MSN Q2 Revenues Down, But Ad Sales Up
Microsoft may have its future growth hopes pinned on ad revenues and advanced media platforms, but it was the company’s traditional strength in PC sales and business products that contributed most to revenue in the second quarter of 2006, the company reported Friday.
The company’s total revenues of $11.8 billion were up 9.4% over second quarter 2005, although profits were off 5% compared to last year. Sales were strongest in the company’s Windows, Office and server products divisions.
By contrast, Microsoft’s MSN division, which includes Internet service, content and advertising, saw revenues decline 2% in Q2—the largest revenue drop of any of Microsoft’s divisions for this reporting period.
But company officials said that the MSN sales slump was largely the result of fall-off in subscriptions to the company’s dial-up access business. Quarterly advertising revenues at MSN, including search, actually grew 12% over Q2 2005; and online display ad revenue increased even more, growing by 20% over the same quarter last year, largely due to a rise in ad rates.
In a conference after the release of the earnings report, Microsoft CFO Chris Liddell said the company expects MSN revenue will be flat in the coming third quarter, due to heavy investment in new search features, particularly centered on images and video, and in continued rollout of the MSN adCenter online ad platform.
Microsoft has been running invitation-only beta tests in the U.S. for adCenter, which offers advertisers greater targeting control over their search ads, since last November. The company has said it expects to have the platform open by June, when MSN’s contract with Yahoo! for paid-placement ads expires. Liddell said that before the end of the fiscal year Microsoft will hire 1,000 new MSN employees to provide customer service for advertisers.
Last December, MSN lobbied hard to sign a search-ad deal with AOL but lost out to current provider Google. Asked in the conference call what impact that loss might have on MSN’s future in online ads, Liddell said Microsoft might “consider acquisitions to fuel future growth”
In a separate announcement, Microsoft said it has promoted Joanne Bradford to corporate vice president of global sales and trade marketing and chief media revenue officer. Formerly MSN’s chief media revenue officer, Bradford will oversee all Microsoft’s media operations, including MSN, Xbox and the upcoming Windows Live and Office Live hosted-applications platforms, and will head up the search for revenue opportunities in IP television. MSN adCenter is designed to streamline ad buys into the unified group of Microsoft Internet properties.
