Why i-bankers shouldn't be venture capitalists, part 476:

Regarding Microsoft's move to cancel it's free chatrooms: '"Our assessment is that Microsoft sees little economic value in maintaining a free, anonymous service," Credit Suisse said in a report to its clients'.

Wait - you mean like Google does with Blogger, it's website, Froogle and Google News? You mean like Amazon does with all of the cool toys on it's website, like it's collaborative filter? You mean like every major newspaper in the world does on the web? You mean like the samples cosmetics companies hand out in department stores? You mean like Microsoft itself does with Hotmail?

Services like these allows firms to build several critical resources and capabilities. The first is is a locked-in user base. Firms can do tons of cool things with locked-in user bases. The second is an innovation capability. These services are like real-time experiments (think Google Labs), which let firms try out new ideas on real users. Just as important they create an external pull for innovation from the user base itself - keeping the firm in touch with market signals. Finally, services like these allow firms to leverage and stretch their existing competences, building new ones to compete for the future.

The i-banks' advice amazes me most of the time. Their view of business is not even based on economics - it's purely based on finance. They sorely need to spend some time in the real world of business.

The quote is from here.