Microsoft’s Entrance to AdCenter: Google and Yahoo, Be Prepared!

Let’s welcome Microsoft’s AdCenter to the PPC advertising field. A quick question, though, why is AdCenter here? Microsoft, the juggernaut, sat on the sidelines for quite awhile and watched as first Overture (later bought by Yahoo) and then Google took online advertising to the next level at which we see it today.

This business, hardly fully grown, yet quite developed, is still dominated by Yahoo and, in particular, Google. AdCenter is not an entry into the ground floor of a new field of business, but a giant undertaking in a field that, frankly, Microsoft will likely not be able to shove people around in. I suppose Microsoft could get in the microchip processing business, too, I mean they’ve got the money – the point is businesses don’t just enter new enterprises because they can. Inexperience taking on experience is rarely a winning proposition. Yet in this case, apparently, Microsoft is taking on Google just because they can – there is enough dough.

Microsoft has deep pockets, deeper than Google – no matter what Google’s stock price is, because they have the years of profitability. What kind of deep pockets, you may ask? In Nov. ’04 Microsoft issued a special dividend and paid $3 per share to stockholders. Microsoft has over ten billion shares outstanding. So, in effect, they dispersed $30 billion dollars from their coffers to their shareholders. Too much money lying around – not a bad problem for a company to have, eh? If you check out Google Finance and look at Microsoft’s balance sheet, you’ll see that they have money enough to do anything still – and that includes dueling Google with AdCenter.

The basic aim of Microsoft’s AdCenter is to increase advertising revenue and directly compete with Google in the industry share of advertising dollars. Is it green pastures of profit or the lust of competition that’s brought Microsoft into this game? It’s tougher to sell the profit motive, honestly. Conventionally speaking Microsoft’s scenario today would have been unthinkable only four or five years ago – that Microsoft would try and become a major provider of online media.

Perhaps Microsoft is entering into an opportunity, partially by luck, where they can exploit Google. Google has made some quantifiable mistakes and created weaknesses that competition could exploit, possibly. I believe that one key to knocking Google off the top of the heap is to go after the advertising base.

I’ve observed AdCenter, advised new users, and even signed up for it myself. The AdCenter console is sleeker than Google and the reporting (and this is important for advertisers – possibly lost on Google) is better. Primarily, they offer a Cost Estimator for advertisers, to help keep within budget while providing rank, traffic and cost estimates per keyword. AdCenter, on the surface at least, seems intent on ceding information over to the advertiser.

Microsoft’s AdCenter can further drive a wedge between Google and its advertising base by raising the click fraud issue. Aside from being notoriously difficult to communicate with, for advertisers with concerns, Google has been secretive, almost sneaky, about their click fraud settlement – contacting advertisers to opt-out of the class action settlement with a harmless looking email, some say that resembles spam. Google may be creating an environment of mistrust that could, ironically given Microsoft bullying reputation, drive advertisers to Microsoft’s AdCenter.

 I think that if Microsoft wants to step up their Search Engine Marketing platform, above what’s available they have a number of duties:

1) Bring more meaningful web conversion data for advertisers – and that’s exactly what they seem to be trying to do with their reporting interface options for advertisers.

2) Seek out partnerships here, there, and everywhere. The Yahoo and eBay announcement had thunderous effects on the search arena – a real blow, perhaps, to Google’s pride. Has success, as it’s known to do in human nature, bred contempt?

3) The toughest trick of all, and one where Google is only getting stronger – increase gross user search. This is the one factor that could make AdCenter’s whole existence futile. Google is doing a bang-up job of increasing an already dominant share of search. Just this week Google recorded 43.1% of searches conducted by US residents in April. This is up from 36.5% in April, 2005. Google has been taking all comers lately with charges of click fraud, secrecy, being hypocrites, even the protectors of child porn – charges don’t come much more scurrilous in the corporate world. But Google’s growing share of search is a magic bullet, impossible for competitors, short-sellers, or even run-of-the-mill ill-wishers to ignore. It confirms that they are the top banana in the world of Internet marketing. Simply put, when people want to find things on the Internet, they’re going to Google first. The inference is clear, Google’s search is best. While Google grows the competition claws to keep market share, competition that includes Yahoo, a company that only exists right now to slowly bleed search share to Google, a percentage point at a time, despite an impressive track record and performance in the field. And this is promising to Microsoft?

Good luck.