The search business is all about selling advertisements...targeted advertisements. People hate traditional advertising because it is obnoxious and irrelevant. When ads are targeted to what we are interested in...they are actually useful, helpful, and educational. The better the targeting, the better the return for advertisers, and the more that users actually "like" the ads and click on them. Everyone wins.
Technical people focus obsessively on the search algorithms, size of index, response time, and quality of results. All of these are important to the user experience, but delivering relevant ads is the key to business success. cNet has a story Microsoft demos advertising lab which explains Microsoft's AdCenter and the work going on in the Microsoft Research Labs.
Microsoft is currently working on 40 advertising prototypes that would work with mediums such as video, television, mobile devices and the Internet. The ads also will be designed to address paid search, behavioral targeting and contextual advertising.
There is also an AP story today running in Forbes on-line "Microsoft Plans Launch Of Search Ad System".
Overall, they aim to give advertisers a better sense of the age, gender and other traits of people who are viewing certain information online. For example, the technology could give a car advertiser the best shot at reaching women over 45, or men under 25. A movie company, in turn, could be given a better chance of reaching people who are or have recently visited sites related to entertainment.
BusinessWeek Online has an outstanding story entitled Search Advertising By The Numbers which explains how the advertising business is evolving from smooth talking salespeople selling "shotgun approach" splashy ads to a more analytical approach of using real data to target ads and measure results.
Advertising. For decades, it has been an industry of expansive ideas, creative people, and chummy deals hatched in fine restaurants. But this world of relationships and high concepts has been under siege for three years by people up to their elbows in numbers. Search advertising's biggest advantage comes from the numbers it generates. It enables marketers to track customer behavior, and it replaces hunches with science.
This is precisely why I think we will see more advertising dollars moving away from traditional media (TV, Radio, Newspaper) to online media. Today less than 10% of all advertising dollars are spent on line. Google gets a pretty big chunk of that because they have the audience and the AdSense keyword targeting system for selling keywords and targeting ads. Microsoft now has a sophisticated system AdCenter, to do the same things. Here is the announcement.
Advertisers will continue to demand real ROI and traceable results for their advertising dollars. Traditional media will have a hard time matching the cost effectiveness and traceable results of online advertising. Look for Google, Yahoo, and MSN to reap the rewards. We are talking billions of dollars here. Just as a reference point, Google had revenues of $1.6B last quarter and will probably do about $6B for the year...all advertising revenues. Yahoo did $1.3B last quarter, and will do over $5B for the year. Again, this represents less than 10% of all advertising dollars...and it will continue to grow.
MSN Search is now in a position to sell their own ads and target them better than ever before. The MSN system uses a variety of attributes, and mountains of click stream data, to effectively target ads. It sounds like the MSN ad targeting technology has some real innovations that will result in much more relevant ads which will benefit the users and advertisiers. In addition, MSN can now sell their own ads which will increase their profitability. Good news for MSFT stockholders.
Greg Linden "Geeking with Greg" has more coverage of this topic and the work going on at Microsoft Research Labs. John Cook at the Seattle Post Intelligencer has an excellent article Microsoft hopes to cash in with click-on ads.