MSN Learning the Ropes on Contextual Ads

MSN's quiet foray into contextual advertising, an early venture not yet in beta, will compete effectively against programs from Google and Yahoo only if it builds advertiser volume. Still, experts think MSN can succeed in the contextual ad space, likely bringing new features to the market as it has done with its beta paid ad program, MSN adCenter.

Search marketers and others voiced views on the program, reportedly called ContentAds, which is expected to roll out in beta slowly this year.

Though MSN executives would not disclose details about ContentAds, a spokesman confirmed that the company is working on a contextual ad program as part of adCenter.

“We see contextual advertising as a strategic investment for Microsoft,” the spokesman said. “We have always stated that we are interested in delivering innovation in this space as part of adCenter.”

Still in the early stages of starting a program to compete against Google AdSense and Yahoo Publisher Network, MSN executives are querying advertisers and publishers on their experience with other contextual ad programs.

“Much like the approach MSN took on the paid search side, they have been doing a lot of due diligence on the state of the [contextual] market,” said Peter Hershberg, managing partner at search marketing firm Reprise Media, New York. “They're reaching out to both publishers and advertisers to see where the shortcomings in existing programs are.”

But to gain revenue share versus Google, Yahoo and smaller ad networks including Miva, MSN will need to have a volume of advertisers, differentiate its program and possibly distribute ads across Microsoft Live applications.

Already, a slow ramp-up of advertisers in the paid MSN adCenter program has hampered that beta program. Advertisers report high ROI on certain campaigns with MSN adCenter but cannot compare performance effectively against Google and Yahoo until volume increases.

“In order to be appealing to a publisher, they have to have a significant number of advertisers covering a broad spectrum of topics,” said Fredrick Marckini, CEO of search marketing firm iProspect, Watertown, MA.

Hershberg agreed, saying, “If they don't have this inventory filled, it's going to be very difficult for them to compete with any of the existing players. They're not going to be able to offer publishers as rich revenue shares.”

To differentiate itself, MSN's contextual program is expected to feature more bells and whistles than those offered by Google and Yahoo, just like MSN's paid ad program differs from Google AdWords.

The adCenter paid ad pilot attracted advertisers by offering demographic targeting, lightweight bid management and day parting, city targeting and other differentiating factors.

But those features are available because MSN uses information from its registered users, on its own properties, which likely will not be the case with contextual advertising, said Dave Williams, chief strategist at search and performance marketing agency 360i, New York.

“MSN will need to differentiate, and it will need to find a way to deliver better results,” he said. “The best hope for MSN is that it will offer a new spin on contextual advertising.”

With its late entry into the contextual ad market, industry observers are unsure whether MSN can grab market share from the leaders. Publishers and advertisers already have dollars allotted to the Google and Yahoo programs.

“Google and Yahoo have both gained credibility among publishers, and there's only so much real estate on a page for additional ads,” Williams said.

“A lot of the biggest contextual opportunities [publishers] have already chosen Yahoo or Google,” Marckini agreed.

Still, Marckini predicts MSN ContentAds will be profitable if it integrates advertising into more software applications and users' desktops, via its Microsoft Live program.

“Should Microsoft choose to move more applications to Web-based applications … it portends the possibility of contextual advertising being displayed to those various software tools,” he said. “People who adopt their Live platform may be very willing to accept those ads, especially if they are relevant.”

And despite its late entry, Hershberg thinks MSN's steady learning approach will fuel success of its contextual ad program.

“It's one of those instances where being late to the game has been beneficial to them,” he said. “They have been able to learn from some of those mistakes and have been able to create a different product.”

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