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September 26, 2005

MSN jumps in with talk about their new contextual ad program

It has been long suspected that MSN would eventually jump into the contextual ad game with their own competitive program to Google AdSense. And quotes from Yusuf Mehdi of Microsoft in today's New York Times seem to officially confirm the fact it is a program they are working on in conjunction with their soon-to-be-released AdCenter PPC program.

Microsoft also expects to use its new system to sell ads on other Web sites, just as Yahoo and Google do with their systems.

The article also goes on with specific comments by Mehdi:

He said that once Microsoft had a large number of advertisers and had refined its ad placement formulas, it would be able to compete with Google and Yahoo to sell ads on other Web sites because it would be able to offer higher ad revenue.

There is a virtuous cycle in this business, Mr. Mehdi said, because the more sites in an advertising network, the more advertisers are attracted and the higher the potential advertising prices. For Microsoft, running such a network has another benefit - the building of relationships with Web site owners, many of whom are users of its software and online services.

MSN launching their own contextual ad program comes as little surprise to those familiar with the industry. After all, Google generates a significant amount of income from their content network partners and Yahoo launched their own beta program YPN last month. However, if MSN gets plenty of advertisers on board with AdCenter, they have some advantages over both Yahoo & Google.

Because MSN AdCenter will feature options of target ads to particular demographics, including age and gender, this could allow publishers greater flexibility in what ads they show. For instance, I have a few sites targeting female audiences... if I could include this information in the MSN contextual ad platform, these sites could be given higher priority to showing ads that advertisers are targeting female audiences. This combined with other targeting methods could result in high paying ads for publishers and good CTR and ROI for advertisers.

How far away could the MSN contextual ad program be? We probably won't see beta for a while. They not only work out any potential kinks in AdCenter once it starts its US beta in October, but they also need to build up ad inventory as well. When they launch, they will still be using Yahoo ad inventory as well as their own, with plans to have fully replaced Yahoo by the spring.

It will phase in the system in the United States, using its own ads on some pages and ads sold by Yahoo on others, starting in October, said Joseph Doran, MSN's senior director of monetization. The company hopes to replace the Yahoo ads entirely by next spring.

And as the MSN AdCenter US beta will start relatively small as an invite-only beta, it would be very likely that they would do something similar when they do launch a contextual ad program. It could end up being something similar to the limited beta release YPN is currently doing.

So while you won't be able to sign up for an MSN contextual ad program tomorrow, the good news is that it is in the plans of AdCenter to eventually offer their own program to compete with AdSense and YPN.

Posted by Jenstar at September 26, 2005 09:46 AM

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Comments

I see a potential for a windfall for the first adopters of the program. What I mean, the advertisers that use affiliate programs. They could make out like bandits. Also, this gives another option to the small website owners, or niche players to really key in on their ads. But, you cannot count out Google. Sooner or later they will add even better functionality.

Posted by: Neil Camp at September 26, 2005 03:00 PM

Here comes a new challenger. :)

I'm very happy to hear about new Ad programs. At least, we, as publishers, will have more choices. Hopefully they will do a good job.

Posted by: EngLee at September 26, 2005 06:31 PM

What I'm most curious about Jen, is:

Did you get an invitation?

Posted by: Nikke at September 27, 2005 01:29 PM

This is great news. Looks like MSN ads is going to pay the website owners alot more than Google or Yahoo. I would think Microsoft will go into it initially breaking even if not a small lost just to attract more publishers and to compete against Google. I can't wait to get that invite code from MS.

Posted by: George at September 27, 2005 02:26 PM

Well MSN will really bring contextual advertising up a notch with the advent of highly targetable advertising for specific demographics. Niche websites and blog owners can really get specific and drill down in their niche. It should be good to see.

Posted by: John at September 27, 2005 10:23 PM

Hope they open it to international publishers right from the start. I'll be serving MSN ads from my Linux server! Ironic.

Posted by: Migs at September 28, 2005 07:02 AM

Given that the vast majority of Google's income comes from advertising, this would appear to be MS' first direct salvo against Google. It's all well and good for them to do projects like start.com, but they're now trying to hit Google hard in the pocket.

"because it would be able to offer higher ad revenue."

Microsoft has lost something like $4bn (yes, billion) on the XBox so far, because they're determined to win the living room. And those loses will continue to mount as the XBox 360 is launched in a couple of months.

Someone want to take a guess as to how much they're prepared to lose to win the search/ad market?

Posted by: Jamie Thingbox at September 30, 2005 03:29 AM

Do you think that competition between MS Google and Yahoo will bring possitive results for publishers?

Posted by: Alex at October 5, 2005 04:13 AM

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