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5/19/2008
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Microsoft To Court Advertisers With Revised Search, Ad Plans

The company is now looking to make "small, targeted acquisitions" in search and advertising, and potentially in regional markets or "key geographies."

Amid a renewed bid for a partnership with or acquisition of part of Yahoo, Microsoft this week will lay out its advertising and search strategies this week at its annual advertising conference, Microsoft president of its Platforms & Services Division Kevin Johnson wrote in an e-mail to employees Sunday.

"The fact is that we are not where we want to be in this business yet and we've been in this position longer than we'd all like," Johnson, president of the company's platforms and services division, wrote. "It's time for us to seize the opportunity."

Speaking at the conference, advance 08, will be Microsoft executives including chairman Bill Gates, media big-wigs like Viacom CEO Philippe Dauman, and in this election year representatives like former Hillary Clinton campaign strategist Mark Penn.

Throughout the week, Microsoft will lay out its advertising strategy, beginning with a keynote by Brian McAndrews, senior VP of Microsoft's advertising and publishing group. McAndrews will likely point to recent Microsoft advertising successes in the face of dominance by Google, such as the fact that ad revenue at the company is growing by more than 40% this quarter alone, and that the acceleration of growth rates have recently outpaced Google, Yahoo, and AOL.

The company's strategy appears to be three-fold. First, Microsoft will keep pushing of all kinds of advertising buttons, with acquisitions, partnerships and new technologies. Second, the company will build its online presence to lure advertisers. And third, Microsoft will continue pouring resources into search to gain a better toehold in the search ad business.

Instead of looking to acquire companies like Yahoo going forward, Johnson's e-mail notes that the company is now looking to make "small, targeted acquisitions" in search and advertising, and potentially in regional markets or "key geographies" as Johnson puts it. Microsoft will build on that with strategic partnerships, possibly including a new Yahoo deal.

Johnson's e-mail and the ad conference come as Microsoft expressed renewed interest in Yahoo on Sunday with an "alternative" deal, likely involving advertising, that wouldn't amount to an outright acquisition of Yahoo for Microsoft. Microsoft pulled out of a $40-billion plus acquisition bid for Yahoo earlier in May.

Though Johnson pointed to partnerships and small acquisitions, he not only didn't rule out the possibility that Microsoft could still try to buy Yahoo down the line; he underlined it. "At this time, we have not made a new bid to acquire all of Yahoo!, but we reserve the right to reconsider that alternative," he wrote. Microsoft appears to be banking on the use of new products including the forthcoming Windows 7, Windows Live wave 3, Windows Mobile 7, and Internet Explorer 8 as ways to drive traffic and "unify experiences and scenarios." Part of this effort will likely be a better branding effort, as Johnson calls Microsoft's mix of online services branding -- it includes Live, MSN, Online, and several other brands -- "fragmented and confusing."

The new traffic Microsoft hopes for will be a way to further Microsoft's ambition to lead the display advertising market, which today has no truly dominant player.

Search also looms large in Microsoft's plans, despite Microsoft's current position as a distant third to Yahoo and Google. On Wednesday, Microsoft will disclose "a major new initiative" for coming search improvements. "We are getting better and better with our core algorithmic search, and at the same time, we are investing to differentiate in vertical experiences and to disrupt the current model," Johnson wrote.

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