Microsoft`s Push for the AdWords Market

We’ve known it for a while: Microsoft’s agreement with Overture expires in June, 2006. This paves the way for MSN to take a large slice of the pay per click pie with its own advertising program: adCenter.

With two of the three search engine giants, Google and Yahoo, already having their massive advertising arenas, it only makes sense for Microsoft to enter the race. What took them so long to start? Were they just dragging their feet, or were they simply being patient and waiting for the opportunity to make a huge splash?

Part of the reason it took so long for MSN to jump on the ad bandwagon is the agreement Microsoft has with Overture, the first successful pay per click ad program, which is owned by Yahoo! Search Marketing. Those who know the Redmond, Washington based company understand that this could not make MSN happy for too long, however MSN chose to utilize some form of advertising while it spent its energy on revamping its search engine.  MSN contracts with Yahoo until the end of June, and will be replacing the contracted program with their own, which has a unique approach that will give both Yahoo and Google a run for their money.  The $15 billion U.S. Internet advertising market is a compelling reason to enter the game, even if MSN comes in last place.

But MSN wants to do more than simply serve ads; they want to be better than what’s already in place.  MSN’s adCenter is unique for its use of customer profiling, taking advantage of the data MSN gathers from its more than 9 million subscribers.  MSN AdCenter, which debuted in Singapore at the end of September 2005, allows advertisers to launch highly targeted online keyword search-based campaigns, with the ability to include or exclude target customers based on geographic location, gender and age and to run ads only during certain times and days.  For MSN, advertising is not just about exposure, it’s about exposure to the right audience.

“With the competing products you buy a word. On ours you go into detailed level and see who is searching for words,” said Eric Hadley, senior director of advertising and marketing for MSN. “You can plan an (ad) buy based on the people and say, ‘I’m willing to pay this much for this demographic, and I don’t want these people in the mix.’”

The adCenter pilot program initially was scheduled to begin in the United States on March 16, 2006, but MSN’s adCenter Beta was active well before that date.  Testing the waters seems like a good idea for Microsoft, who invested millions to launch the program in the United States.  In the pilot program, you can even import ads from Yahoo and Google’s programs to make the switch-over more attractive to those who are already advertising with MSN’s competitors, allowing you to avoid manual upload of each of your keywords or ad campaigns.

One of the major complaints advertisers have with pay-per-click programs is the inability to choose to whom they are advertising, resulting in unqualified traffic.  This will make all the difference in being able to make the sale or not.  MSN’s adCenter information page states, “For instance, if you sell running shoes, you want an audience who is interested in running shoes to see your ad and take action, which may result in the audience clicking on your search ad, visiting your web site, and buying a pair of running shoes. Conversely, you would not want someone who is interested in buying horseshoes to see your ad and take a similar course of action because that likely not result in a sale, but the click on your ad by this person would still cost you.”

Currently, registration for the adCenter pilot program is by invitation only.  You will apply for the program, and if you meet with MSN’s criteria, you will be extended an invitation.  I finally received mine, but it took nearly 4 weeks to receive.  Further, with the invitation, I received a similar sign-up offer, but for the MSN pilot QuickLaunch Marketing Analyst, which I can only assume is like Google Analytics.  I say “assume” because I am still on the waiting list for signing up for Google Analytics.  I can’t report on personal experiences with adCenter Beta just yet, however a few clients signed up for the adCenter pilot program have already seen great returns.

A representative from AskJeeves finds the concept of MSN’s customer profiling slightly disturbing because they feel this violates privacy issues, and so do many others.  But MSN claims that the information they get from registered users is not personally identifiable, and cannot be traced back to any one particular individual.  I would imagine that this would be no different than the information gathered by Google with its toolbar, which technically is a version of spyware.

However, some people who believe this is just another form of spyware are not happy with the idea of customer profiling at all.  And while MSN doesn’t intend for the information to be used in any way to harm individuals, there are plenty of folks out there that don’t have the same ethics.  People have trouble differentiating between helpful and harmful spyware, and would just rather not deal with it at all.

For advertisers, however, the idea is worth gold.  Advertisers are truly tired of spending money on completely unqualified clicks on their ads, and being able to reach their target audience is, after all, what successful marketing is all about.  And, if advertisers are happy, then publishers are happy.

MSN Search rolled out a new user interface in February, a Search and Win promotion in March, which offers prizes to those who use the MSN search engine, and plans to revamp its entire search presence on the web within the next few weeks.  Some critics of the MSN pilot program feel that Microsoft is a day late and a dollar short; Microsoft disagrees and simply states that it was waiting patiently to see where modern search would lead before jumping in with both feet.  Joanne Bradford, top salesperson at Microsoft says, “I thank Yahoo and Google for proving that a software company can be a media company and a media company can be a software company.”

MSN certainly has their work cut out for them, however.  In 2005, Google took in almost $6 billion in revenues from their Internet advertising, four times that of MSN.  Yahoo collected $4.6 billion, more than three times that of Microsoft at $1.4 billion.  Analysts say that they can easily expect MSN’s revenue to double within three to five years; however, experts also say that MSN’s revenue cannot keep climbing unless they close the gap in the irrelevant and what many consider “spammy” results from the search engine.  And no gimmick in the world will make people overlook the poor search engine results, no matter how much they are offered.

Even with a successful launch of MSN’s adCenter, advertisers will only reach a fraction of surfers compared to Google’s and Yahoo’s.  According to the Nielsen Net Ratings, Google finished 2005 with a whopping 48% of all searchers using it as their search engine, with Yahoo coming in second at 22%, which is a considerable decrease since August, 2005.  MSN barely came in third place with only 11% of the searchers to boast about.  Clearly, MSN search has been on the steady decline, and some analysts feel that they were asleep at the wheel for perhaps too long.

MSN recently dumped the Inktomi search engine in favor of its own algorithmic search engine, RankNet.  RankNet is a “learning” engine, collecting information as searchers use the MSN search to better its results every time a search is made, then contouring future results based on the data.  However, many people still seem unhappy with the search results provided by MSN search, indicating a lack of ability to weed out spam and duplicate content, while providing less relevant results than before.

Still, MSN’s marketing techniques are impressive, and Forrester Research projections place MSN’s Internet advertising revenues at $26 billion by the year 2009.  Other experts strongly disagree, especially in light of the current failures by the search engine to provide relevant results.  Microsoft has not unveiled its specific plans to revamp the search engine, whether they are algorithmic, filters, or other changes; they have only indicated that a major change is in the works.

One of the driving forces behind the new adCenter is Microsoft’s Windows Live.  Executives at Microsoft feel that Windows Live is their ace in the hole, and where adCenter is concerned they believe that the unified Windows Live services will allow Microsoft to get a deeper understanding of the people using its online services.

Ad placement using MSN’s adCenter keyword bids depends on a type of quality score like Google’s, taking into account cost per click, click through rates, and relevancy of landing pages.  Where MSN differs from Google in the respect to landing pages is that Google allows non-relevant keywords to prompt ads depending solely upon bid price, whereas with MSN’s ads, if the landing page is devoid of the keyword you’ve bid on, your ad won’t be shown.

Currently, MSN is only serving about a fourth of its ads through its adCenter, while the other 75% are served from Overture or other sources.  The program is still only a pilot program, so statistics are hard to gather during this time.  However, advertisers have reported seeing a higher rate of return on their ads at a much lower cost.  It will be interesting to see where the revenues will increase once the program is in full force by July.  Yahoo says it has already made its adjustments in the financial shift it anticipates from losing the profits from the MSN ad revenues.

MSN fully expects to take a large piece of the pie in July when the adCenter fully rolls out, especially backed by its aggressive marketing strategies.  While some experts feel that the pie isn’t necessarily going to get bigger with the launch, they also anticipate that it will only divide Google’s and Yahoo’s pieces.  Yahoo’s piece of the pie will certainly get smaller, since many of the ads served currently through adCenter are Overture driven, and once Overture’s agreement with MSN ends in June, MSN is free to keep the whole piece of the pie instead of splitting the proceeds with Yahoo.  MSN also will strive to expand the big pie of Internet searchers into a bigger one, and some analysts support this ideology; especially in light of the expanding online searches which are being integrated into virtually everything: toolbars, PDA’s, wireless phones, and desktop utilities to name a few.

It is still too soon to predict where adCenter will end up once the full program is launched, and analysts keep their opposite points of view intact.  I have a “wait and see” policy, and for now, will refrain from making predictions regarding the world of search.  In a way, search engine technology is like the shifting sands on a beach, because the Internet seems to be ever changing and fluid.  Ultimately, in the end, searchers want relevant results, whether in an ad format, or on a search results page.  With all of the changes in the works from Microsoft, MSN search certainly hopes to deliver soon.


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