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Microsoft AdCenter and New Direction Panned

Dvorak and Davis Express Same View in Different Ways

Microsoft Corp. is heading in a new direction! Why, it's just like deja vu all over again.

The company that seemed to have the weakest name imaginable when it was founded in the mid-70s--our product is not big, it's "micro," and it's not tough, it's "soft"--is apparently going back to the first page of its playbook. This page would contain the play in which it operates on the premise that first you miss out on a huge new development Then you make up for lost time by either buying a competitive product or reverse engineering one, then run everyone else out of business through brutally effective business and marketing discipline.

DOS, then Windows, then Office, then Explorer. Other attempts with MSN and .NET. A real battle with Real Networks. And numerous other, smaller skirmishes too numerous to mention in a single article. Segue quickly to the present moment, and the latest battle is with Google and Yahoo in the land grab for the great, new search frontier.

A major shot was just fired with AdCenter, an online ad platform, which an Information Week report referred to as "a milestone in the company's struggle to catch up with Google Inc. and Yahoo Inc. in the multi-billion-dollar search advertising market." AdCenter was announced by company CEO Steve Ballmer (pictured above) at an MSN Strategic Account Summit in Redmond. MSN and Windows Live.

The ad platform lets advertisers by display ads and search ads at MSN and Windows Live, and is designed to compete directly with Google AdSense and Yahoo, including the ability to bid on keywords. This should end the relationship between MSN and Yahoo, which had been administering search ads with MSN.

Redmond also announced that it is acquiring New York-based Massive Inc., a company that places ads in video games. This deal would presumably bolster the company's XBox strategy, which has so far been a clear winner in a very competitive market.

So, everyone knows these basic facts. But what to make of it? Acerbic industry commentator John C. Dvorak (pictured left) certainly was not impressed by Microsoft's impending new direction when he recently pronounced the company "bed-ridden" in a report he did for Dow Jones Market Watch.

Dvorak said in his report that "Microsoft should have abandoned MSN a decade ago," adding that "there is a lot of talk about Microsoft becoming more of a publisher and selling advertising. (But) Microsoft should be buying advertising not selling it. This is not a media publishing company; it's a software publishing company. Why people keep encouraging Microsoft to go in this direction is baffling."

Dvorak also said the company has a "preoccupation with Google," opining that Microsoft is "too easily distracted by successful companies who are not competitors. There is a deep-rooted belief that if a company like Google is successful, then they are an enemy per se. So the company obsesses on what Google is doing rather than concentrating on important Microsoft projects. Now Microsoft is about to do a deal with Yahoo to flank Google. This old-lady-like skittishness is unbecoming for a company this size."

Longtime, respected Microsoft observer and web services commentator Dwight B. Davis (pictured below), Vice President and Practice Director at Summit Strategies, gave us a more nuanced view, but one which hardly praises Redmond's recent machinations outright.

Davis, who remains based in Seattle while serving as an executive with Boston-based Summit Strategies, said "clearly, Microsoft is driven not only by Google envy, but also by the perception that Google is also a growing threat. As has been widely noted, Microsoft was slow to respond to the online ad opportunity/Google threat, so is now trying to make up lost ground."

"Having a solid ad management and distribution engine is an important part of Microsoft's belated response, but it isn't the only necessary element. Unless Microsoft can make its search engine -- and other online services -- more competitive with Google's Microsoft won't have the necessary traffic to match Google's allure to advertisers."

(SYS-CON had done a sample test of MSN versus its two competitors some months ago, with MSN definitely found lacking. Will this issue go away? Or will this be like one of Microsoft's singular failures, the infamous Bookshelf CD-ROM in the late 80s that couldn't pour the proper ZIP code out of a boot if the instructions were printed on the heel?)

Davis sees a richer picture, as he also told us that Microsoft "is also trying to attract online users with a broad portfolio of online services, not just with MSN search. Some of those online services are those that Microsoft is developing under the Microsoft Live umbrella (Windows Live & Office Live services), and which aim to leverage Microsoft's huge base of software users. Obviously, Google doesn't have that type of base to tap, so at least in this way Microsoft can conceivably offer services -- online enhancements to Windows and Office -- that Google can't match."

But he also noted that "Microsoft Live and other MSN services still have a long way to go, however, before they come close to the number of Google search users. It also remains unclear which of the non-search services will prove the most attractive to advertisers, or how advertisements will be targeted and displayed for some of those other services. I.e. If I'm searching for gardening tools, it's fairly easy to identify and display relevant advertisers' links. If I'm using an online calendar service, it isn't so obvious."

Davis also peeled back another layer of the onion, saying "Of more interest to me is what Microsoft may be planning for hosting some of its server-based business applications (i.e. the Dynamics portfolio) and -- secondarily, I expect -- Office and other desktop PC-based applications."

"Microsoft is already working with some service provider partners to offer hosted versions of, e.g. Microsoft CRM, and it has indicated that it expects many SMB customers to ultimately get much of their software functionality via such SaaS (Software as a Service) offerings. But Microsoft has, to put it kindly, always been ambivalent about the SaaS model, since it could potentially undermine its core perpetual-license business model and existing channel partners."

We'll work to track down comments from, and opinions about, Yahoo and Google, as this story plays out in the days and months ahead. Meanwhile, what do our readers think?

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.

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