from Bloomberg

Microsoft Ramps Up Google Challenge in $12 Billion Display-Ad Market: Tech

By Dina Bass - Sep 6, 2011

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.

‘Intelligently’ Investing

“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Microsoft must modernize the design, which looks outdated and requires even expert users to run through multiple steps, said Grace Liau, who runs VivaKi’s ad operations group.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.

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