BigShinyThing

Currently, the ads on Microsoft’s MSN’s search engine have been sold by Yahoo! The company now intends that all of its ads will be sold in-house by Spring next year. Microsoft founder Bill Gates will demonstrate his commitment to online advertising as a sector when he opens the inaugural conference of the UK’s internet advertising industry next month (as reported in The Guardian).

Last year online overtook radio advertising in terms of overall share, reaching a level of nearly 4% in the UK - the Internet Advertising Bureau says it is on track to overtake the market size of outdoor by the end of 2007. Last year spending on ad searches, pop-ups and other forms of online advertising rocketed 62% year-on-year to hit £653.3m in 2004, from £407.8m in 2003.

The New York Times reports that the search-based advertising system to be used by MSN aims to improve on the services already offered by Google and Yahoo! by allowing marketers to target users based on their sex, age and location. Microsoft already owns a lot of demographic information on its users gleaned via services such as hotmail and its Passport identity service. Google and Yahoo! only allow a limited targeting of search ads by location, with Google arguing that it doesn’t need demographic data to direct its ads because Web searchers can directly indicate what they may want to buy through their keyword search queries. Tim Armstrong, vice president for advertising at Google, also plays the privacy card: “We are very heavy on user privacy. So our way of targeting advertising relies heavily on what we know about the content people are looking for.” Google already takes into account other factors such as the time of day and the geographical location of the user.

Microsoft also believes it has another advantage over Google: the building of relationships with web site owners, many of whom are users of its software and online services. But Google ads is already an appealing option for small businesses looking to raise their profile online in a cost effective way. It remains to be seen if Microsoft can achieve the same resonance with these entrepreneurs that Google has.