Microsoft Takes Aim at Pay-Per-Click

Posted on by Chief Marketer Staff

Google and Yahoo were put on notice earlier this month that the paid advertising search is set to become a three-horse race. Microsoft hosted a meeting for advertisers at its Redmond, WA, headquarters to unveil its own proprietary platform for linking pay-per-click ads to search results and other Web pages. And although the launch announcement made all the right nods to peaceful coexistence and the importance of MSN’s contractual obligation to Yahoo, no one thinks the software superpower is about to settle for third place in the paid search sweepstakes.

At its annual Strategic Account Summit for its biggest online advertisers, Microsoft CEO Steve Ballmer stressed the importance of becoming competitive in a search industry that has grown beyond the company’s initial expectations, both in usage and in the advertising dollars it brings in. “We’re going to drive and drive and drive and drive innovation as fast and furiously as we know hot to in search,” he told the meeting, according to press reports. “We’re a company that is fairly persistent.”

The company announced that it will begin testing its pay-per-click service within six months, starting with MSN Search properties overseas in France and Singapore. Those pilots will be used to gather comment from both advertisers and users. No firm date has been announced for any test of the platform in the U.S.

Much of that innovation will focus on giving paid-placement advertisers more visibility than they currently have into the audience that they’re buying when they bid on clicks. To provide this finer detail, Microsoft will apply the aggregate audience data that it receives from anyone who registers for an MSN service, including Hotmail, according to MSN product manager Karen Radetzki. These details will include demographic information about age and gender, lifestyle or psychographic data, income detail, dayparting, geographic location down to the city level.

That sharper ability to target keyword bids will mean that advertisers will be able to think in terms of buying audiences, not just bidding on terms, Radetzki said “We want to go beyond the click and turn it into a real connection to customers.”

Just as significant as the level of audience detail will be the fact that advertisers will have access to this data surrounding keywords before they place their ads and launch their campaigns, allowing them to strategize search engine marketing the way they now do other media buys. Advertisers will also have a greater ability to adjust keyword buys during a campaign, and will get fuller post-campaign reporting. “One thing we heard from advertisers was that after a campaign had run, they were not certain how clicks translated to their business and ROI objectives,” Radetzki said. “We will provide the back-end intelligence specific to those campaigns: For these keywords, in these campaigns, you reached this consumer, with details about age, gender, what page they viewed, when they saw them, geography, wealth status, and so on.”

In launching the pay-per-click platform, to be known as MSN AdCenter, Microsoft aims eventually to make it a one-stop shop for integrated ad campaigns across a number of properties, not just the revamped MSN Search that the company moved into beta testing last fall. Advertisers should in time be able to use the audience intelligence to buy e-mail ads, contextual advertising, and banner and video ads across the range of MSN properties. Reports from the Ad Summit have even included Microsoft’s digital TV property, called IPTV, in that group.

“AdCenter will deliver that intelligence with one tool, in one place, with consolidated billing and the same campaign management functions for a gamut of advertising opportunities,” Radetzki said.

She added that the reasons for choosing Singapore and France as ground zero for the AdCenter pilots were twofold. For one thing, the company wanted to test in both an English-speaking country (Singapore) and a foreign one. For another, it wanted to test on two different advertising models. In Singapore, MSN Search uses only MSN paid-placement ads at the page header position; but in France, MSN uses Yahoo’s right-rail ads.

Inevitably, that brings up the question of MSN’s ongoing relationship with Yahoo, one of the two largest suppliers of paid-search ads along with Google. MSN is currently operating under a contract to accept ads from Yahoo’s paid-placement service, including in MSN Search. That contract runs through June 2006 and gives MSN the right to sell “MSN featured” ads in a spot at the top of the results page, while Yahoo’s ads run along the right rail. Both at the advertiser summit and in subsequent interviews, Microsoft has been careful to stress that the AdCenter launch does not signal a severing of its relationship with Yahoo.

“Our relationship with paid search from Yahoo is highly valued and is not going to change based on this announcement or because we’re piloting this program,” Radetzki said. “Worldwide paid search is a $6 billion opportunity today according to Piper Jaffrey and expected to grow to $10 billion by 2008. We don’t see coming in and pushing anyone out. We see everyone benefiting, particularly the advertisers and customers.”

Nevertheless, it’s widely expected that MSN won’t renew its contract for Yahoo paid-search placement once it runs out. Yahoo CEO Terry Semel has been reported in various press reports as speculating the same way. In one interview, he allowed that the search advertising market was big enough to accommodate three major players. That report also quoted Semel as saying that supplying paid-search ads to MSN was a “not very interesting” line of business for Yahoo.

But while the number two paid search provider may be impassive in the face of Microsoft’s pay-per-click debut, SEM firms and search advertisers should find opportunities and better customer service in the new environment, according to several industry players. “Anything that creates competition is good for the guys who are buying,” says Will Margiloff, CEO of online marketing firm eXact Advertising. “MSN is a fabulous source of traffic.”

Margiloff points out that some paid search providers have been more receptive than others to the needs of advertisers and the SEM firms serving them and says that Microsoft’s AdCenter launch should solidify the position of SEM firms in the search industry. “With more competition, it’s going to be an increasing component of their business to make sure firms like ours are being worked with and getting good customer service,” he says. “As MSN enters the marketplace, and possibly AOL follows later, they’re all going to step up and do that.”

Frederick Marckini, CEO of SEM firm iProspect, attended the Microsoft Ad Summit and says that the demonstration he saw there was “very powerful”.

“It raises the bar on search engine advertising,” he says. “It’s not just that you can limit and control your bidding, it’s that you can research terms before you buy. There’s information there on searchers by keyword and phrase that no one has ever seen before. That kind of data is gold for marketers.”

Marckini believes the AdCenter launch portends the arrival of the age of true, full-fledged searcher demographics in search engine advertising. Both Yahoo and Google are going to have to respond to this strategic innovation on Microsoft’s part, he says, and at least one of them is well positioned to do so. “Don’t forget that Yahoo has their e-mail platform and their My Yahoo registrations, so they gather a lot of data on their searchers as well.” As for Google, he says, that company has made it a point of honor never to be last with innovation.

“Right now, Microsoft is first with something really good in search,” Marckini says. “And in this market, first with innovation is mindshare. It’s how you begin to chip away at another search engine’s lead.”

Microsoft Takes Aim at Pay-Per-Click

Posted on by Chief Marketer Staff

Google and Yahoo were put on notice last week that the paid advertising search is set to become a three-horse race. Microsoft hosted a meeting for advertisers at its Redmond, WA, headquarters to unveil its own proprietary platform for linking pay-per-click ads to search results and other Web pages. And although the launch announcement made all the right nods to peaceful coexistence and the importance of MSN

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