Microsoft to push MSN into black with $30 m

LONDON: Microsoft is investing $30 million over the next 12 months to woo

advertisers to its MSN portal, the company said on Thursday. The money has been

allocated for MSN's business units in Europe, the Middle East and Africa, and is

part of a larger $100 million initiative to attract advertisers to its portals

around the world, Microsoft said.

Over the past 18 months, Microsoft has invested $250 million in promoting and

building up the MSN portal, the company said. The results are starting to pay

off. Last November, MSN overtook Yahoo as the largest portal in Europe. It had

28 million monthly visitors in August, according to JupiterMMXI. Now, Microsoft

wants to assert its lead to draw in more advertisers to push the portal into the

black.

Troubled online Ad market

Microsoft's announcement comes at a rough time. Advertisers are skimping on

ad campaigns in the wake of a slumping global economy and the threat of a US-led

"war on terrorism." Online advertising has been hit particularly bad.

Online ad expenditure forecasts for Europe have been reduced on multiple

occasions this year as advertisers continue to question the medium's

effectiveness.

Merrill Lynch recently stated that it expects online advertising in Europe to

grow by 24 per cent this year. In early 2001, other industry forecasters had

stated that year-on-year growth rate for Europe would be three to four times

that rate. Microsoft expects the downturn in online advertising will result in

further consolidation of the once high-flying portal sector, putting further

pressure on the top sites to attract the dwindling ad revenues to stay alive.

"There is a lot of money still being spent by the more traditional

advertisers," Sharon Baylay, European, Middle East and Africa marketing

director for MSN told Reuters. "I'm not seeing as much online as I'd like.

Our challenge with this new programme is to help show what this new medium can

offer."

The online ad market has been damaged in part because Web sites have done a

poor job explaining to larger advertisers the most cost-effective way to use the

medium, a London-based Internet analyst told Reuters on Thursday. But, the

analyst said, Microsoft's influence could change that. "Anything that makes

online advertising more legitimate and more accepted is going to benefit

everybody," he said. "And I think Microsoft is in as good a position

as anybody to do this."

Microsoft has introduced a raft of new online advertising formats. In

addition to the staid banners and button-shaped ads, MSN will now begin selling

full-page ads that that appear while a Web page is being downloaded. After a few

seconds it shrinks to a fraction of the size so a reader can view the intended

Web page.

Another new ad format is called "the scratch-off ad." Akin to a

scratch-off lottery ticket, the ad message is revealed by having the mouse

cursor scrape along the banner. The scratch off ad is priced at 35 pounds

($51.64) per thousand page impressions (CPM), a steep increase over the standard

banner ad, priced at 13 pounds CPM, according to the rates published on MSN's

Web site.

As part of the $30 million investment, Microsoft has expanded its online ad

sales force to 150 from roughly 40, and has hired Chris Dobson, a veteran of ad

buying firm Zenith Media, as its European sales director. Dobson's team will

work on forging stronger ties with ad agencies across the region to attract new

business.

Microsoft also introduced a new ad-targeting product, akin to DoubleClick's

DART product, which can point ads at consumers based on their tastes and

preferences.

"This is something we've been working hard on," Baylay said of the

new ad-targeting product. "It's something we need to be able to compete

with DoubleClick on."

(C) Reuters Limited 2001.