Microsoft morphs into media player

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Microsoft has seen the future, and it's advertising.

By consolidating its ad-sales staff within one global Microsoft Corp. sales division and promoting MSN's U.S. sales chief Joanne Bradford to run it, the company signaled its seriousness about becoming a bigger media player and started to execute against the vision of Chairman Bill Gates, who said last fall that he was staking the company's future on Internet advertising.

Ms. Bradford and her team will not only sell ads on, but also on Xbox, Xbox Live and a whole range of new Web-based software products such as Office Live and Windows Live. They will also try to introduce more behavioral targeting ads. Not only does this greatly expand Ms. Bradford's total inventory, but it gives her intriguing ad options that differentiate Microsoft's offers from those of its two bigger online ad rivals, Google and Yahoo.

Why did Microsoft wait so long to ramp up its online ad sales offering? "We were finding our conviction about the advertising business," admitted Ms. Bradford, whose new title is corporate VP-global sales & trade marketing and chief media revenue officer.

Part of Ms. Bradford's challenge will be to standardize online pricing and unit sizes across platforms and markets. MSN is in 42 global markets, and international advertising amounted to 40% of the company's worldwide advertising.

For the second quarter of the fiscal year 2006, MSN revenue worldwide decreased 2% to $593 million compared with the second quarter of the prior year.

"It takes someone incredibly strong to lead that effort in that organization," said Sarah Fay, president of Aegis Group's digital global network Isobar. "If you want people to fall in line, you have to get someone at the helm who is highly credible. And I think she is."

Microsoft also plans to serve ads customized to consumers' desires. It has long served ads targeted to users' geographic and demographic profiles. Now it will ask users to fill out a profile that tells the portal what kind of advertising matches their interests. (Users who don't complete the profile will see a standard series of ads.) "It's about making ads more relevant to you as a consumer," Ms. Bradford said.

Change the dynamic

Jeff Lanctot, VP-media and client services at interactive agency Avenue A/ Razorfish, said that although he is not convinced that the majority of users will take the time to tell Microsoft what ads they want, "if it's successful, it will really change the ad dynamic because it will take the issue of consumer control to a new level."

Such sophisticated metrics will give brands the data to segment and target their customers better. "If you can identify who is buying and who is the more valuable customer, you can treat them according to future purchasing [potential]," said Joe Wilcox, senior analyst, Jupiter Media. "That's the benefit."

Google, which serves ads based on the context of the page the user is on, has not done much behavioral or geographic targeting. The AOL/Google pact sealed in December to cross-sell ad products could give the search leader access to customer data it wouldn't otherwise be able to tap, though. And Yahoo, with its 100 million unique visitors and richly segmented database of registered users, has long been a sophisticated behavioral marketer.

Microsoft's behavioral targeting "gives us some critical mass and focus to compete with Google," Ms. Bradford said. Microsoft attracted 192 million unique visitors worldwide in December, versus Google's 198 million and Yahoo's 200 million, according to Nielsen/NetRatings.

One challenge for Microsoft is touting services that aren't ready yet.

The Windows Live products-a collection of Web sites containing software tools that let consumers customize their own content-are in beta and will not begin rolling out for Hotmail, Messenger and Gadgets until later this spring. MSN Hotmail has about 215 million active members worldwide and Messenger has 185 million active, according to Microsoft.

"Live is for an Internet achiever-someone who feels the Internet can empower them," Ms. Bradford said.

MSN's blog service, Spaces, will continue with the one-sponsor model of main pages, but will seek to clump targeted ads around user groups with common interests. Ms. Bradford's team is seeking branded-entertainment sponsors for online games through Xbox Live, at about $1 million a pop, as well as in-game advertising.

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