The online arms race is heating up. As 700 of Microsoft's most important advertisers and agency executives descended on its corporate campus for the second day of its Strategic Account Summit, Microsoft CEO Steve Ballmer unveiled the company's AdCenter, the advertising platform through which it will serve ads to all the companies various online products.
The AdCenter is its ambitious two-years-in-the-works push to get into the advertising business, which Microsoft leaders have decided will be the driving force within that software. (Case in point: A recent video of Mr. Ballmer ranting on stage at an Avenue A/Razorfish client meeting that it's all about "advertising, advertising, advertising" has made the rounds online.)
"This is a big effort across the entire company, not an MSN issue," said Eric Hadley, senior director-advertising and marketing, MSN. "Microsoft engages more customers around the world than any other brand through gaming, mobile applications, IPTV, MSN.com, Live, Office Live for small businesses. Think of AdCenter in the middle of all of that serving ads -- text ads, graphical ads."
$5.1 billion search ad business
Most immediately, the AdCenter platform will be an integral tool in the effort to grow MSN's share of the $5.1 billion online search business. Right now, its share lags behind Yahoo and Google. In fact, the move has partly been spurred on by Google, which has proven how lucrative the search advertising market is. In addition to its success in search, Google has also amassed a collection of Internet-based software products that instead of living on a hard drive, live online. Microsoft fears that may cannibalize its core business: client-based software services, such as the Office tools. So Microsoft has been investing in its own version of Internet-based software: Windows Live.
Many of the Windows Live features were revealed. For example, its mail product, which launched in beta mode last week, offers Outlook-like functions such as the ability to view new e-mails without refreshing the screen and the ability to move mail from folder to folder by dragging and dropping.
Details of search function
Microsoft also detailed several of its search functions. The highest priority, said Christopher Payne, VP-Windows Live search, is to deliver "answers, not just links." MSN claims its search function provides more relevant answers, reducing the amount of time it takes users to find what they want. For example, it prioritizes answers based on what it thinks might be helpful for searchers. A query for "Ice Age: The Meltdown" might show nearest theaters and showtimes.
"This is the kind of thing that really drives user loyalty and user engagement with the system," Mr. Payne said.
One of the biggest changes to the search system is a filtering option that lets users create custom search platforms using criteria they want to be included -- a city, for example, or a liberal or conservative-themed search.
"I see that as a huge stickiness," said Tim Daly, VP-marketing strategy at Sendtec. "Now the trick is for them to get people to understand how to use it."
Internet Explorer and MSN
Microsoft has a long way to go to create the kind of user loyalty Google's search system has been able to create. A new version of Internet Explorer, by far the most popular browser, will feature an MSN search tool in the upper right corner. Already Google has begun to make noise with the Justice Department about the feature, clearly fearing what could be a killer app for Microsoft's search ambitions.
Mr. Hadley, however, is confident that it's the quality of Microsoft's search and Live features will help the company prevail in the uber-competitive online ad landscape.
What matters, he said, is "if you make a better product. The cost of change is low, which is a benefit or detriment, depending on which side you're on."