Microsoft has recently made public statements demonstrating its intention to become a more serious player in the advertising business by providing ways for brands to communicate with consumers beyond existing banner ads and search ads.

In a session at the Consumer Electronic Show, Mark Kroese, general manager of marketing and strategy within the Entertainment and Devices Division, was quoted as saying that the off-browser focus areas include ads in and around video games, mobile devices, and video. These new advertising mediums represent about 25% of total online advertising spend, and have seen huge growth in recent times.

Figures quoted by Microsoft for the increase in ad spend from 2006 to 2007 included:

• ad spend on gaming was up 32 percent,
• ad spend on video was up 39 percent,
• ad spend on mobile was up 54 percent,
• ad spend on online search was up 17 percent,

This compares with traditional advertising media where spending has declined: radio was down 1 percent, newspaper down 2.8 percent, and ad spend on major TV networks was down 5.7 percent.
(sources are eMarketer, Parker Associates, and Yankee Group).

Kroese said that Microsoft could reach more than 100 million “monetizable users each month” thanks to it games, video and mobile offering. He went on to note that this was more than the largest US cable operator.

He stated that Microsoft’s mobile ambitions went further than banner and text ads, and included:

• ad supported 411 (Directory Assistance) services, based on voice advertisements
• location based advertising
• digital coupons on mobile phones
• “adver-games” in video games
• sponsored gaming tournaments, including one with Halo3
• a system to put video ads in front of video content that is watched on Media Player, the software that is shipped on all Windows PC’s

This should come as no surprise to people familiar with Microsoft over the years. They are a very intelligent company that takes a long view of markets, and is patient in building the pieces needed to win in the areas they have targeted. As more and more revenue has moved to the internet, specifically in search advertising, Microsoft has been putting a lot of effort in that area.

With mobile advertising just beginning, its clear that now is the right time to start staking out a territory and building a defensible position. Since Microsoft has not been dominant in the search or banner ad space, they are making new efforts to grow the business outside of these areas.