Why MSFT must make an acquisition in online media

Why MSFT must make an acquisition in online media

Summary: Businessweek's cover story is: "Inside Microsoft's War Against Google - With Yahoo off the table, Microsoft plans to challenge Google's online-ad juggernaut alone. A behind-the-scenes look at its provocative strategy.

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TOPICS: Microsoft
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Businessweek's cover story is: "Inside Microsoft's War Against Google - With Yahoo off the table, Microsoft plans to challenge Google's online-ad juggernaut alone. A behind-the-scenes look at its provocative strategy."

This behind the scenes look isn't very deep. It mostly centers on MSFT's "top U.S. salesman for online advertising, Keith Lorizio." He is trying to convince large online ad buyers such as E*Trade to put more money into display ads and other online ads rather than search ads.

Fair enough. But how is that going to help Microsoft?

What is missing from this wafer-thin analysis of Microsoft's battle with Google is a look at the business of online ads.

It's wonderfully ironic that BusinessWeek misses the key issue that frames Microsoft's strategic problem: it can't grow its advertising business organically to match the deluge of ad money pouring into online advertising.

Microsoft spelled this out when it launched its acquisition bid:

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence.

"The resulting benefits" are for Microsoft because there is no way it can organically grow its online ad business at a rate that can soak up $40 billion flooding into online markets in the next three years. No way.

It has to acquire online media properties otherwise it will miss out on an incredible bonanza--the richest gold rush in advertising since the radio was invented, imho.

Topic: Microsoft

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6 comments
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  • Anti-economies of scale

    You can't just be a big fat monster and demand more more more.

    Humans are cleverer than that.
    fr0thy2
  • MS should mitigate the importance of search

    I personally believe having ad overlays on music tracks and video could be a great way to mitigate the importance of search ads. People spend a lot of time listening to music and watching videos. If MS pursued this and became successful, it could take away a lot of the ad momentum from Google. I however would like to emphasize how this works most effectively, through the building up of a media platform which allows the long tail of the media / entertainment industry to prosper. Also MS? software + services approach would allow the company to build the best solution out there, emphasizing superior user experiences, and media playback of content stored locally on devices.

    Also, heavily emphasizing to people the great usefulness of searching under various categories (e.g. maps, news, books) can help mitigate the importance of Google?s general purpose search algorithms. E.g. I believe live.com should more look like [url=http://search.live.com/explore?FORM=BXHP]this page[/url], rather than [url=http://www.live.com/]this page[/url]. I certainly hope that MS comes up with better general purpose search algorithms than Google?s soon. I don?t think it is a matter that MS can?t: I just think its current search algorithms have misguided priorities. I think MS? search algorithms? highest priorities should be along [url=http://tinyurl.com/4xgqag]these lines[/url]. Instead, MS? current search algorithms seem to readily hack search phrase integrity in search results, for the most popular and current web pages that may have only tiny elements of a user?s search phrase. I think this is really screwed up! Returning web pages containing phrases that are the closest matches to a given search phrase, should be MS? search algorithms? highest priority.

    I believe therefore that MS should do all it can to mitigate the importance of search when it comes to raking in ad revenue. I believe at the same time it should come up with better search algorithms than Google?s.
    P. Douglas
    • The end of a blank piece of paper

      why have blank paper when you can have a load of gobsihte pre-printed all over it.
      fr0thy2
      • If what you mean is that ...

        ... it is better to have the neat, simple www.live.com web page, then fine. As long as MS finds a way encourage users to search by category. MS e.g. could encircle the category options at the top of the search box on its live.com web page, and stylize it to look handwritten, with a note stressing the significantly better results users would obtain if they use these options. The above could be done in red ink. What's important is that MS drive users to search by category, as a means de-emphasizing the use / importance of general search.
        P. Douglas
  • RE: Why MSFT must make an acquisition in online media

    I really hope M$ tries to fuck with Google. They will NOT get anywhere.
    atari8bit
  • Tom Foreskin's wafer-thin presentation

    Tom predicts there's going to be a $40 billion expansion in new money spent on online advertising over the next three years. A "deluge", he says, and an "incredible bonanza", and "the richest gold rush in advertising", is coming up, in his humble opinion. But, with the sole exception that online advertising has been growing in recent years, he gives us no fundamentals from reality that would support such a prediction. Because he gives us no basis for believing him, what he says is worthless. He sounds like somebody from the late 1990's who only sees the growth numbers and doesn't see the fundamentals.

    My own opinion is that Microsoft has a dire need to improve the quality of its search engine, but has no need to make acquisitions in online advertising media and actually should avoid such acquisitions because Microsoft is a technology company and should remain so. Its efforts at online media so far have been pathetic -- it's got no competence or competitive advantage in the area at all.
    seanwal111111