MSN's Evolving Advertising Business

Strong growth in advertising revenue has enabled MSN to become profitable despite a decline in its paid subscriber base—a business condition that could cause MSN to invest more heavily in free services than subscription services. Although MSN has some unusual advantages, including almost-guaranteed traffic via links in Microsoft software, its advertising strategy—including the diversity of its advertising programs and its recent decision to eliminate pop-ups—offers useful lessons for other Web-based companies that rely on advertising revenue. Understanding MSN’s advertising programs can also help advertisers determine how best to reach MSN’s large audience.

Riding the Wave

The Internet advertising market is finally recovering from the dot-com collapse: online advertising totaled US$7.3 billion in 2003, up from US$6.0 billion in 2002—the first year-on-year increase since 2000—according to a joint study conducted by the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC). This growth is expected to continue through 2004, with researcher eMarketer predicting record online advertising sales of US$8.4 billion, higher than the 2000 peak of US$8.1 billion.