Microsoft-Google Clash Looms as adCenter Moves to Launch Pad

The long-anticipated online advertising battle between Microsoft and Google moved closer to becoming a reality Wednesday as Microsoft begins final preparations on its MSN adCenter search advertising platform.

Microsoft is expected to display the last update to the test version of adCenter during the two-day MSN Strategic Account Summit at its Redmond, Wash. headquarters. The event will involve more than 700 people in the advertising, technology, communications and entertainment fields discussing online media trends.

Opportunity Abounds

The summit begins amid new speculation that Microsoft may partner with Yahoo in order to better compete against Google. A report Wednesday indicated that Microsoft had discussed taking a stake in Yahoo in recent months, possibly through the sale of MSN to Yahoo.

The summit, an annual event at Microsoft for several years, is a chance to highlight advances in online advertising technology and how Microsoft fits into the evolving landscape, CEO Steve Ballmer said.

“This summit is a celebration of the exceptional innovation taking place throughout the advertising industry and its vital importance to Microsoft,” he said. “We are dedicated to creating even more valuable business opportunities for advertisers via the world’s largest, most comprehensive set of online services.”

The summit is themed “connect” and Microsoft said it will focus on building relationships with online consumers by providing multiple services, from online software through the Microsoft Live effort, and the content-focused MSN.

Pop Stars and Advertisers

Among those appearing at the summit are Donny Deutsch, TV talk show host and chairman of advertising agency Deutsch Inc., who will speak alongside Microsoft Chairman Bill Gates on “reconnecting to the vision,” a talk Microsoft said would be about “consumer connections, ad-supported services, targeted messaging through the medium of paid search, the growth of mobile media and related topics.”

Deutsch will also interview rap artist, producer and record label executive Jay-Z on what lessons the cataclysmic changes seen in the music industry hold for the online advertising realm.

On Thursday, the summit features a discussion featuring major Microsoft advertisers, including Wenda Harris Millard, chief sales officer of Yahoo, Tim Armstrong, vice president of advertising sales for Google and Greg Stuart, president and CEO of the Interactive Advertising Bureau.

The subtext to the entire summit this year will be the looming battle between Microsoft and Google as both jockey for position in a range of overlapping areas, from Web e-mail and browser plug-ins to desktop search, social networking and online video delivery.

Microsoft has said that adCenter, which it has tested extensively overseas and more recently in the U.S., will provide it an immediate advantage in the space when it launches next month. The online advertising ordering and delivery system will outdo existing offerings by giving advertisers greater control over where their ads go, with Microsoft saying it will be able to more accurately target consumers with the right ads.

To Yahoo or Not

Now that adCenter is prepping for its June launch, some are questioning whether advertisers are ready for that narrowed-down approach or whether they still want the vast audience size that Google is able to provide with its existing links to thousands of content pages on the Web.

To wrest away some of that market, Microsoft said during its most recent earnings release that it plans to invest as much as US$2.4 billion in the next 15 months on technology development, much of it aimed at the online advertising space.

Yahoo, meanwhile, is said to be eyeing a summer launch of its own self-service ad delivery system, code named Panama. Both companies may see the value of teaming to better compete with Google, which has built a substantial advantage in the space through its relationships with advertisers.

Yahoo has “notable assets” for the online ad battle, including more than 400 million users, a “very strong global position in display and search advertising, and appealing Asian businesses,” Standard & Poors analyst Scott Kessler said.

Yahoo and Microsoft are not strangers, having agreed in 2005 to link their instant messaging platforms by the middle of this year. They may be drawn more together by the Google-AOL partnership, Kessler added.

They also have additional motivations, including keeping shareholders happy. Microsoft and Yahoo both disappointed analysts with their recent earnings announcements.

Some analysts are saying MSN adCenter, meanwhile, may take more time than previously expected to gain traction, with the switch to the new platform expected to slow growth of the advertiser network, at least temporarily.

Microsoft recognizes that long-term, advertising could become a major source of revenue growth, one that could help the software giant sustain growth and profits between major software releases, Gartner analyst David Smith told the E-Commerce Times.