MSN Takes First Step Toward Native Ad Platform

In a move that could eventually eliminate the need for MSN to share ad revenue with archrival Yahoo , MSN announced it would begin testing its own online advertising platform. The move follows the January 2005 rollout of MSN’s built-from-scratch search technology.

Dubbed MSN adCenter, the homegrown technology is designed to let advertisers take advantage of the audience information MSN gleans from its users to better target keyword ads.

Advertisers will be able to refine their keyword buys by geographic location, gender, age group, lifestyle segment and time of day, combining data from Microsoft’s Passport registration and purchased demographic information from partners including consumer data bureau Experian.

The new ad platform will start with a very limited test, beginning in Singapore and France sometime within the next six months, with no set time frame for completion.

Eric Hadley, senior director of advertising and marketing for MSN, said Microsoft plans to use technology to differentiate itself from rival paid search advertising providers Yahoo and Google.

The new ad platform takes the best of the various systems MSN now is using, Hadley said. “The vision is, this will be a platform that allows you to buy everything. Now, we have the ability to manage campaigns across our network. This tool will give a new level of business intelligence.”

He said the ability to take the usage data that MSN is constantly mining and combining it with data sources such as Experian will provide much better tools for targeting ads.

For example, according to Hadley, when a florist buys the keyword “flowers” on a rival search engine marketing network, it has no way of controlling which searchers see the ad. The plan for MSN adCenter is to let that florist choose to only show the ad to high-income men who, according to MSN’s analysis, are more likely to send flowers as a gift.

“The software provides business intelligence so advertisers know more about their campaign going into it.”

Another feature in the works will let marketers submit URLs of their Web pages. Software will analyze the content and identify relevant key words. “If we can give our customers more tools to reach their customers, they’ll have a more successful campaign,” Hadley said.

MSN is starting with the popular pay-per-click search ad model, but Hadley said the company plans to extend the tools and platform to include a variety of placements and media types.

“Ideally, the same intelligence would work for an e-mail newsletter buy, a video buy, a banner buy,” he said. The eventual goal is to provide a “one-stop shop” for planning, executing and managing all kinds of online campaigns, from mom-and-pop baby bootie advertisers to major players working with search engine marketing companies to manage millions of key words.

“How the baby bootie advertisers use the tools will be different from [how large marketing companies] use them,” he said, “but the business intelligence will be the same.” MSN hasn’t made any decisions about minimum buys or minimum bids for key words, he said. The pilots will help determine what the market wants.

Chris Winfield, president of search engine marketing firm 10e20, said he welcomed a new face — and more competition — in the game. “You know at first they’re going to have to charge less,” Winfield said. “For a small business that’s gotten sick of paying so much, they can take advantage of some good pricing on MSN — for a little while.”

While advertisers bid for ad placement on Google and Overture, Winfield said, the ad networks set minimum bids, and prices have risen from a penny per click to five cents and then to ten cents a click. He guessed MSN might start the bidding at five cents.

He thought the move was a smart one for MSN, which is in third place in terms of search usage, according to Nielsen/NetRatings. Yahoo is MSN’s closest competitor, with Google having a long lead, yet MSN shows Yahoo’s pay-per-click listings in its search results and has to share the revenue. Yahoo was in a similar position last year, when it used Google’s search technology until it launched its proprietary search technology.

Microsoft had no comment on whether its plans might infringe on patents on a bid-for-placement system owned by Yahoo Search Marketing Services (formerly Overture).

Overture sued Google for patent infringement over Google’s AdWords pay-per-click advertising service. Google settled the suit in August 2004, giving Overture 7.5 million shares of pre-IPO Class A stock and licensing Overture’s technology.

An MSN spokesperson pointed out that Yahoo still is a partner of MSN, and the official press release emphasized the company’s commitment to continuing the partnership, which it recently extended through 2006.

Microsoft CEO Steve Ballmer will premiere the new software at the company’s annual conference for advertisers on Wednesday.

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