Microsoft gets into new world of advertising

Well, it's official. Microsoft is now in the new world of contextual advertising. It's just like the old world of advertising (Microsoft sells billions of dollars of advertising every year, even before today) but it's more efficient.

But, I don't need to hype this new world up. You all know what I'm talking about. Just look at how Google is getting its money. Or read Memeorandum today.

So, why does Microsoft care so much about the world that Google is the leader in? Well, cause the advertising industry is a lot bigger than the software industry. Translation: the MBA's here see a lot more growth potential in advertising-backed software than they do in software that you go to Fry's and buy.

Not that the model of "buy your software here" is dead. Xbox is proving that. I've already spent hundreds of dollars on games, both on Xbox Live arcade and in stores like BestBuy and Fry's.

But, they look at Google, which has operating margins of 34% (with quarterly revenue growth of 79%), and Yahoo, which has operating margins of 18.79% (which has quarterly revenue growth of 33.5%), and they get excited.

Great, so we're in the game now.

Now what? Well, I look at it like we're in the record business and we need to find great bands to build audiences. Then the advertising folks will be able to put ads on those things and we'll all be happy.

So, do we build a great business by copying the "bands" from other companies? (I'll be honest, that's what we've pretty much done so far). To me that just sounds so boring and uninteresting. Imagine you work a music company and your boss tells you to "copy the Beatles."

Yeah, that'll really work.

The next three years will define Microsoft as a company. It'll be interesting to see how our innovation engine roars to life. We've been making some great acquisitions and hiring some great people. And I hear a major engine tuneup is underway thanks to other things that I can't talk about yet.

The trick is, can we find a new way to compete. One that doesn't rely on the old tricks that teams fell back on in the past? Luckily this time around there's piles of money to be had for all three companies — if we create value and find new audiences.

Just because there was Michael Jackson, or Elvis, or the Beatles, doesn't mean that the Black Eyed Peas couldn't come along and make a sizeable business.

Metaphor switch time. :-)

It's real easy in the technology world to follow the path someone else broke through the ice. But that's lazy.

Microsoft needs a few icebreaking ships to forge a new path.

I see a few being built. But we need more.

91 thoughts on “Microsoft gets into new world of advertising

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  4. Ads in software? Is this a new concept? Of course I jest. I recall a day when I would search for online services that were ad free. I would look for freeware that was ad free. Of course I have given up.

    Now I search for products and services where the advertising doesn’t drown out the service. As a WLMail user I am horrified by the size of the adbar on the right side of the screen. It steals valuable space from the reading pane.

    The bottom line here is, ad driven revenue in software is here to stay. Get used to it. It ain’t going away. Let’s just hope Microsoft can manage to place advertising in such a way that it doesn’t drive users away.

    Oh, and hasn’t Microsoft already defined itself? What’s with this “The next three years will define Microsoft as a company. It’ll be interesting to see how our innovation engine roars to life.” nonsense? Hasn’t innovation been the defining factor for Microsoft for the past 2 decades?

  5. Ads in software? Is this a new concept? Of course I jest. I recall a day when I would search for online services that were ad free. I would look for freeware that was ad free. Of course I have given up.

    Now I search for products and services where the advertising doesn’t drown out the service. As a WLMail user I am horrified by the size of the adbar on the right side of the screen. It steals valuable space from the reading pane.

    The bottom line here is, ad driven revenue in software is here to stay. Get used to it. It ain’t going away. Let’s just hope Microsoft can manage to place advertising in such a way that it doesn’t drive users away.

    Oh, and hasn’t Microsoft already defined itself? What’s with this “The next three years will define Microsoft as a company. It’ll be interesting to see how our innovation engine roars to life.” nonsense? Hasn’t innovation been the defining factor for Microsoft for the past 2 decades?

  6. I used to be in the MS camp – .NET developer, thought Macs were for hippies.

    Then I tried one. And like Sam said, most web devs I know prefer to use Macs and not MS products unless they work in internal corporate IT.

    In my case, I don’t feel any hate but rather a complete lack of faith and trust in MS web dev products. I suffered through Web Classes, Visual InterDev and all the horrors those entailed.

    Now, with my shiny new Mac, TextMate and Ruby on Rails I feel like a giant weight is off my shoulders – I can dream and create with ease, beauty and fun.

    Maybe I AM a hippie.

  7. I used to be in the MS camp – .NET developer, thought Macs were for hippies.

    Then I tried one. And like Sam said, most web devs I know prefer to use Macs and not MS products unless they work in internal corporate IT.

    In my case, I don’t feel any hate but rather a complete lack of faith and trust in MS web dev products. I suffered through Web Classes, Visual InterDev and all the horrors those entailed.

    Now, with my shiny new Mac, TextMate and Ruby on Rails I feel like a giant weight is off my shoulders – I can dream and create with ease, beauty and fun.

    Maybe I AM a hippie.

  8. Overall, most developers like Microsoft. This developer loves Visual Studio 2005. DreamWeaver comparatively, is a toy — for drag-n-drop coders. Every experienced web designer I know codes their HTML by hand. We have DW installed but only use for quick mockups and for training students.

    Microsoft also has the most extensive highest quality developer support in the world. http://www.asp.net, MSDN, etc. There are more examples, tutorials, starter kits and peer support than you can shake a stick at. .NET developers truly love the framework.

  9. Overall, most developers like Microsoft. This developer loves Visual Studio 2005. DreamWeaver comparatively, is a toy — for drag-n-drop coders. Every experienced web designer I know codes their HTML by hand. We have DW installed but only use for quick mockups and for training students.

    Microsoft also has the most extensive highest quality developer support in the world. http://www.asp.net, MSDN, etc. There are more examples, tutorials, starter kits and peer support than you can shake a stick at. .NET developers truly love the framework.

  10. Jeremy,

    90% was just a number that I came up with by counting in my head the developers I knew vs. the developers I knew that like Microsoft. All the ones that like Microsoft are the ones that make horrible websites… These are just the ones I know though

    Sam

  11. Jeremy,

    90% was just a number that I came up with by counting in my head the developers I knew vs. the developers I knew that like Microsoft. All the ones that like Microsoft are the ones that make horrible websites… These are just the ones I know though

    Sam

  12. I’d love to know where you get your stats about 90% of Web developers hating Microsoft… And I mean stats as in “statistics”, not a poll of people you know and hang out with. I use Google too, but that doesn’t mean I hate MS (not that I necessarily love them either, it’s more like a noncommittal relationship between a couple of people who enjoy some of the same movies and not much more)

  13. I’d love to know where you get your stats about 90% of Web developers hating Microsoft… And I mean stats as in “statistics”, not a poll of people you know and hang out with. I use Google too, but that doesn’t mean I hate MS (not that I necessarily love them either, it’s more like a noncommittal relationship between a couple of people who enjoy some of the same movies and not much more)

  14. After reading the comment by Sam, I was reminded when I went to Microsoft for some product testing. This was for Microsoft Search. They asked me how I found items in MSDN, or Microsoft. I showed them. I used the MSDN Search, this by the way was my usual pattern, then switched to Google. Google returned more relevant results, and I could click the URL and get directly to the content I needed in 2 clicks. If Microsoft can’t even search it’s own content as well as Google…

    I have been a Web-Developer for years, since 1995 anyway, I don’t loathe MS products, I am open to trying them. What I find is that in the search arena, MS doesn’t quite hit the nail on the head. I have been trying to use Windows Live, the search is pretty good, however the page takes too long to load.

    As far as the other products that MS makes, take Mappoint for instance, great product, poor delivery. Here was my situation: I was developing a shipping calculator for our Freight Business. It involved complicated calculations based on mileage, tolls, etc. I used .Net to create it and tied the mapping to Mappoint webservices (worked great!). I contacted the Mappoint sales department and they were selling the service in hit blocks of millions of hits. (I was only going to get 1000′s of hits a month not millions). They would only sell me $13K of usage at a time, I asked if anyone resold in smaller blocks, the rep never even called me back. This was 2 years ago, I think somethings may have changed. I ended up with a developer type account that was FREE for one year. Nice, but I didn’t want free, I wanted to pay for a smaller block of hits.

    Finally, I just reinstalled DreamweaverMX (2002), I have been using VS2005 for 6 months. I still find myself designing in Dreamweaver and copying the HTML to Visual Studio. Microsoft your Visual Design Environment Sucks. The programming tools, work well, the Design Tools for Visual Appearance, well they just suck.

    So while Microsoft may be persuing Advertising, they are losing focus of their core. I believe the same true for Google, they too are losing focus on their core. You both have great products, and I would say, stick to what you know.

  15. After reading the comment by Sam, I was reminded when I went to Microsoft for some product testing. This was for Microsoft Search. They asked me how I found items in MSDN, or Microsoft. I showed them. I used the MSDN Search, this by the way was my usual pattern, then switched to Google. Google returned more relevant results, and I could click the URL and get directly to the content I needed in 2 clicks. If Microsoft can’t even search it’s own content as well as Google…

    I have been a Web-Developer for years, since 1995 anyway, I don’t loathe MS products, I am open to trying them. What I find is that in the search arena, MS doesn’t quite hit the nail on the head. I have been trying to use Windows Live, the search is pretty good, however the page takes too long to load.

    As far as the other products that MS makes, take Mappoint for instance, great product, poor delivery. Here was my situation: I was developing a shipping calculator for our Freight Business. It involved complicated calculations based on mileage, tolls, etc. I used .Net to create it and tied the mapping to Mappoint webservices (worked great!). I contacted the Mappoint sales department and they were selling the service in hit blocks of millions of hits. (I was only going to get 1000′s of hits a month not millions). They would only sell me $13K of usage at a time, I asked if anyone resold in smaller blocks, the rep never even called me back. This was 2 years ago, I think somethings may have changed. I ended up with a developer type account that was FREE for one year. Nice, but I didn’t want free, I wanted to pay for a smaller block of hits.

    Finally, I just reinstalled DreamweaverMX (2002), I have been using VS2005 for 6 months. I still find myself designing in Dreamweaver and copying the HTML to Visual Studio. Microsoft your Visual Design Environment Sucks. The programming tools, work well, the Design Tools for Visual Appearance, well they just suck.

    So while Microsoft may be persuing Advertising, they are losing focus of their core. I believe the same true for Google, they too are losing focus on their core. You both have great products, and I would say, stick to what you know.

  16. “copy the Beatles.”

    Actually yeah, that will work (and has time and time again). Even a basic rundown of charted music history will show tons of Beatleish copycats and cover remakes that made it, bigtime, yes, bigtime. Siouxsie and the Banshees remake of ‘Dear Prudence’, but for one example.

  17. “copy the Beatles.”

    Actually yeah, that will work (and has time and time again). Even a basic rundown of charted music history will show tons of Beatleish copycats and cover remakes that made it, bigtime, yes, bigtime. Siouxsie and the Banshees remake of ‘Dear Prudence’, but for one example.

  18. One thing that I have to say about this -

    Most of the web developers out there utterly hate Microsoft. How do you guys expect to get everyone to switch to using your little AdCenter thing when (I’m guessing) over 90% of web developers use Google or Yahoo as their primary search engines. I know tons of web developers, and not a single one uses MSN or Live.com. Sure, you guys may have a new business model on how to do online advertising, but Microsoft has so many haters in the web developer world. You guys have been cocky, and it’s coming back in your face now; Google is making you guys start to rethink how on top of your game you guys are.

    I understand that you have the resources to do as much research or whatever you want for developing this new product. However, you guys need to win back the developers if you want this to succeed. Out of all my developer acquaintances and friends, 95% of us are going to pick a Google product over a Microsoft product every time. Not because Google’s products are necessarily better (though they usually are), but because of the image that we hold of Microsoft.

    I wish you the best of luck with your new services.

    Sam

  19. One thing that I have to say about this -

    Most of the web developers out there utterly hate Microsoft. How do you guys expect to get everyone to switch to using your little AdCenter thing when (I’m guessing) over 90% of web developers use Google or Yahoo as their primary search engines. I know tons of web developers, and not a single one uses MSN or Live.com. Sure, you guys may have a new business model on how to do online advertising, but Microsoft has so many haters in the web developer world. You guys have been cocky, and it’s coming back in your face now; Google is making you guys start to rethink how on top of your game you guys are.

    I understand that you have the resources to do as much research or whatever you want for developing this new product. However, you guys need to win back the developers if you want this to succeed. Out of all my developer acquaintances and friends, 95% of us are going to pick a Google product over a Microsoft product every time. Not because Google’s products are necessarily better (though they usually are), but because of the image that we hold of Microsoft.

    I wish you the best of luck with your new services.

    Sam

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  21. Now that I think of it – a better analogy would be
    Google = Coca Cola (The real thing).
    MS = Royal Crown Cola. Its not even Pepsi.

  22. Now that I think of it – a better analogy would be
    Google = Coca Cola (The real thing).
    MS = Royal Crown Cola. Its not even Pepsi.

  23. “And I hear a major engine tuneup is underway thanks to other things that I can’t talk about yet.”

    Isn’t a tuneup something that normally happens quickly, takes a modest amount of capital and results in an engine that runs much more efficiently? Please tell me that’s what you mean Robert. ‘Cause I’m hearing rumors of across-the-board salary increases which, beyond being fatally stupid from a timing point of view given the latest stock meltdown, would seem to suggest an engine that’s running less efficiently, costing more and providing less value. In my world, when we get those, we just junk ‘em. :-)

  24. “And I hear a major engine tuneup is underway thanks to other things that I can’t talk about yet.”

    Isn’t a tuneup something that normally happens quickly, takes a modest amount of capital and results in an engine that runs much more efficiently? Please tell me that’s what you mean Robert. ‘Cause I’m hearing rumors of across-the-board salary increases which, beyond being fatally stupid from a timing point of view given the latest stock meltdown, would seem to suggest an engine that’s running less efficiently, costing more and providing less value. In my world, when we get those, we just junk ‘em. :-)

  25. “It’ll be interesting to see how our innovation engine roars to life”
    LOL, 30 years now you’ve been trying to start the innovation engine and it’s still stuck in neutral, I won’t hold my breath.

  26. “It’ll be interesting to see how our innovation engine roars to life”
    LOL, 30 years now you’ve been trying to start the innovation engine and it’s still stuck in neutral, I won’t hold my breath.

  27. I’m interested in knowing what

    “And I hear a major engine tuneup is underway thanks to other things that I can’t talk about yet.”

    means Robert. Engine, as in, the company’s engine? or the MSN search engine?

    Jim

  28. I’m interested in knowing what

    “And I hear a major engine tuneup is underway thanks to other things that I can’t talk about yet.”

    means Robert. Engine, as in, the company’s engine? or the MSN search engine?

    Jim

  29. And finally, the tribute band “Rain” plays venues all over the world at $%55.00 a pop. (not high school auditoriums”), and often sells out.

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