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Microsoft There's More to Life Than Search

A quick glance at the empire that Google built by selling small text ads alongside search results is all the proof you need to know there's a pile of money in search.

But could it be that advertisers give search a little more credit than it deserves?

In a presentation here at the Interactive Advertising Bureau's Mixx conference, Microsoft's Young-Bean Song told an audience of online marketers that search is really just the tip of the iceberg. According to Song, who oversees analytics at the company's Atlas Institute, a buyer's online purchasing decision represents the influence of every exposure they have had with a brand, not merely the ad that they clicked on immediately before making their purchase.

The claim continues efforts by Microsoft to take a shot at one of the great conundrums facing the online advertising industry. For all of the consumer behavioral data that the digital space provides, marketers continue to struggle with finding a reliable way to measure the return on investment (ROI) of their ad campaigns, which some say has hindered growth of the Web ad industry.

Moving beyond the "last ad-clicked" model of measuring ROI is the essence of the tracking model that Microsoft (NASDAQ: MSFT) introduced in February, called engagement mapping. The model is the product of an extensive research and development initiative undertaken by Song and his team at the Atlas Institute, a research arm that Microsoft picked up through last year's $6 billion acquisition of aQuantive.

Talking up opportunities in non-search advertising also is important for Microsoft in particular, which maintains a large array of online media properties and has gotten into the ad serving and management market through aQuantive.

To support its position, Microsoft today released a new study concluding that 94 percent of all interactions that consumers have with a brand online don't receive any credit when advertisers run ROI studies. It also expanded the beta of its engagement mapping program to make it available to all of its Atlas ad-management clients.

"You don't have to be in marketing to realize that there's a lot more going on," Song said. "People are seeing ads across many, many sites, across many, many channels, over extended periods of time. And all of those different touchpoints are making a difference."

Does search obscure other ads' value?

To illustrate his point, Song offered a parable from the offline world. Trying to gather field research, an ad executive for Corona beer heads into a neighborhood watering hole. He sees the neon Corona sign behind the bar, and proceeds to observe a lot of people standing right in front of that sign and ordering Corona beer. Connecting the dots, the ad executive decides that the sign is all he needs to move product and immediately discontinues all other advertising activities, such as print ads, billboards and TV spots.

A little far-fetched? Sure, and Song admitted as much. But his point was that placing a disproportionate emphasis on the last ad impression a customer saw before making a purchasing decision gives short shrift to the other placements that, Microsoft contends, often deserve the bulk of the credit for driving a conversion.

The online corollary to the Corona sign would be the search ad. Simply measuring search discounts the impact of graphical display ads and rich-media ads, which generally command greater engagement than text-only search ads. But because many people navigate the Web using a search engine, the search ad is very often the last paid placement users click on before visiting the site where they make a purchase.

"If they ultimately use a search ad to get to your Web site, all of that value is obscured, because only the last click is getting credit," he said. "This idea that search is this magical fountain of customer acquisition -- it certainly is in some cases, but in many cases it's not."

The competitive angle

Anyone who has been watching Microsoft throughout the past year might see something a little incongruous about Song's talk. Grabbing a bigger share of the search market, after all, was the principal motivation behind the failed attempt to acquire Yahoo (NASDAQ: YHOO).

Then in July, after the Yahoo bid had fallen apart, Microsoft CEO Steve Ballmer told analysts at the company's annual financial meeting that the company was prepared to spend heavily on the "trillion-dollar opportunity" that search represented. Search, Ballmer explained, was becoming a "two-horse" race between Microsoft and Google (NASDAQ: GOOG). Chris Liddell, Microsoft's CFO, called Yahoo a declining asset, and the company has repeatedly referred to the attempted Yahoo buyout as a "tactic," not a strategy unto itself.

So while Microsoft is planning to double down on its own position in the search market, it is also now out to prove to advertisers that it might be worth their while to spend more of their online budgets on non-search ad placements.

"There are basic rules, basic bits of data, basic variables that we're all already very comfortable with that can be used to actually take that one ad that's getting all the credit and share that credit amongst all the other digital touchpoints in that consumer's history," Song said.

"How many times have you heard in this industry people lamenting how consumers are spending a third of their time on the Internet, how come we're now seeing a third of [marketers'] budgets on the interactive space?" Song said that engagement mapping could close that gap by providing a weighted value to each ad impression based on its contribution to the consummated transaction.

Microsoft is hoping that its engagement mapping might even have a solution for the monetization woes of the social networks, which typically fetch low ad rates.

"If Facebook and MySpace were actually garnering the amount of media revenue relative to the amount of time spent, those guys would be crushing all of us," Song said. "The reality is that people aren't seeing that value."

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