Microsoft takes on Google with targeted ads

Microsoft on Wednesday outlined a broad new offensive against Google as it laid out plans to insert the targeted advertising generated by its new AdCenter system into a range of digital services beyond internet search.

Steve Ballmer, chief executive officer, is set to give a fuller account of the plan on Thursday when he speaks to representatives of big advertisers and leading advertising agencies at a conference at Microsoft’s headquarters.

According to advance details of his speech supplied by the company, he will also announce that all adverts on MSN in the US are now supplied by Microsoft’s own ad network, fully competing for the first time with the more established networks of Google and Yahoo!.

The presence of the company’s software on all sorts of devices, from the Xbox 360 games console to mobile handsets, gave it a wider platform that would serve as an outlet for its recently created advertising network, said Blake Irving, vice-president in the company’s new Windows Live division.

Mr Irving’s comments mark Microsoft’s latest bid to persuade advertisers that it can start to close the widening gap with Google, whose dominance of the search advertising business has given it an ever greater influence over targeted interactive advertising.

Google’s search advertising revenues jumped by 80 per cent in the latest quarter, a period during which Microsoft’s shrank as it started to activate its own network rather than rely on adverts supplied by Yahoo.

In an interview, the Microsoft executive refused to comment on a report, in the Wall Street Journal, that the software company had considered linking up with Yahoo as a way to compete more effectively with Google. However, he stressed the software company’s plans to invest even more heavily in its own algorithmic search engine and interactive advertising network, which are believed to have already consumed hundreds of millions of dollars.

“We’re willing to invest a lot more – and we’re investing that,” he said. Microsoft’s revelation late last week that it would boost its spending in the coming quarters has rattled investors. Its shares lost 3.5 per cent on Wednesday, leaving them at a new 52-week low.

Analysts said that any combination of its own search and advertising activities with those of Yahoo would represent a surprising about-turn after Microsoft has invested so heavily to try to build a search service to rival those of Google and Yahoo.

“There would seem to be a lot of duplication between [Microsoft and Yahoo]”, said Matt Rosoff, an analyst at Directions on Microsoft. If Microsoft thought that it needed access to a bigger advertising network, then it would have been better to stay with Yahoo rather than branch out to build its own network in the first place, he added.