Microsoft Ramps Up Google Challenge in $12 Billion Display-Ad Market: Tech
Microsoft Corp. (MSFT), the largest software maker, is adding features to its Internet display- advertising products to keep from losing customers to Google Inc. (GOOG) and Facebook Inc. in the $12.3 billion U.S. market.
Microsoft is unveiling tools and partnerships with AppNexus Inc. and MediaMath this month designed to help customers more effectively tailor ads and measure their impact. Sales of graphical display ads, including banners and videos, are poised to climb 25 percent in the U.S. this year.
The company aims to reassure customers such as Publicis Groupe SA that have questioned its commitment to display ads and the Atlas software it acquired with the $6 billion AQuantive Inc. deal. As Microsoft shifted its focus to search-related ads, some marketers have devoted more display-ad dollars to Facebook and Google.
“We have continued to invest behind Microsoft and behind Atlas,” said Curt Hecht, chief executive officer of VivaKi Nerve Center, the unit that oversees technology for Publicis Groupe SA (PUB)’s digital ad agencies. “We need a partner that’s as committed as we are. Microsoft is at a point where they need to show it’s important to them.”
Microsoft is adding personnel and dollars to bolster display and Atlas, which is used to place ads on websites and help advertisers measure performance of ad campaigns. Atlas vies with DoubleClick, acquired by Google in a $3.1 billion purchase announced a month before the AQuantive deal.
“We’re investing more, and more intelligently, in display now,” said Microsoft General Manager Dennis Buchheim, who oversees Atlas and other ad software. “There has been this mumbling out there of, are we investing in display, and absolutely that is a major investment area for us.”
He declined to provide specific spending or personnel targets.
Atlas gives Publicis’s Razorfish, formerly a Microsoft unit, a competitive edge over agencies that use DoubleClick, Hecht said. Still, Microsoft needs to improve Atlas, he said.
“It’s every three years or so that the software needs to be rewritten,” he said. “Microsoft is now at that point in time where the market is asking, ‘What’s next what’s the big rewrite?’ Google has continued to invest in DoubleClick.”
Microsoft must modernize the design, which looks outdated and requires even expert users to run through multiple steps, said Grace Liau, who runs VivaKi’s ad operations group. Atlas users also often have to call a Microsoft engineer to help them target certain ads -- an option more readily available on DoubleClick, she said.
Ads By Region
Microsoft plans new Atlas features for September that will ensure customers see ad copy designed for their region, and keep them from seeing the same ad too many times. Those are already available in DoubleClick, she said.
Microsoft’s renewed push coincides with an expected shift in the Internet-advertising market. Search-based ads -- text- only links that appear alongside Internet queries -- have represented the bigger part of the U.S. Internet-ad market. In the coming years, display will grow faster and become the bigger segment in 2015, according to David Hallerman, an analyst at EMarketer Inc. in New York.
Spending on display advertising, expected to reach $12.3 billion in the U.S. this year, will almost double to $22 billion in 2015, according to EMarketer.
Microsoft is now the fourth-biggest seller of display ads in the U.S. behind Facebook, Yahoo! Inc. and Google. Microsoft’s share is less than one-third of Facebook’s, and about half of Google’s. In 2008, a year after Microsoft agreed to buy AQuantive and Google announced the DoubleClick deal, Microsoft was third behind Yahoo and AOL Inc. (AOL) Google and Facebook were laggards then, Hallerman said.
Google’s ‘Impressive’ Ramp
“The ramp we’ve seen with Google has certainly been impressive,” Microsoft’s Buchheim said.
Just after Microsoft purchased AQuantive -- for an 85 percent premium -- prices for display ads slumped and the market for search-based ads took off. Microsoft, concerned that Google would run away with the market, saw catching up in search as a bigger priority for spending, Buchheim said.
Google had more than 65 percent of the market for software that serves up display ads, including DoubleClick and other programs, according a 2010 report from San Mateo, California- based Attributor, which tracks Internet ad data. Microsoft had 4 percent.
Microsoft’s work on Atlas in the past few years involved behind-the-scenes plumbing, not new features, said Ryan Mackle, director of display platforms at Microsoft.
The company wants to change that by adding so-called demand-side platforms like AppNexus, MediaMath and Turn Inc. as partners. The companies’ products let advertisers purchase only the ads that target a specific audience -- for example, those who have recently viewed the advertiser’s website.
Microsoft is also rolling out what it calls audience- messaging tools that can ensure that a particular version of an ad is shown only to customers in certain regions, or that a customer who has already seen parts one and two in an ad series is shown the third installment, Mackle said.
The software maker also has developed a feature for its Excel spreadsheet program that makes it easier to manage media campaigns, and software that lets customers view their Atlas data in dashboards in Microsoft’s SharePoint program.
Starwood Hotels and Resorts Worldwide Inc. uses Atlas to make sure that customers visiting its websites in Europe are shown banners for hotels in Paris and Prague, not Tokyo, said Jason Albright, director of global online merchandising for the hotel chain.
‘Behind the Ball’
DoubleClick has surpassed Atlas in targeting capabilities in the last several years, he said. Now Atlas is spending to catch up.
“They were a little bit behind the ball, but they recognized that and are investing in the right areas,” he said.
Advertisers are increasingly looking to purchase search and display ads together, making it necessary for Microsoft to make sure it has a strong offering in both. Google has grown so quickly in display in part because it has harnessed existing relationships with search-ad customers, Hallerman said.
“Microsoft needs a piece of display to keep their overall ad business going,” he said.
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