .NET's milieu -- probably will not affect business-to-consumer (B2C) e-commerce anytime soon.

"Web services will mainly be a bust on the consumer side for the foreseeable future," Bartels said. "It will first be adopted within a company or with trusted partners."

Kathman suggested that partnerships with leading brick-and-mortar retailers like Wal-Mart could bolster Microsoft's B2C stance.

But while the likes of Amazon and Wal-Mart are respectful of Microsoft, Bartels argued, they have no intention of letting Microsoft dominate the business.

Moving Violations

In addition, Microsoft may have hampered its own candidacy for e-commerce stardom by compiling a track record of customer alienation, security breaches and underhanded land-grabbing, according to Kathman.

"There has been a huge backlash [against Microsoft] from the Justice Department dealings and public relations problems," he said.

Facing a consumer population wary of sharing personal information with any third party, Microsoft weakens its trustworthiness with every announcement of a new security vulnerability uncovered in its Internet browser, instant messaging and other software products, he added.

"If Microsoft wants to become an e-commerce force, it needs to watch what it says and should not scare people any more than [it] already has," Kathman cautioned.