Don't Count Us Out: Microsoft Assuages Online Advertisers

After Big Buys by Google and Yahoo, Giant Must Use Annual Client Summit to Showcase All It Has to Offer

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NEW YORK ( -- Microsoft's annual ad gathering this week in Seattle comes on the heels of big deals by Google and Yahoo, and the Redmond, Wash., giant wants its biggest advertising clients to know it isn't sitting still in the space either.
Silverlight, Microsft's new video and animation technology, could be the foundation of an internet strategy.
Silverlight, Microsft's new video and animation technology, could be the foundation of an internet strategy.

The confab falls three weeks after Microsoft lost out to Google in the bidding for DoubleClick and a week after Yahoo agreed to acquire online ad exchange Right Media.

"You have to look at Microsoft's position beyond the internet, extending Live and MSN into mobile platforms and next-generation TV platforms, where Microsoft has a pretty good foothold in the system level," said Gartner analyst Andrew Frank.

Show of strength
Indeed, the message will be that Microsoft is bigger than most people realize when all its bits and pieces -- MSN, Live services, Xbox, Office -- are combined. But the company conceded it needs to remind advertisers of all those parts and demonstrate how they work together.

"It's a complex story that we need to help simplify for the advertiser," MSN Chief Media Officer Joanne Bradford said. "They recognize our assets, size, depth and breadth of offering, and we need to make it easier for them to buy and understand."

A major acquisition could help.

As of this writing, Microsoft hadn't made a major online-ad-technology acquisition but was in talks with 24/7 Real Media, and rumors were circulating that it could consider aQuantive, parent company of Atlas and Avenue A/ Razorfish, or ValueClick. Ms. Bradford wouldn't go into details but said, "Don't think we're standing still." She added that Microsoft will have "a strong story to tell" amid all the recent acquisition activity.

Increasing revenue
Microsoft's online ad ambitions fall under its Online Services Business, where revenue was up slightly to $623 million in third-quarter 2007 from $562 million a year ago. The company is investing $2 billion in research and development to try to capture a greater share of the online ad market, but that effort has yet to bear major returns.
Joanne Bradford, MSN Chief Media Officer
Joanne Bradford, MSN Chief Media Officer

Last year the company introduced its Live brand of communication products, which had been branded MSN: Hotmail, Messenger and social-networking tool Spaces, as well as the lauded Live Earth mapping service. MSN regularly builds Live tools into its content; it used Spaces technology on its Stop Global Warming microsite, for example.

Live search, which was supposed to be Microsoft's home-grown Google killer, has struggled to gain share. While Microsoft executives say it's superior to Google search, search-industry watchers have noted one could slap a Google logo on it and few could tell the difference. Building a better product, unless it's a markedly different product, just isn't enough to convert the masses. The company said it soon would put more marketing muscle put behind the Live products.

Silverlight at the end of the tunnel
Microsoft touted one interesting online offering last week in Las Vegas at its annual Mix conference for developers: Silverlight video and animation technology. Michael Arrington predicted on TechCrunch, "Silverlight will be the platform of choice for developers who build rich internet applications." Former Microsoft blogger Robert Scoble titled his post on the topic "Microsoft 'Rebooted the Web' Yesterday." While Mr. Scoble said he doesn't think Silverlight constitutes a web strategy yet, he said the foundation had been built and suggested Google could one day build products on top of the Microsoft technology. "For end users at home, it'll look slicker, feel better and have far better video quality than anything Google can throw at Windows users with YouTube, Flash, etc.," he wrote.

It's not totally clear how Microsoft's ad products play into the technology, although as a start it's offering Silverlight streaming media services for free in exchange for an ad-revenue-sharing plan.

"You have to take a long view with Microsoft because they're clearly in it for the long haul," Mr. Frank said. "There's bound to be a lot of these deals over the years, and Microsoft is clearly capable of making them and being smart about them."
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