Microsoft, Google Take Battle for Online Ad Dollars to Cannes

Microsoft Corp., Yahoo! Inc. and Google Inc. have taken their battle to become the online advertiser of choice to the sandy shores of Cannes, wining, dining and making pitches to the world’s biggest ad agencies.

The technology companies are fighting for a chunk of the $456 billion global ad market, as Coca-Cola Co., Unilever NV and Procter & Gamble Co. increasingly follow their customers online. The Internet ranks second behind television as the most popular medium for marketing, and traditional ad agencies are the key to unlocking access to such ads.

“The ad agencies are a great driver of growth for companies like Google and Microsoft,” said Alex DeGroote, a media analyst at Panmure Gordon & Co. in London. “Google doesn’t do creative work like an agency, but it can tell you through research if search advertising is the way forward.”

At the “Microsoft Advertising Beach Club,” on the French Mediterranean coast, executives mingled this week over cocktails and hors d’oeuvres. Yahoo! gave away free flip-flops and flew in comedian Ben Stiller to host a seminar, while Google served up YouTube smoothies and let attendees of the 57th Cannes Lions Advertising Festival design T-shirts on a digital board.

Photographer: Keyur Khamar/Bloomberg

Attendees walk past the Microsoft Corp. booth during the 2010 International Consumer Electronics Show (CES) in Las Vegas, Nevada, on Jan. 8, 2010. Close

Attendees walk past the Microsoft Corp. booth during the 2010 International Consumer... Read More

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Photographer: Keyur Khamar/Bloomberg

Attendees walk past the Microsoft Corp. booth during the 2010 International Consumer Electronics Show (CES) in Las Vegas, Nevada, on Jan. 8, 2010.

The world’s largest advertising companies, WPP Plc, Publicis Groupe SA, Omnicom Group Inc., Interpublic Group of Cos. and Havas SA are working closely with Microsoft, Google and others for everything from search and display advertising, measuring results, training staff in digital technology and evaluating growth in online video ads.

‘Frenemy’

Two years ago Martin Sorrell, chief executive officer of WPP, the world’s largest advertising company, called Google a “frenemy,” expressing concern the search engine would go directly to clients, bypassing agencies. The two sides are now working together.

WPP is now Google’s biggest customer. The group’s agencies place ads with Google for a total value of $850 million to $900 million a year.

“Google can walk into WPP now and we’ve got a lot of value to offer and we can show demand for their products and services,” said Damian Burns, Google’s head of global agency relations. “We’re investing millions in research with agencies.”

Ad agencies and Internet companies together have created such digital ad campaigns as the Evian Roller Babies, Kylie Minogue riding a velvet bronco for Agent Provocateur and the Dove Evolution campaign, which showed the transformation of a normal woman into a billboard pinup using Photoshop.

Revenue Streams

“We can think of a great idea that involves search or online but the ad agencies aren’t good at executing it,” said Tom Eslinger, worldwide interactive creative officer at Saatchi & Saatchi London. “They’ve got lots of brain power that we don’t have on our side.”

One of Saatchi & Saatchi’s most popular viral campaigns was a channel it built with YouTube for T-Mobile, Deutsche Telekom AG’s unit, which showcased videos of hundreds of people dancing inside London’s Liverpool Street station.

Microsoft takes in about $3 billion in revenue from advertising a year, or a little more than 5 percent of overall sales, said Darren Huston, Microsoft’s corporate vice president for consumer and online. Google, which reported revenue of $5.06 billion in the first quarter this year, gets almost all of its revenue from advertising.

While Google dominates the most profitable search advertising market, Microsoft and Yahoo last year struck a 10- year agreement to team up. Yahoo plans to use Microsoft’s Bing search engine on its sites. The companies expect to finish integrating their Internet-search businesses by the year-end.

Suspicions Remain

Still, ad agencies remain suspicious of the technology companies’ plans for the market. Google earlier this month acquired a startup called Invite Media that helps customers place ads on websites more effectively.

“This puts Google in a strategic position where lots of agencies are developing and investing in, around bidding and display,” said Andrew Frank, a media analyst at Gartner Inc.

Google’s purchase leaves lingering concerns about the role of the technology companies in advertising.

“I agree more agencies are looking at partnering with these companies but I wouldn’t say they’ve welcomed them,” Frank said. “There are still concerns about the role of these companies in being providers and media companies themselves.”

Still, the two sides are continuing to work together -- at least for now.

Microsoft announced in Cannes an accord with Chevrolet through Xbox 360 that allows users to simulate driving its new electronic car, Volt, from their sofas without a controller. Microsoft and Interpublic are seeking an industry-wide platform to manage media operations such as ad buying.

‘Doing Right’

“We are a technology provider and advertising is driven by technology,” said Marc Bresseel, Microsoft’s vice president of global agencies.

AOL Inc. announced a partnership with Interpublic agency, Mediabrands, on online retail advertising.

ZenithOptimedia Group Ltd., the media-buying agency for Publicis, last week hosted a two-day conference in London with their online ad partners, which featured Google executives one day and Microsoft the next day, said Frederic Joseph, digital chief at ZenithOptimedia.

U.S.-based Omnicom, the world’s second-largest owner of ad agencies, has a global contract with Google’s Doubleclick ad server, which delivers and analyzes ad placements, though the company purchases media from everyone, said Jonathan Nelson, Omnicom’s digital chief.

“These are the largest players in the market and you wouldn’t be doing right by your clients if you’re not working with either Google or Microsoft. Everybody works with everybody.”

To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net.

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