Meet Microsoft, the advertising company

Microsoft, first and foremost, is a software company. Or is it? Microsoft is making a growing number of strategic moves in online advertising and is making no bones about its ambitions to be an advertising-broker powerhouse.

Microsoft, first and foremost, is a software company. Or is it?

Consider these recent developments:

* On May 3, Microsoft announced its intent to acquire European-based mobile-phone advertising company ScreenTonic.

* On the heels of its bidding-war loss of DoubleClick to Google, Microsoft is rumored to be nosing around another advertising company, 24/7 Real Media 

* Microsoft is promoting its Personal Expressions for Windows Live Messenger theme packs, which incorporate an expanded capacity for advertisers who want to make "advertisers part of face to face conversations."

* Last year, Microsoft bought Massive Inc. to help the company embed ads in games.

* Microsoft is encouraging its partners to build Vista gadgets that are elaborate, interactive ads.

* Microsoft is seeking new ways to get members of its Live communities to build mash-ups around ads. They want to find a way to repeat the success of the Microsoft "Gears of War" trailer that took on a mash-up life of its own on YouTube.

At this week's Mix '07, the final keynote from Robbie Bach, President of Microsoft's entertainment and devices division, made no bones about Microsoft's advertising ambitions. Bach spent much of his 45-minute address detailing how advertising is becoming more of a central component to many of Microsoft's businesses, including gaming, mobile phones and video/music delivery.

Bach discussed how Microsoft's goal to connected entertainment revolves around making experiences personal, interactive and social. Integrating Windows Live Messenger into Xbox Live is one example of how the Softies plan to do this. Sharing the same contact list and search mechanism across your desktop, laptop and mobile device is another.

Microsoft isn't adding all this social-software goodness to its products just because the up-and-coming generation want and expect it. Microsoft also sees a way to make money here.

Just like Google, Microsoft is looking to advertising to offset the cost of providing these services. And because Microsoft, like other online advertising brokers, knows that users generally hate ads and try to find ways to circumvent them, Microsoft and its marketing partners are seeking ways to integrate inextricably content into ads.

At Mix, Bach talked about "experiential marketing" using software and services in combination. First you attract the customers, then you engage them and finally you excite them. He pointed to an Xbox 360 program Microsoft did with Burger King, via which Microsoft helped create $3.99 games that integrated advertising with content. Burger King sold 3.2 million of these games in six weeks -- enough to have an impact on their financial results.

With Xbox Live, "we've created a social community and that community markets to itself," Bach crowed during his Mix '07 keynote. "I've been at Microsoft for 19 years," Bach said. "From a marketing perspective, it's a new world The tools and services and apps are becoming part of the medium, and that's part of how the marketing happens."

How do you feel about Microsoft's quest to become more of an advertising broker? Will the Empire be any more "evil" than Google in its quest to integrate content/search/ads?