May 5, 2006 1:35 pm

The week in technology: Microsoft’s ad attack

Microsoft stepped up its attack on Google’s advertising stronghold, announcing that all ads on its MSN search product were now powered by its own AdCenter system.

As of right now, 100% of our traffic is being served through adCenter. This means no more Yahoo! ads on Microsoft Search pages in the US, France and SG,” said David Jakubowski, head of Microsoft’s Go To Market and Search Strategy division.

“Anyone with a credit card can sign up and start running campaigns,” he added.

This is the first time that adverts are all supplied by Microsoft’s own ad network, allowing it to compete fully with Google and Yahoo!.

At a conference with ad industry representatives at Microsoft HQ, the company, which has been steadily increasing the proportion of MSN ads supplied by AdCenter and reducing those powered by Yahoo! technology, also sought to woo advertisers by stressing its wider presence which now stretches from the PC and the web to video games consoles and mobile phones.

Microsoft plans to insert targeted advertising generated by AdCenter into a range of digital services beyond the confines of search. The company is planning to release a beta version of a contextual advertising service in the next few months which will allow Microsoft powered ads to appear on websites other than their own.

The launch of AdCenter was described as an “important milestone” for Microsoft, which now describes itself as a provider of online media through sites like MSN and Windows Live rather than a software company, its traditional role.

Most commentators recognised the move was a crucial strategy shift for Microsoft.

“No understimating the importance of the project to Microsoft. As Tarek Najm, adCenter GM, told the Journal, it’s “the next big revenue engine for the company”, said Staci on PaidContent.org.

But the company has a lot to do to close the widening gap with Google, which reported an 80 per cent rise in search ad revenues in the latest quarter.

“This is being positioned in a lot of places as an effort to beat Google but Microsoft can win by increasing its own share — even if it doesn’t gain supremacy (an unlikely scenario in any case) — and becoming a “must buy” instead of “maybe in addition to”, added the PaidContent blogger.

AdCenter works in a similar way to rival products, with advertisers bidding against each other online to have their ads displayed alongside search results. But in addition to ads appearing on certain keyword searches AdCenter also targets ads according to some user demographics.

The first impressions of the service were not altogether favourable. One blogger said the service was running far from smoothly with a “maddeningly confusing” user interface and no ads appearing some 24 hours after setting up a new campaign. Then the keyword selection tool broke and stayed broken.

Another user complained of error responses like “unspecified data error” and “no record of my user name” while trying to use the system.

Ebay’s slowing pains

EBay’s latest quarterly results, published two weeks ago, failed to dispel fears that the company’s stellar performance of the past was beginning to slow, and its share price fell 8 per cent on the day.

At the company’s annual analysts’ conference on Thursday, executives from eBay tried to shake off the concerns by talking up plans to move into new, faster-growing areas of e-commerce.

Meg Whitman, chief executive, talked up the prospects for selling “in-season” items and the new website, eBay Express, for customers who don’t like the traditional auction style buying. Buy-it-now items, which sell for a fixed price, already account for about 34 per cent of sales on eBay and the company sees potential for competing more with conventional retailers.

On the Skype front however Ms Whitman said the voice-over-IP company, which eBay bought last year for $2.4bn, was not likely to add to earnings for two to three years.

Om Malik had some advice for eBay on his blog this week, including “come up with eBay 2.0 and figure out a role for the company in the digital future” and “get into digital media sales”.

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