A Kinder, Smoother 2008 For Microsoft?

Looking Ahead

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New Year, Big Plans For Advertising

In order to win ground against Google, in particular, the company needs to expand its advertising base all around, says one analyst.

"For Microsoft to really get a big chunk of [those] revenues, they have to be more than just [an ad] publishing [site]," Matt Rosoff, lead analyst for consumer technologies at researcher Directions on Microsoft, told InternetNews.com. The company's executives know this, he said, and are investing for the long term.

For instance, last summer, Microsoft bought out online advertising firm aQuantive for $6 billion, the largest acquisition in the company's history. It was a move designed to help it gain a larger footprint and more advanced technology in the online ad arena. It also acquired aQuantive's interactive agency unit Avenue A | Razorfish in the deal, making it one of the largest players in the online ad agency arena almost overnight as well.

That investment is already starting to show some promise.

In mid-December, Microsoft and Viacom inked a deal aimed at providing content to Microsoft's Web sites. Additionally, Viacom also announced it has selected Microsoft to be its preferred Web site display ad service provider, and will let the software company sell unsold display advertising for Viacom Web properties.

The Viacom deal highlights two other properties that Microsoft got in the aQuantive purchase -- the Atlas AdManager graphical ad serving technology, and DRIVEpm, which provides services that match advertiser campaigns up with publisher ad inventory.

However, online advertising is still a money pit for Microsoft and will remain so for now.

"By their own admission, they're not giving a timeline for profitability [for online advertising]," Rosoff said.

In the meantime, it appears likely that Microsoft's traditional product lines – augmented by ample reserves of ready cash -- will continue to keep the firm's coffers brimming.

On its financial analysts' call in October, company executives predicted revenues for fiscal 2008, which ends June 30, in the area of $58.8 to $59.7 billion, up from $51 billion in fiscal 2007.

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