How much is a partnership with Microsoft Corp. worth to a financial services company?
One way to spot-check occurs every year, when the technology giant releases the newest version of its Money personal finance software.
This year, in one of the few changes to the network of alliances embedded in Money, a new credit bureau is linked to the product. Experian Inc. has replaced Equifax Inc. as a Money partner, a position that required Experian to offer free credit reports, scores, and monitoring services - something Equifax decided was no longer cost-effective.
Nearly every Microsoft partner faces such a question, because the relationships require not only teaser product offerings, but also almost always mean payments to Microsoft for inclusion in the software. (American Express Co., which brings its famous brand to the table, is the rare exception.)
The major credit bureaus - Equifax, Experian, and TransUnion LLC - are all searching for distribution channels for their new consumer products. They are also trying to figure out how heavily they should assert their relatively obscure brands, if click-through Internet advertising is the most effective way to build a subscriber base, and whether banks make better partners than Web portals.
In the case of Money, Equifax decided to pursue more traditional channels; Experian decided to tighten its relationship with Microsoft; and TransUnion, which says it too has been approached by Microsoft, is keeping out of the ambit of such big players.
Microsoft says the change of bureau partners supports its ambition to be a major source of credit data to consumers. After Equifax decided not to renew its contract to offer free products to over six million Money users, Microsoft approached Experian to fill the gap and then some.
The result is a more prominent "credit center," basically a debt management site where Money users can keep track of their credit score (a proprietary Experian one, not a FICO one), use interest rates and average payments to figure out their long-term debt burden, and sort out their credit card bills, among other things.
"We're offering more value" than Equifax did, said Ed Ojdana, the president of Experian's Consumer Direct division. The Costa Mesa, Calif., company is owned by the British conglomerate GUS PLC, whose other lines include Argos Retail Group and Burberry.
The credit center "is the most recent of a very large relationship we have with Microsoft that goes back a number of years," Mr. Ojdana said in an interview last week. Consumerinfo.com, which Experian acquired last year to be the foundation for its consumer business, had earlier used Microsoft's msn.com as a major distribution channel for its products.
"The way to be the leader [in consumer credit reports] is to sew up these online relationships early," he said. Experian has over 125 marketing partners, including Intuit Inc., which says its Quicken software has 15 million users and a 70% share of the consumer finance software market. (Microsoft says Money has at least 6.5 million.)
Jeff Zimmerman, an Intuit senior product manager, said Quicken "offers a lot of services, but does not necessarily focus on trying to give away freebies." Users currently receive a free credit report and 30 days of free monitoring service from Consumerinfo.com.
"We make enhancements to the software," he said Friday. "The cost of a credit report is not what's on people's minds. It's keeping their finances on track."
Most products and services linked to Quicken, including a bill payment service powered by CheckFree Corp. and a credit card issued by Citigroup Inc., carry the software's brand. Mr. Zimmerman said the presence of the Quicken brand also signifies better compatibility with the software.
In the 2004 version of Quicken, which will come out in August, financial institutions will be able to attach links to their Web sites. That is simply a convenience that comes with the software, Mr. Zimmerman said. "It's not a big ad."
Mr. Ojdana of Experian said it would like to offer more products and services through Quicken. He also acknowledged that his bureau's approach to online partnerships has inevitably led to some duds. "A lot of big names in the late '90s," such as the search engines infoseek.com and magellan.com, "are not around anymore," but "some sites that struggled early on, like msn, are now very powerful portals, and we do a tremendous business there."
Microsoft said it is trying to meet increasing consumer demand for access to credit files.
"Average credit card debt is $8,500. That's up from $7,600 last year," said Nicole Rogers, a business manager for the Redmond, Wash., company's financial products group.
Debt management clearly "is an issue our users care about," she said. "Those who are managing their finances using Money want to have access to this information at one place."
The refinancing boom has also created a flurry of consumer interest (and perhaps anxiety) about what is in their credit reports, another Microsoft spokeswoman suggested. On Wednesday, GUS PLC reported that Experian had 1.6 million consumer subscribers for its products as of June 30, 78% more than it had a year earlier.
Equifax, of Atlanta, said it simply chose to reallocate the funds applied to the Money 2003 partnership, though it continues to advertise through msn.com. (Microsoft typically gets paid a commission for each sale generated through its properties.) Equifax does not have a partnership with Quicken.
"We decided to widen the scope of direct-to-consumer advertising this year in more traditional channels," said Virgil P. Gardaya, a corporate vice president at Equifax and the general manager of the consumer business, said last week. "When we looked at our mix of advertising, we saw there were other opportunities out there. So we decided to pass on renewing the MS Money segment."
He also suggested that the decision was influenced by the Atlanta ad firm Morrison Agency, which Equifax hired this year. Equifax is currently advertising products through cnn.com, cbsmarketwatch.com, and other Web sites. It is testing ads with all of the major portals, including Yahoo and America Online.
Meanwhile, TransUnion, which is part of the Pritzker-owned Marmon Group conglomerate, says there is no economic incentive to lock up such pricey ad spaces right now.
"We've had conversations with Microsoft and other portals like Yahoo and AOL," said Jan L. Davis, an executive vice president at the Chicago bureau and the president of its TrueLink consumer business. "They typically require fairly significant monetary requirements for advertising and fairly hefty commissions and fees. We haven't elected to spend our marketing dollars in that way."
Its primary concern is simply to acquire customers at the lowest cost, she said. "At least so far, there are plenty of other places [besides the major portals] to spend money and generate new accounts for less." In the future "those channels might make more sense, if we've exhausted our lower-cost alternatives."
Partnerships with big names can diminish the visibility of emerging brands like TransUnion and TrueCredit, under which the bureau markets most of its consumer products, Ms. Davis said. "One of the challenges when working with a big portal is that it's difficult to maintain your own identity. Promoting the TransUnion and TrueCredit brands are simply part of our ongoing direct-to-consumer approach."
Financial institutions are just as important as Web portals, if not more so, as a major distribution channel for consumer credit products, Ms. Davis said.
All three bureaus have private-label arrangements where financial institutions can resell credit reports and scores to their customers under their own brands. TransUnion has such a deal with Providian Financial Corp., and Equifax has one with Capital One Financial Corp. Experian has yet to sign a deal with a large institution but says it is will this year.
