This morning, I attended a briefing at Microsoft that was meant to introduce what's new with MSN/Windows Live. Overall the event was well attended and well organized by Microsoft. The first session, the one I was most interested, was about what Microsoft was doing in the advertising space.
We were shown a bunch of slides as to what Microsoft's version of Adsense would do for advertisers and publishers. It was a lot of marketing on how it would have better targeting and relevance. There were a lot of words, but there was not stake in the ground as to what it would do better. I couldn't stand it for long so I asked a question point blank: "Can you give us the bottom line? How much more money will publishers make using Microsoft as opposed to your competition?" (Google of course). The answer was surprising, and so were the follow on questions:
The answer I got was; "Google is doing a great job with adsense, and we cannot match the revenue a publisher will make with adsense, but we will give a lot more control to the publisher as to the kinds of ads that get shown on their page". This was shocking, I thought, for sure, Microsoft would start by making publishers more money.
Immediately after this answer, another question was asked by Ken Gullickson sitting on my left: "How much of a discount will publishers have to take vs. Google to get the benefit of controlling the ads?" The answer was "it will be a very very small discount to what you get from Google on some of your inventory, but not all of your inventory". The answer was not satisfying, and Bill Gurley, sitting on my right went straight to the jugular and asked: "How's that going to work with Google's exclusivity clause, if you don't offer ads on all the inventory?"
Three questions by VC's and that was it for Microsoft adCenter. There was one great piece of advice offered though from our table. "Why don't you guys (Microsoft) dramatically change the revenue split, say keep 10% and make it transparent to disrupt Google's game?" That was a great suggestion, but the sideways answer made it clear that Microsoft could not do that at all. If they did, it would sure affect Google's share price.
Here is where I come out of this as a VC and publisher. On my ads, I pretty much only care for the dollars it brings in, given there is some broad editorial control over the kinds of ads (adult, gambling etc.). If I get clickthroughs, then the ads are relevant. I don't want more relevant ads if come with less clickthroughs. So I don't get why a publisher would accept less revenue for more relevant ads? If publishers could make more money, they would definitely switch out of Google, and I think Microsoft needs to understand that fast.
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