Microsoft Sees Internet Ads as Key to Future

NEW YORK The growth in the online advertising market has caused Microsoft to look for more ways to capture the market and produce growth rates more similar to Google and Yahoo.

The introduction of ad-supported Internet services Windows Live and Office Live are part of a broader effort to build a bigger presence in the online ad market, where Microsoft’s MSN badly trails Yahoo and Google. In its latest quarter, Microsoft’s display advertising revenue grew about 20 percent from the same period a year ago. Yahoo’s ad sales grew 40 percent and Google’s more than doubled.

Live.com is a personalized portal page that allows users to organize Web feeds and add instant messaging, e-mail and blogging from a single location. In September, Microsoft reorganized its corporate structure, placing MSN within a unit that encompasses Windows and its other consumer software products.

“We’ve already embraced advertising and ad revenue in MSN,” said Joanne Bradford, chief media revenue officer at MSN. “This is the company saying advertising revenue is important to the future of Microsoft.”

At the center of its advertising strategy is MSN adCenter, a platform designed to let advertisers target placements based on demographics and behavior. Microsoft is currently testing adCenter for search results, but it plans to add Live services to the platform, as well as the ability to run on X-Box, mobile devices and Internet TV.

The Live Web services primarily will carry graphical ads, Bradford said, with most priced on per thousand impressions. Unlike search ads bought through adCenter, Microsoft will not conduct an auction for the placements.

The company is also experimenting with running ads on Microsoft. Bradford said she expects adCenter will include the MSN portal by the end of 2006.

Bradford said the development of powerful ad systems, like adCenter and Google’s AdWords, are a response to the need for advertisers to efficiently handle advertising efforts in a scattered digital media landscape. “Search scales because it’s highly automated,” she said. “Once we can automate the rest of the process, it will scale.”