Ad Programs Expanding

As part of a strategy to earn more revenue from online advertising, Microsoft is testing display advertisements on MSN Spaces and several of its next-generation “Live” services, which are currently in beta testing. The company has also expanded its adCenter paid search platform to new advertisers in the United States. The gradual expansion of Microsoft’s online advertising programs could impact other Web companies, particularly Yahoo, which provides most of MSN’s paid search results today, and Google, which relies on Internet advertising for nearly all its revenue.

AdCenter in Transition

Paid search, in which advertisers bid for placement in search results, is one of the fastest-growing online businesses. However, MSN’s paid search revenue declined between the Dec. 2004 and Dec. 2005 quarters. In contrast, market leader Google saw revenue from advertising on its sites—most of which is paid search revenue—grow 104%. Yahoo does not break out results in the same way, but its total advertising revenue grew 39% to US$1.32 billion in the same period; MSN’s total advertising revenue grew only 12% to approximately US$330 million.