Microsoft Sees Ad-Supported Software

NEW YORK Microsoft plans to extend its new online advertising system to put ads across a variety of the company’s services and products, including its popular consumer software programs, an MSN executive said.

MSN adCenter, which launched today in France and late last month in Singapore, will be rolled out in the U.S. market beginning in October, the company said. Within 18 months, the platform will expand from search advertising to encompass a range of media, including mobile, gaming and even software, said Yusuf Mehdi, senior vice president of MSN’s information services and merchant platform unit.

“We’re working on a single advertising system,” he said during a keynote address to open the MIXX Conference in New York, sponsored by the Interactive Advertising Bureau and Adweek Magazines. “It’s an ambitious vision.”

A key part of that vision, apparently, is exploring ad-supported software. Mehdi said Web advertising is now viewed within Microsoft as a company-wide mandate. Microsoft recently reorganized its corporate structure, placing MSN within a unit that encompasses Windows and its other consumer software products.

Mehdi said Microsoft believes its ad system serves as a “one-stop shop” for advertisers to target audiences on MSN, Xbox, third-party sites and even users of its software. “We’re thinking of offering software that is ad funded,” he said.

The move to ad-supported software, which could encompass Microsoft Office programs, could give MSN adCenter enormous reach. Microsoft this summer considered purchasing Claria, an adware maker, though executives decided against the move after criticism arose from Claria’s past business practices. Claria built a 50-million installation base by bundling its pop-up advertising software with free programs like file-sharing services. Critics maintained many users unwittingly downloaded the advertising software, a charge Claria has disputed.

Mehdi did not elaborate whether such ad-supported software would place ads within the programs or through a separate application.

Mehdi allowed that MSN is late to the search market, calling it a “small player” in a space dominated by Google and Yahoo. With its new search engine and MSN adCenter, however, he said Microsoft would quickly catch up by giving advertisers the ability to use demographic data to improve their ad campaigns.

“We really are betting on the audience, on the customer intelligence,” he said.

MSN adCenter uses aggregated user information from Hotmail other site registrations and matches it to third-party data sources, creating audience profiles tied to keywords. In a live example, Mehdi showed how advertisers could find the gender and age breakdown for searches of “vin” (wine) in France, which tend to be older males, while women over 65 frequently search for “Vin Diesel.” Mehdi said Microsoft would eventually add behavioral targeting to the system.

“Nobody yet has harnessed the power of a wide audience,” he said.