04:54 PM

Microsoft Targets Google, Yahoo With Online Ad Platform

AdCenter is an online service where advertisers can buy space across Microsoft Web properties MSN and Windows Live. The ad platform lets advertisers purchase display and search ads.

Microsoft Corp. on Thursday launched its online advertising platform in the United States, a milestone in the company's struggle to catch up with Google Inc. and Yahoo Inc. in the multi-billion-dollar search advertising market.

Steve Ballmer, chief executive of Microsoft, unveiled the company's plans for AdCenter late Wednesday at the MSN Strategic Account Summit, an annual meeting with online advertisers at the software maker's Redmond, Wash., headquarters.

AdCenter is an online service where advertisers can buy space across Microsoft's Web properties MSN and Windows Live. The ad platform enables advertisers to purchase display and search ads. The latter is the hottest ad market on the Web.

Like Google's AdSense and Yahoo's own ad platform, AdCenter lets advertisers bid on keywords that consumers use in searching for products and services. The price paid depends on how likely the word or phrase would be used, and determines the placement of ads on search results. All three rivals also offer analytics and reporting tools that advertisers can use to measure the effectiveness of their ads.

Microsoft, however, is trying to go a step further by also targeting ads based on a person's demographics.

In launching AdCenter to deliver "100 percent" of advertising on its online services, Microsoft is apparently ending its partnership with Yahoo, which had administered search advertising on MSN. The contract between the two companies is set to expire next month.

While Microsoft's plans look good on paper, its biggest hurdle in matching the success of its rivals will be in closing the gap on usage. Microsoft's MSN search engine lags far behind Google and Yahoo, with the former the clear favorite of the U.S. online population.

Nearly half of all online searches in March were with Google, while Yahoo accounted for 22 percent, and MSN 11 percent, according to Nielsen/NetRatings.

Quality in performance could be Microsoft's biggest problem.

"The one thing that bothers me the most is the search results," Joe Wilcox, analyst for JupiterResearch, said. "In my ongoing use of the search engines, MSN results and relevancy definitely lags behind both Yahoo and Google.

Wilcox said it's "essential" that Microsoft improve its search engine to lure more users.

"When you want to go somewhere, you're going to take the road that gets you there," Wilcox said.

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