Microsoft Pitches New Ad Measurement Approach

As it moves to better compete with Google in online advertising, Microsoft is aiming to increase its appeal to marketers with a new way of tracking Web ad campaigns’ performance and return on investment (ROI).

The company’s new “Engagement ROI” measurement — which is being baked into its Atlas Media Console campaign management tool — seeks to promote a change in thinking about how ads affect consumers’ buying decisions.

The conventional take has been that consumers’ buying decisions are impacted only by the most recent ad they clicked on — the so-called “last ad clicked” view.

[cob:Related_Articles]With the debut of Engagement ROI in beta testing on March 1, Microsoft is promoting a more holistic approach that it said gives due weight to other branding aspects that contribute to a customer’s purchasing decision.

“The ‘last ad clicked’ is an outdated and flawed approach because it essentially ignores all prior interactions the consumer has with a marketer’s message,” said Brian McAndrews, senior vice president of Microsoft’s advertiser and publisher division, in a statement. McAndrews previously served as chief executive of aQuantive, the digital advertising company Microsoft purchased last year.

The $6 billion aQuantive acquisition turned out merely to be a precursor to Microsoft’s ambitious plans in the online ad space. On Feb. 1, the software giant made an unsolicited $44.6 billion bid to purchase Yahoo with the expressed purpose of creating a viable No. 2 in an industry where the leader, Google, has shown few weaknesses.

In its latest advertising-related push, Microsoft aims to quantify engagement, a slippery metric that digital marketers have been trying to hammer down as they continue to search for better ways to state ROI.

Engagement mapping will assign a value to each ad that factors into a customer’s “path to action,” Microsoft said.

Using the approach, Atlas Media Console will begin tracking a variety of elements that together can determine an ad’s effectiveness: its size, format, frequency and how recently it appeared before the customer took an action.

“Our engagement mapping approach conveys how each ad exposure — whether display, rich media or search, seen multiple times on multiple sites across many channels — influenced the eventual purchase,” McAndrews said.

The importance of a multichannel engagement metric is supported by a report released late Sunday by Avenue A | Razorfish, one of the world’s largest interactive ad agencies, which Microsoft obtained through the aQuantive purchase. (Microsoft also picked up Atlas Media Console through the acquisition.)

In its fourth annual outlook on the digital advertising market, Avenue A found that marketers are moving away from the portals and diversifying their spending to reach consumers on social networks and entertainment sites, as well as those dedicated to music, gaming and video sharing.

“Customers don’t live on a handful of Web sites or portals anymore, said Jeff Lanctot, senior vice president of global media at Avenue A and editor of the report. “Advertisers still value large sites, but they realize the Web presents a seemingly endless number of advertising options.”

With advertisers diversifying their ad campaigns, Microsoft sees an opportunity with the new multichannel tracking tool to differentiate itself and increase its appeal.

By giving advertisers an ideally better tool to evaluate campaigns’ ad placement, Microsoft hopes to take the guesswork out of multichannel, multiformat advertising. Calling the new feature a “quantum leap,” Microsoft said that Engagement ROI would provide advertisers greater agility and insight in managing their campaigns.

Several agencies and Microsoft ad clients will participate in the beta testing, including [email protected], Citi Cards and Best Western International. Microsoft expects to report preliminary results before the start of the second quarter.

The launch also comes as industry analysts are expressing concerns over what could happen to online ad dollars — key to the growth of Microsoft’s Web business — if companies are forced to trim marketing budgets amid a continuing economic decline.

In the meantime, online advertising is holding strong, with estimated revenues having increased 25 percent in 2007 over the previous year, according a report released today by the Interactive Advertising Bureau (IAB), the industry group for digital marketers.

Online ad spending hit an estimated $21.1 billion in 2007, up from $16.9 in 2006, according to the industry report, sponsored by the IAB and conducted by Pricewaterhouse Coopers. The IAB will report actual numbers in its full 2007 industry analysis in May.

Microsoft’s announcement of the Engagement ROI coincides also with a keynote address that McAndrews is scheduled to make today in Phoenix at the IAB’s annual summit.

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