Earlier this week, Microsoft released an email marketing extension of Office 365, its cloud-based subscription service that features Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Access.

According to the announcement, Microsoft Connections includes templates for newsletters, announcements and customer referral, subscription sign up pages, and a variety of reports on open rates, clicks, unsubscribes, and so forth.

While cloud-based email marketing vendors like MailChimp provide many more features, what's potentially revolutionary is the price, which is zero dollars a month to companies that are already paying for Office 365.

While this is potentially good news for small businesses (who always like "free"), it's potentially very bad news for MailChimp and its ilk.

The MailChimp business model has a "free to play" lower tier which spikes upwards as the list of subscribers grows. For example, with MailChimp, you can email to a list of up to 2,000 subscribers a month for free, but if you have 24,000 subscribers, it will cost you $150 a month.

This creates absurd situations where some vendors charge as much as $150,000 per gigabyte to store email addresses. Sending the emails themselves costs almost nothing, which is why Amazon's Simple Email Services (SES) is practically free.

As I pointed out in a previous column, email marketing providers like MailChimp don't have a sustainable business model at those prices. They're ripe to be undercut by a vendor whose pricing reflects actual costs.

In that price war, Microsoft has an absurd advantage: money to burn. The company has $126 billion in cash on hand, so offering products for free is no big deal for them. (Although there's always the unlikely specter of another anti-monopoly lawsuit.)

Furthermore, Microsoft probably sees offering free email marketing software, contact storage, and mass emailing as a strategic means of leapfrogging over Amazon, which lacks comparable capabilities.

Finally, Microsoft has a long history of undercutting the business models of companies that receive revenue from software applications that are useful in multiple industries, a.k.a. "horizontal" applications.

So, then, should small businesses make the leap? Not so fast.

The question for small businesses is whether Connections will be like Microsoft Media Player (which was so useful it clobbered RealNetworks) or like Microsoft Money (which was so clunky that even Quicken drove it into being canceled).

While it's way too early to predict the future, Connections is off to a weak start. For example, the overview description of the mobile version of the app (on Apple and Android) currently reads as follows:

Microsoft Connections is an easy to use app to build customer loyalty, get new customers, and grow your business. Customer referrals are the most effective form of marketing. Referred customers buy more, stay longer, and help you grow your business. Connections makes it simple for your customers to spread the love! Connections helps you create, send, and track customer referrals.

However, email marketing is only peripherally connected to customer referrals. I strongly suspect that whoever wrote that description doesn't understand the basic concept of email marketing. That's not a good sign that Microsoft is going to get this right.

Furthermore, as I pointed out in a previous column, Microsoft's track record in business applications, while not as spectacular as its manifest failure in mobile devices, has been less than stellar. (The company's ill-fated attempts to break into CRM come to mind.)

For now, then, small businesses should probably shy away from Connections unless they're already subscribing to Office 365, in which case it might be worth a try. Fortunately, one nice thing about email marketing is that once you've built a subscriber list it's pretty easy to move from platform to platform.

Published on: Jul 12, 2017