MSN dependent on ads but sees growth

HONG KONG: MSN, the Internet services division of Microsoft Corp, said on

Friday it will depend heavily on advertising for revenue in Asia (excluding

Japan) for the next three to five years, and is betting its growth on the

increase of overall corporate marketing budgets. "Our greatest challenge is

probably all the negatives around dotcoms in general and the doubting of the

Internet," said MSN's Hong Kong-based Asian regional general manager, Celia

Chong Wu.

In a gloomy report this week on Web advertising in the region, investment

bank Credit Suisse First Boston wrote that "Asian advertisers have not made

online advertising a permanent or significant component of total advertising

expenditure, primarily because they do not see online advertising as being as

effective as other forms of advertising."

An overwhelming 90 per cent of MSN's revenue in the region comes from online

advertising. Korea and Taiwan account for about half of the regional revenue

with India, Hong Kong, Singapore and Malaysia contributing the remainder.

Yet MSN said it remains committed to the ad revenue model in Asia, and plans

to offer clients not just banner ads, but more comprehensive marketing and

advertising options.

The strategy is pinned on the assumption that despite weak market sentiment,

corporate advertising and marketing spending in the region will increase in time

- and the Web is here to stay. "MSN is very firm that online dollars will

continue to grow," Chong said.

MSN said it already has a leg up on competitors like Yahoo because it did not

have that many dotcom advertisers. "Our clients are HSBC, Samsung, Intel,

Unilever and Mercedes," Chong said. "Our customer base is a little

more stable," added Joe Doran, MSN's Redmond, Washington-based

international products manager.

MSN wants to position itself as an integrated service portal offering mail,

search and shopping to compete against Yahoo's awesome brand name as a powerful

search engine. "We'll probably end up partnering with local content

providers," according Doran, who sees MSN portals becoming a platform for

specialized Internet products.

(C) Reuters Limited 2001.