Microsoft's Wide-Open Spaces

Given its wild popularity with young Web surfers, News Corp.'s (NYSE:NWS) MySpace has understandably become a threat in the eyes of its Internet rivals. Perhaps in response to the hip social-networking site, Microsoft (NASDAQ:MSFT) is set to launch a new version of its Spaces service, newly linked to its Windows Live service, that contains more social elements than before.

Microsoft's Spaces allows its users to set up blogs, just like Google's (NASDAQ:GOOG) well-known Blogger. Windows Live Spaces, the new and improved version soon to launch, will expand upon blogging with a host of new features. The new offerings include Windows Live Gadgets, tiny Web applications such as weather updates or stock tickers that Microsoft says are "developed by the community for the community." In addition, Friends Explorer will allow users to connect with one another through Windows Live Messenger.

Significantly, Microsoft will give Spaces a social-networking feel by allowing users to set up "Friends modules" through which folks can hook up with one another. These aren't unlike the friends lists provided by social-networking sites like MySpace or Friendster.

In another interesting development, Windows Live Spaces will feature banner advertising to cover the costs of the otherwise free service, as opposed to the text ads Spaces has featured in the past. However, if users find the ads annoying, they can upgrade to a for-pay premium service, Hotmail Plus, which will allow them to turn off the ads in their personal Spaces.

That's an important detail to note amid the increasingly ad-driven Web. Advertising on MySpace -- including the intrusive, graphics rich Flash ads that particularly annoy me -- has become a big, big deal, given the site's tens of millions of daily users. Some advertisers have even set up "profiles" to collect "friends" for future marketing opportunities, including Wendy's (NYSE:WEN) and Disney (NYSE:DIS). It's an interesting state of affairs, given that that many people believe younger consumers are increasingly tuning out old-fashioned, non-targeted advertising. (I wrote about similar shifts in advertising earlier this week.)

Microsoft's not the only one trying to get into the action, though. Yahoo!'s (NASDAQ:YHOO) current Yahoo! 360 service also integrates blogging and social networking elements. In addition, Time Warner's (NYSE:TWX) AOL offers users AOL Journals, and rumors circulated earlier this year that it would offer a stepped-up rival to social-networking sites.

Microsoft's smart to try to elevate its profile in social networking with this new and improved iteration of Windows Live Spaces. But for the time being, there may not be enough differentiation for Spaces to tackle the real heavyweights in the arena.

Microsoft is a Motley Fool Inside Value selection, while Time Warner and Disney are Motley Fool Stock Advisor recommendations. Try either service free for 30 days by clicking the preceding links.

Alyce Lomax does not own shares of any of the companies mentioned.