At MSN Summit, Visions For An Ever More Digital Culture

Gates, Ballmer lead cheers for innovation, online advertising

After developing software to seamlessly connect a myriad of devices, from the personal computer and mobile phone to the Xbox and even a toaster, Bill Gates celebrated awkwardly with his colleagues by doing the Cabbage Patch as a voiceover exclaimed, “Locked in a room with no shower facilities, greatness can still happen.”

A dream, yes. A reality, not yet.

But if Gates has his way, this humorous rendering of the future—shown as a commercial to an auditorium of some 500 marketing, media and agency professionals at the MSN Strategic Account Summit last Friday—will be a reality sooner rather than later. And the rhythmically challenged Microsoft chairman and chief software architect will be dancing.

The software giant is putting $6.8 billion in research and development behind what it describes as “seamless computing,” which will eliminate the manual transfer of data from one device to another by linking them through software. “This is the era where all those things will happen. This is the decade where digital devices will become a part of mainstream activity,” said Gates, whose comments concluded the fifth annual two-day conference here at the Microsoft campus in Redmond, Wash.

A day earlier, Microsoft CEO Steve Ballmer and MSN chief media revenue officer Joanne Bradford were equally optimistic. Bradford, who said that “everything is going digital in our lives,” called for marketers to raise their budget allocation for the Internet to 8-12 percent, pointing to the travel and financial categories, which already surpass that, at 15 and 17 percent, respectively.

Ballmer was even more bullish, declaring that 100 percent of ad dollars will be spent online by 2010. “You won’t know the difference,” he explained. “Everything will go over intelligent IP distribution. All marketing will have characteristics of online marketing.

Ballmer offered the expected response when asked by an audience member about recent press reports that Microsoft is in talks with Time Warner about possibly buying its troubled America Online unit. “I think it’s always inappropriate to comment on that type of rumor,” he said. “What I would advise to you is don’t read too much into [rumors] and some of them will actually come true.”

Microsoft is playing catch-up in the red-hot search realm. Outsourcing search is “probably the thing I feel worst about,” Ballmer said, projecting the debut of an algorithmic search engine within the next 12 months. Inktomi and Overture, both owned by competitor Yahoo!, currently supply MSN’s algorithmic- and sponsored-search product, respectively.

In a breakout session Thursday afternoon, Christopher Payne, vp of MSN Search and Shopping, outlined plans for MSN Search, which currently gets some 1 billion queries a month. MSN is at work on a search product that features personalization based on a user’s past queries, localization that goes beyond ZIP code or city entries, and an ability to answer a users’ question directly. “We firmly believe that search is in its infancy. We think about the potential,” Payne said.

The following day, Yusef Mehdi, corporate vp for MSN Information Services and Merchant Platform, previewed some of this year’s product introductions and upgrades. Among them: demographic and geographic targeting on the MSN ad platform, an MSN music service and more content partnerships like the one struck last week with Major League Baseball.

Yahoo! chairman and CEO Terry Semel kicked off Friday by advising advertisers to buy across an online network, rather than just the home page or one or two verticals, in order to reach a demographic target. He also said they should purchase more than one network—a practice that has become easier with the standardization of ad units. “If your demographics are sitting in eight or 10 [verticals], won’t you start thinking about how should you integrate this into the entire campaign?” he said. “I get my demographic spread more evenly so my reach extends toward more people.”

Both Semel and Bradford emphasized how the on-demand nature of the Internet is also changing media consumption patterns. To illustrate, Bradford said more than 600,000 people watched online video of The Simple Life’s Paris Hilton getting bucked off a horse, and 22 million viewed the Janet Jackson Super Bowl halftime show incident on the Web. The new dynamics of programming, said Semel, will be, “I want what I want when I want it. I’ll decide what music I want when I want it. I’ll decide what stocks I want when I want it.”

Given that consumers are increasingly controlling their content, “Marketing has to be designed for a world where consumers are in charge,” said Ty Montague, creative director at independent Wieden + Kennedy in New York, during a breakout session Thursday. “Drop your traditional assumptions about your traditional roles. If you’re in advertising, stop doing ads. Learn to tell stories that move people not only emotionally, but physically. If you’re a TV network or portal, stop treating marketers like big checkbooks on legs, but someone you can partner with to build audiences.”

Meanwhile, Donny Deutsch, CEO of Interpublic Group’s Deutsch, called the 50-year-old agency model broken, saying shops stuck in a silo mentality should reconstruct. “They are still being driven by general advertising, and then at some point [the plan] is handed off to the stepchildren. The tools [on the Web] are going to be different, but the [branding] principles are going to be the same. There’s no clear line. It’s not a vacuum. It’s not by itself.”