Microsoft Pushes to Boost Internet Ads, Gain on Google, Yahoo
By Dina Bass
Sept. 25 (Bloomberg) -- Microsoft Corp., trailing in the Internet advertising market, is stepping up efforts to take market share from Google Inc. and Yahoo! Inc.
The Microsoft division that sells advertising for company Web sites will begin offering ads on products from video games to online business services as well, said Vice President Joanne Bradford. Microsoft, the world's largest software maker, hopes to quadruple ad sales in the next three years, said Bradford, who will unveil the strategy this week at the annual Advertising Week show in New York.
The move is part of Redmond, Washington-based Microsoft's plan to add clients to a list that includes DaimlerChrysler AG and Visa International Inc. Behind in an Internet search ad market with annual revenue of $6.5 billion, the company is trying to compensate with more sophisticated and customized ad campaigns.
``They are perennially underrated, despite the size of their audience, and left in the shadow of Google and Yahoo,'' said Jeff Lanctot, vice president at Seattle-based ad agency Avenue A/Razorfish, whose customers include Nike Inc. and Citigroup Inc. ``They are seen broadly as having failed because of the search weakness.''
The changes will let ad clients deal with one salesperson to set up a campaign on multiple Microsoft products, said Microsoft General Manager Eric Hadley, 35. ``People don't see Microsoft as successful in online advertising because we're so fragmented,'' he said in an interview.
`Not Enough'
Microsoft's MSN unit generated $1.39 billion in ad sales in fiscal 2005. The company declined to disclose the figure for the year ended June 30. Google had $6.07 billion in 2005 ad revenue, and Yahoo had $4.59 billion.
``Whatever Microsoft is doing, so far it has not been enough to keep pace,'' said Matt Rosoff, an analyst at Kirkland, Washington-based Directions on Microsoft.
Microsoft has doubled its ad sales force in the past year to ``hundreds,'' said Bradford, 43, who oversees ad sales. The company in May bought new York-based Massive Inc. to sell video- game ads, and Microsoft's new Office Live Internet service has sold out its entire ad inventory to companies such as Dell Inc. and Bank of America Corp.
Two new products, the Zune music player and the MSN Soapbox video service, plan to carry ads as well.
Bradford also wants to convince companies that campaigns relying on so-called display ads will be more effective than typical ads that appear when a user looks up information. The industry has ``spent a little too much time on'' such ads, she said.
Search Versus Display
Search ads appear adjacent to results on sites such as Google and MSN. Display ads, a market led by Yahoo, are larger ads with video and graphics.
JupiterResearch forecasts search advertising will grow faster than display advertising through 2011. Still, convincing customers to spend more on display ads would help Microsoft, which gets most of its ad sales from display, according to Yusus Mehdi, 39, who was appointed Microsoft's chief advertising strategist in March.
Microsoft's effort comes amid a downturn in Internet advertising that caused Yahoo on Sept. 19 to say results will come in at the low end of forecasts.
Microsoft gets praise from Avenue A's Lanctot for having engineering executives talk with advertisers to ensure products meet their needs.
Visa's Campaign
That wasn't always the case. Mehdi spent a lot of time trying to figure out if the Internet ad market was ``for real or just a random thing,'' he said. In 2002, when MSN passed $500 million in ad revenue, Bradford met Chief Executive Officer Steve Ballmer, who dubbed the effort a ``real'' business, Bradford recalled.
Microsoft is trying to win clients by helping them run distinctive campaigns that go beyond standard banner ads, using tactics such as contests, user-generated video and sponsorships.
Visa has run several campaigns on MSN, said Jon Raj, Visa's vice president for advertising. It's a far cry from 2002 when Visa didn't work with Microsoft, he said. That year, Bradford ran into Raj at a conference and asked for a chance to change his mind.
In 2003, Raj considered Microsoft competitors for a contest asking 18- to 29-year-olds to submit videos of their best inventions, one of the first experiments with user-generated Internet video. ``Just for kicks,'' he said, he added Microsoft. The company won. ``Now when we are working on innovative projects they have the team to come in and help us make that a reality,'' he said.
To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net