Microsoft seeks online advertising advantage

SEATTLE — No one can quite agree on whether Microsoft Corp. held its first online advertising summit in a conference room or a cafeteria, but what everyone does remember is how little attention was paid to the field just seven years ago.

This year, Redmond-based Microsoft is expecting 700 people at its annual MSN Strategic Account Summit, which comes as even the most skeptical of advertisers are realizing the potential — some might say necessity — of hawking their goods online.

But although the field is hot, Microsoft has plenty of work to do as it tries to persuade advertisers to go with its services, particularly when pitted against market leaders Google Inc. and Yahoo Inc.

“Microsoft has long watched sort of on the sidelines as Google has built up online advertising into a hugely profitable business,” said Andrew Frank, research director with Gartner.

Frank doesn’t expect Microsoft to be able to play catch up immediately, but he thinks the company has the potential to find a niche with Microsoft adCenter, the online advertising platform the company is in the midst of launching.

Microsoft has traditionally relied on a Yahoo subsidiary to deliver the ads that appear alongside its search results. Microsoft’s own platform will replace that, although the software maker says the long-term plan is much broader.

With adCenter, Microsoft hopes to eventually allow companies to target detailed audiences, such as men between ages 18 and 25 who make a certain income and live in the Northeast. Then, it hopes to be able to offer those companies the ability to create a variety of advertisements that will reach across a wide swath of mediums where it has a presence, such as its search engine, its television platform and its online videogame play service.

Eric Hadley, general manager for trade marketing with Microsoft’s MSN online unit, insists he and others aren’t losing sleep over the fact that it is still in the early stages of its effort, while Google and Yahoo have recently impressed Wall Street with upbeat profits.

Microsoft’s MSN unit lost money in its most recent fiscal third quarter. Microsoft also conceded that its investment in adCenter will hamper its ability to make money on MSN in the coming quarter and next fiscal year ending in June 2007.

“We’re not in for the sprint, we want to have the long-term play,” said Eric Hadley, general manager for trade marketing with MSN.