AdAgeChina: This is your fourth trip to China since December. Why is this market now so important for MSN?
Bill Shaughnessy: Like many companies, you can't look at China and not appreciate the opportunity that exists, just [through] the law of big numbers. You have to have a presence. There are things going on here [like] technology adoption that are core to what Microsoft represents so it makes perfect sense as to why we anxiously want to have a bigger presence here. The last year has been about growth, learning and scaling up infrastructure, people and interest from advertisers we want to attract. We're starting to win some big brands as advertisers on MSN like Pepsi.
AdAgeChina: MSN operates in China through a joint venture with Shanghai Alliance Investment, not directly through Microsoft. Does that make it more challenging for an American company to develop in China in the same way it is growing elsewhere?
Mr. Shaughnessy: They're actually a great partner. Frankly, nothing is holding us back from developing what we want to develop in China. The MSN business is essentially a media-funded business, for the most part, so by its very nature it's going to speak a different language. In fact, I think it's a language the rest of Microsoft needs to start understanding with the growth of online advertising, as more dollars move to the online world from traditional media, it's becoming a bigger and bigger part of our ability to drive revenue. It's something the company is embracing wholeheartedly right now.
AdAgeChina: So China is leading the way in some aspects?
Mr. Shaughnessy: I wouldn't say leading the way, it's consistent with other Internet markets. The online advertising market in China as a percentage of overall spending is smaller than in other big markets like South Korea or Japan. However, the growth rate is pretty stunning and as China becomes a more consumer-driven economy and develops a taste for consumer goods, money follows the eyeballs. As more and more Chinese spend time on the Internet, you"ll see more dollars flow there.
AdAgeChina: China is a very advanced Internet market, with more than 110 million users, but it's not a very sophisticated creative market.
Mr. Shaughnessy: True, but hopefully our competitors face the same situation, so we're all in the same boat. There are markets that have embraced advertising wholeheartedly. If you look at the Chinese market as it
becomes more consumer-driven, naturally you're going to see more innovation around advertising.
But there are nuances that happen in Asia that are different compared to the U.S. For example, when we look at our usage patterns, China drives twice as many MSN Spaces, pages like blogs, photos and other user-created content, compared to the U.S., which says a lot about the potential of this area.
AdAgeChina: Who's the most popular blogger on MSN in China?
Mr. Shaughnessy: My team today was talking about a guy named "Poison," who created a site that over six million users have visited. It's just some guy who dresses cool. Apart from that, there's nothing really unique about him, but the site just took off.
AdAgeChina: How important is it to get China right?
Mr. Shaughnessy: We view China as a top four market, not in revenue today, but in opportunity, strategic importance, investment, it's right up there with the U.S., Japan and the U.K. Historically we looked at advertising opportunity, Japan was the biggest market outside the U.S., but when you look at sheer numbers, and strategic importance, China clearly has to be part of that top tier.
Five years from now, I think the numbers are going to be so insanely huge, but I could make that comment for Microsoft in general, that's why we're investing so much. We have a major R&D facilities in Beijing, Shanghai and Shenzhen. China is a huge bet. The fact that the Chinese President [Hu Jintao] recently visited Bill Gates? house shows that it goes both ways.
AdAgeChina: Did you get to meet President Hu during that trip?
Mr. Shaughnessy: No, but I live down the street so I purposely made it a point to go for a walk that night. All I saw were police and helicopters, unfortunately, but I heard that meeting was incredibly positive, which is great for all of us at Microsoft.