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January 17, 2006

Microsoft adCenter followups

Posted by David Hunter at 4:43 PM ET.

In the hoopla surrounding the announcement of Microsoft’s adLab in Beijing, Microsoft officials drew a lot of press by confirming what had been been pretty much common knowledge ([1], [2]) about the roll out of adCenter:

Microsoft Corp. plans to launch its system for selling advertising alongside regular search results by June in the United States, giving the company its next piece of ammunition in the battle with rivals including Google Inc. and Yahoo Inc.

Microsoft has been testing its ambitious new platform for selling all kinds of online advertising, called adCenter, since last spring. Right now, the company said about 25 percent of the sponsored links that accompany regular search results on its MSN Search site are from adCenter, but that will grow to 100 percent by the time the company’s fiscal year ends in June.

Redmond-based Microsoft currently outsources the job of providing such sponsored links to a Yahoo Inc. subsidiary, Overture Services, although the contract between the two expires in June.

So it’s not just a self-imposed deadline. Aside from the technical challenges, there are also some perceptional ones as well. Randy Chen at Axcess News:

Scientists at Microsoft’s AdLab are supposedly working on advanced targeting and reporting capabilities for adCenter. But sources in Beijing said there may be other considerations Internet users should consider that lay in Windows OS default settings.

Microsoft has argued that many objects are harmful to computers and so its OS automatically prevents many online advertisements from displaying. In order for a user to fix it they have to change their OS settings to permit those objects to display, which most users are reluctant to do, or are unaware that they can even change it.

If Microsoft’s Chinese AdLab designs a new type of advertising object, Windows OS is most likely going to treat that object like it does its own default programs and permit it to be displayed while Microsoft itself will argue that what’s developed in China is outside of the Redmond, Washington software maker’s control.

The disadvantage may be considered unfair business practice but US-based ad agencies will not be able to do anything about it in court. They would have to seek legal recourse in China, where the Internet is controlled by the Chinese government.

AdLabs may also be cooperating with the Chinese government in its development work by using new technologies created at AdLab to monitor Internet users surfing habits, even to the extent that they could block certain ads by keywords or subject categories, like adult content, political advertisements and even employment.

I don’t place much credence in the first theory since any such new advertising object would be obvious to all and the equivalent of Microsoft shooting itself in the foot. The second perception will be much more difficult for Microsoft to dispel because the value-add Microsoft is claiming for adCenter is detailed demographic information about Web surfers and that was drawing privacy grumbles even before the China connection was unveiled. As for Microsoft’s current China troubles, it clearly doesn’t help that MSN China is a joint venture with the investment company of the son of a former president of China.

Filed under Coopetition, General Business, Governmental Relations, Legal, MSN, MSN Search, Privacy, Yahoo, adCenter

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