OK, OK, the joke is old — no Microsoft product is worth using until Version 3, har-dee-har, and maybe it’s a cheap shot at a product just awakening in beta.
But one of our favorite Microsoft smart guy bloggers, Don Dodge, is posting about AdCenter like it’s some kind of moneymaker for Microsoft, and I have to say — what? This is like waiting for Zune to move the dial for Microsoft’s stock. The umpteenth-place entry in a two-player market is not “big financial news,” and will not make a noticable impact until some major changes are made. AdCenter is a weak offering, MSN Search is losing market share, and the reason is performance. Neither AdCenter nor MSN Search work as well as competing offerings. The combination of the two is just not compelling for ad buyers.
Don notes that “the real money is made by delivering ads,” by which I assume he means “the real money is made when the ads delivered are so relevant and helpful that people click on them rather than just looking at the non-revenue search results.” In that regard, my experience indicates that Microsoft has a long, long way to go. Don (and Ballmer and Gates and everyone else) can tout the “rocket science” in search and ad serving all they want — they’re right, these are hard problems — but this Microsoft offering still needs more rocket scientists.
As a loyal member of the Microsoft Partner Community, I signed up for Microsoft AdCenter when it first became semi-open for business in June. The ads I placed on Microsoft’s service generate negligible traffic for us, while Google ads generate a ton and Yahoo ads fall somewhere in between. I use approximately the same words in each service, and the results are strikingly different. My semi-quantitative analysis shows that Google delivers far more hits — substantially more than I would expect just by allowing for the respective market shares of Google and Microsoft in the search market. (I say “semi-quantitative because my hit tracker gives incomplete results, and each service provides different reporting tools.)
Here’s a simple illustrative example: When I buy the search phrase “grid computing,” I want people to click on a Digipede ad that leads here. With Google AdSense, buying that phrase costs a lot, and I get a lot of hits (249 clicks on our ad in a given recent period from that single exact search phrase, and we could have had more if I had not limited our budget). When I buy “grid computing” at Microsoft’s AdCenter, it’s cheap, and I get — bupkus, zilch, nada (ok, 7 clicks to be more precise, and that’s without coming CLOSE to our budget). Yeah, part of that is overall search market share, but part of it is clickthrough rate, and part is the profile of users searching for this particular phrase — and taken together, I do better on Google, by a lot. (Yahoo is somewhere in between; Microsoft is a distant last.) To me, just a big dumb entrepreneur buying ads, this looks like Google is doing a (much) better job serving my ads to an audience that cares. (Yes, these are Search Ads, not the newly available Content Ads Don posted about; we have no experience with the latter at AdCenter yet, but I look forward to trying them out. Note that this new offering, again, is strictly catch-up with long-established offerings on Google and Yahoo.)
Also the signup process was simpler at Google, and guess who’s legalese was less intimidating and obtrusive? And while I’m piling it on, Google and Yahoo have reporting that’s more intuitive (and in Google’s case, more responsive), Google allows integration with the very-cool Google Analytics service, both Google and Yahoo provide better control over where and when your ads run, and they make it easier to recover a lost password (I had to go back to guessing at AdCenter; I have no idea where my password was emailed by the AdCenter password recovery robot, but it wasn’t to me…).
In its current form, AdCenter is an also-ran, which is a shame — one might expect that the Microsoft-centric target audience I’m looking for would use MSN Search more often than many other audiences would. I will tell the “Chief Media Revenue Officer” (I kid you not) the same when her contractor gets around to sending the satisfaction survey she promised me.
I’ll be happy to post again after we’ve had some experience with the added content ad functionality Don reported. In the meantime — wake me when we get to 3.0.
3 responses so far ↓
1 Don Dodge // Sep 5, 2006 at 2:38 pm
John, Fair comments based on real experience with the early beta. I accept that and respect your judgement. You are right, Microsoft adCenter has a long way to go, but it may not take as long as you think to get there.
From a technology perspective I am pretty confident that the adCenter team can deliver a world class solution for advertisers and site publishers. The system will be very competitive financially and deliver an excellent ROI.
In terms of market share…that could take longer. I agree that Google dominates search engine market share, and also dominates the ad serving business. There really hasn’t been much competition. Advertisers and web site publishers want competitive alternatives. So do search engine users.
Microsoft has come from behind before. Remember Netscape? They were free and had nearly all the market. Remember Nintendo and Playstation? xBox started from nothing and now has huge market share. It always looks impossible, but great products and staying the course eventually yeilds results.
The search engine advertising business is about $10B and growing rapidly. adCenter can reasonably get $1Billion of that market near term and a lot more long term. That moves the needle…even for Microsoft.
2 john // Sep 11, 2006 at 2:04 am
Don, believe me — I don’t doubt Microsoft’s ability to come from behind. As a customer of the adCenter service, I am hopeful that Microsoft’s technology will perform as you expect. The point of my earlier post was — that technology does not perform well today. Not for advertisers, and not for searchers. But since you raise the prospect of Microsoft becoming a major player in this large and growing market, and since you tout the financial importance of this offering, let’s take a look at some of your points.
The Netscape analogy does not hold well — the browser market, while attracting a ton of attention, was a “zero billion dollar market,” and Microsoft’s aggressive move into All Things Internet put IE in the center of the company’s laser focus. Everyone at Microsoft cared. I spend plenty of time at Microsoft, and I can tell you with certainty — not everyone at Microsoft cares about adCenter. Not everyone can even NAME adCenter. I spent three days at the Worldwide Partner Conference in Boston less than two months ago, and nobody said “adCenter” out loud.
The Xbox analogy is better — an off-mainstream offering that Microsoft can tinker with until it’s right (flame on, gamers, but that’s the truth). So yeah, if by “near term” you mean three versions and almost five years (Xbox was released 58 months ago), then sure, a determined Microsoft team should be able to carve out an interesting piece of the online ad market. I think that’s what I said in the first place — and I hope we get to Version 3 faster than that.
But if you mean adCenter will get 10% of the online ad business based on what’s in the market today — I don’t see it.
And what if you’re right? Third place at 10% does not sound like a lucrative place to be. Microsoft makes money when it’s number one in the market (Client, Information Worker) and when it’s in a close one-two race (Server). It’s third-place-and-lower products hemorrhage money (you can list these yourself, but put adCenter on the list for now…).
This phenomenon is not unique to Microsoft — Jack Welch was famous for insisting that every business unit at GE be number one or number two in the market, or he’d sell it or shut it down. But Welch never worked at Microsoft, where the license to lose money in third place (or lower) is, um, not uncommon. Let’s go back to the Xbox analogy. You’re right, it’s got “huge” market share (#2 at the moment), but it’s taken a long time. And, as you know, the “home and entertainment” segment at Microsoft, where the Xbox lives, is still losing money — $1,262,000,000 in the last fiscal year, which I believe brings us to five straight years of Very Large losses — all five of the fiscal years since the introduction of the Xbox. (And that number charitably excludes the enormous expenses Microsoft lumps into “other” in its reporting. Reporting changed partway through the 2002 – 2006 period, but I think I can find over four billion in losses for that group before the trail runs cold…Pretty soon we’re talking about real money.)
So back to your assertions about the financial importance of adCenter — Where’s the secret sauce that moves adCenter ahead of Yahoo, let alone Google? And/or — what’s different about the ad market that allows the number three player to make money in the “near term?” Or should we look forward to ten-figure losses from this group for the rest of the decade?
3 Jeremy // Oct 18, 2006 at 4:51 pm
I’m dropping microsoft from our paid search on Monday. The “orders” context never made sense to me in the first place and that made me wonder if they knew what they were doing. It appears no one who developed the product had done PPC before. The traffic isn’t great and to top if off I go the following from the – “US” Microsoft adCenter Team – today, “US”? Really? And the answer makes no sense. Obviously I already ran the report which is how we got here in the first place.
Dear Sir / Ma’am,
Thank you for contacting Microsoft adCenter Support, my name is Tamara.
After reviewing your email, I understand that you would like confirmation that you only received 35 impressions on 10/17/2006; meanwhile you had received 1,200 with Google on the same day. I realize how this may be of a high concern for you and I would be more than happy to clarify this.
I would like to assure you that our reporting for 10/17/2006 is currently not providing accurate information. It is currently a known issue and we are working diligently on resolving it. There will be inaccurate data for all reports pertaining to 10/17/2006. We would like to apologize for any inconveniences this may have caused you. I am confident that this issue will be resolved within the next few days.
For reassurance, I have run an Account Performance report by day for 10/16/2006 – 10/17/2006 and the results were as followed:
10/16/2006 – 318 impressions, 6 clicks
10/17/2006 – 37 impressions, 1 click
If you would like to run the same report as myself, please do the following:
1. Click on the Reports tab
2. From the Report Group drop down menu, select “Account Performance�
3. From the Report View drop down menu, select “Day�
4. From the Date Rage drop down menu, select “Custom date range�.. and select dates 10/16/2006 – 10/17/2006
5. Click Run REport
I have also documented our emails today in a reference number; your reference number is 1022371226.
Thank you for choosing Microsoft adCenter.
Sincerely,
Tamara
Support Representative, US Microsoft adCenter Team
adCenter Support Phone Number: 1-800-518-5689
Hours of operation: 6:00 A.M. to 6:00 P.M. PT
Simply click “Help� in the upper-right corner of any adCenter page to access a complete set of help topics, see videos to guide you through tasks, and provide useful tips. You can also find resources in the frequently asked q uestions at http://advertising.msn.com/microsoft-adcenter/faqs and on the adCenter blog at http://blogs.msdn.com/adcenter/default.aspx.
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