Microsoft reveals plan for search and advertising
Kevin Johnson, President of Microsoft’s Platforms and Services division, has revealed the company’s intent to grab the lion’s share of the $40 billion global online advertising industry. Speaking at a UBS investor conference in Seattle he described Microsoft’s “Top 2 with 10, 20, 30, 40″ targets, to be achieved over the next three to five years.
- Become the number 1 or number 2 in Online Advertising.
- Capture 10% of all internet page views. MSN.com and Windows Live email are currently standing at around the 6% mark.
- Capture 20% of the total minutes spent on the internet, up from the current 17%.
- Increase share of online search to 30%, up from an estimated 12%.
- Capture 40% of gross online advertising revenue.
To get to these targets Microsoft made a value chain analysis of the online advertising landscape in 2006, identifying four key segments: Search (eg Google, Yahoo); Information Content (Yahoo, MSN, YouTube); Communications and Social Networking (Facebook, Hotmail, MySpace, Yahoo Mail); and Productivity Services (small segment on the watch list of Microsoft). They looked at the revenue and operating income of companies in each sector and then made a forecast for 2010 mapping it back across each sector.
So how easy is this going to be for Microsoft? Certainly an increase in page views and total minutes is not a stretch and so should be readily achievable. The test will be in winning a bigger share of online advertising dollars and of the search market.
The strategy on advertising seems to be based firmly on acquisition. In recent months Microsoft have dug deep into their pockets to buy into aQuantive [Ad marketing holding - $6billion cash], Screen Tonic [mobile ads], AdECN [ad trading exchange] and Massive [in-game advertising].
The strategy to win a greater share of the search market seems to be based solely on improvements in the Live search algorithm. Microsoft have the fundamentals in place and now claim that recent improvements in Live Search now return results with better relevance than Yahoo. However winning a three-fold increase in search share will talk all of the five years.
You can hear Kevin Johnson’s full speech here.
