MSN AdCenter Makes An Entrance

Sometimes arriving late to the party has its advantages—especially if you’re hoping to make a big entrance. Microsoft’s MSN Search is a late entrant in the pay-per-click ad business; for years the search engine used someone else’s search results (LookSmart’s) and served up someone else’s sponsored listings (Overture’s, now Yahoo! Search Marketing.)

But with search ad revenue turning into a self-sustaining business and with Microsoft being… well, Microsoft, that was destined to change. Last year, MSN took the wraps off its home-grown search product. Earlier this year, it unveiled beta tests of MSN adCenter in France and Singapore. And in October, Yusuf Mehdi, senior vice president for MSN information services, told am audience at Advertising Week in New York that adCenter has begun accepting application to be part of its U.S. beta test. He had to: The news had already been picked up by a handful of keen-eyed bloggers and was making the rounds of the search industry.

Since then, MSN reps have been on the road stumping for the beta version of adCenter, delineating the ways in which it will differ from the current Google and Yahoo! offerings and suggesting its future potential (without committing to any specific new developments—this is an open-ended beta with no launch date revealed yet.) Doug Stotland, MSN product group manager, sat in on a search marketing panel on the last day of the Direct Marketing Association’s Atlanta conference in October, and he laid out the basic form that MSN is testing now with selected advertisers. (More about how those marketers are chosen below.)

The big difference will be the ability to target keyword campaigns more precisely to reach different age groups, genders, dayparts or geographic locations. Microsoft has registration information from hundreds of thousands of users of its online products, from Microsoft Passport to MSN Hotmail and the personal Web-page maker MSN Spaces. Microsoft will combine these files with demographic information from consumer databases such as Experian to compile non-identifiable profiles for a large number of keywords.

Beta testers will get to bid on keywords (exact word, phrase or broad match, the same as Google offers.) But the application of the demographic profile data will give them more visibility into the types of searchers most effectively reached by a given keyword, and in theory permit them to target their audiences more narrowly if they wish to. Once they’ve compiled and bid on their keyword list, marketers can choose to apply what Kevin Hill, CEO of search marketing firm Did-It, calls “bid bumps”—paying a premium above the basic bid to apply those targeting factors for age, gender, daypart or location. That premium will give them an edge in winning high ad placement for the keywords for which MSN has profile data.

“We had a couple of key things in mind in entering the paid search marketplace, ways to take search marketing to the next level,” Stotland told the DMA05 audience. “Where it’s about relevance for the consumer, it’s about [return on investment] (ROI) for the advertisers and direct marketers. Below the line, we’ve made it easier to set and control ad budgets than it has been in the past. But on the front end, you can be more surgical about your campaigns by learning about your customers. What are the demographics of someone who’s searching on the terms you’re about to buy, and how well does that map to the kinds of people you know convert for you?”

While Google allows some geographic limiting in search marketing, for the most part, search targeting until now has consisted of the keyword choices themselves; they are the basic indication of the searchers’ interests and needs. “But as marketers, you know that the more you know about the people you’re marketing to, the higher ROI you’re going to be able to deliver,” Stotland said. And the same goes for the outcome of a campaign; using MSN adCenter’s profiling capabilities will let advertisers look deeper into their campaigns to see what groups they’ve reached.

For example, Stotland points to MSN’s data about searches on the term “football” in the French adCenter test. Searchers skewed heavily male in all the age groups—except for those 18 to 25, where 70% of the searchers were female. “That would be useful to know if you’re marketing soccer cleats,” he says. “And it would be useful knowledge not only for your marketing on MSN but for your investments with Google, Yahoo! or Ask Jeeves.”

In time, the folks at MSN expect to roll out other demographic possibilities, including lifestyle and income-related levers.

Like Google does, MSN adCenter will factor clickthrough rate into its keyword ad placements; ads that get higher response rates will be considered more relevant to users. In terms of how the ads appear, MSN is practicing “traffic-forking”, placing the adCenter ads on search results pages about one-fourth of the time. The rest of the time, searchers are still seeing listings sold by Yahoo! Search Marketing ads. The plan is to build that percentage and eventually replace Yahoo!’s product entirely. MSN’s ad contract with Yahoo! is set to expire next July.

While participation in the adCenter beta test is by application only, Microsoft spokesperson Karen Redetzki emphasizes that the engine is purposely looking for a mix of large, small and mid-sized advertisers during the U.S. pilot.

Building the ad process is one thing, but MSN has two hard facts to face in the competition for search marketing dollars. First is the fact that MSN Search now has about half the market share of league-leaders Google and Yahoo!—15.8% in August compared to Google’s 37.3% and 29.7% for Yahoo!, according to Web monitor comScore Media Metrix.

That market share is all the more crucial because at the moment, adCenter ads only appear on MSN Search results pages. In addition to placing their ads within search, both Google and Yahoo! syndicate their ads to other publishers’ Web pages, Google through its AdSense network and Yahoo! through the Yahoo Publisher Network. These show up as contextual ads related to the content of the Web pages they’re placed on.

Microsoft has plenty of its own MSN content sites, but does not as yet have a mechanism for wider distribution of any PPC ad product. That lack was one of the factors behind rumors of a possible Microsoft partnership with, or even partial ownership of, AOL– hints were already in the air at the time of the adCenter U.S. launch. Google has since been named as a rival AOL suitor, and the outcome is anyone’s guess.

But Stotland was explicit that while MSN is not ready to announce its contextual plans, such ads are part of the adCenter program. “We called it ‘adCenter’ rather than ‘MSN Paid Search’ for a reason,” he said. “The vision is that it will be the one-stop shop for all the different marketing and advertising products on MSN. And contextual advertising will definitely be one of those.”

In the mean time, however, Microsoft spokespeople have been floating the prospect of eventually inserting adCenter listings into other MSN content beyond search, such as Hotmail or MSN Messenger. Redetzki says the company is also in the very, very early stages of considering offering some ad opportunities on popular software such as Microsoft Money.

Redetzki stresses that the privacy issues of placing ads within applications would take some working out. But ad-supported software versions—most likely Internet-based—would definitely be a distribution party that Microsoft could dominate.

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