saipothuri
Broken In
SEATTLE: Microsoft Corp. and Google Inc. are the only two companies with pockets deep enough to fight the arms race for Web audience market share, the head of Microsoft's Internet arm said on Thursday.
Web pioneer Yahoo Inc. may end up on the outside looking in on the coming competition for online advertising dollars, said Steve Berkowitz, head of Microsoft's online services group, who recently left a smaller rival.
In an interview, Berkowitz said companies must have the financial might to attract and retain a Web audience, lure advertisers with information about their audience and build powerful data centers.
Microsoft's online services group, formerly known as MSN, currently trails Yahoo and Google in the lucrative areas of online search. The unit is losing money even as its competitors generate rich profits from online advertising.
Berkowitz said the key for Microsoft to close the gap on rivals is to get the hundreds of millions of users who use its e-mail and instant messaging to visit more often, stay longer, and use other services like Web search or social networking.
It will also require heavy investment that only the largest players can afford. Microsoft can rely on the cash spun off by its lucrative desktop computer software business, while Google's advertising business generates hefty profits and its stock enjoys the benefits of a high valuation, he said.
"You have to be able to invest at a level that only right now two companies in the world can invest at and that's Google and Microsoft," said Berkowitz, who joined in May after quitting as CEO of IAC/InterActiveCorp's Ask.com.
The Microsoft executive knows the consequences of not having enough scale on the Internet. Ask drew rave reviews for its search technology but had trouble attracting users.
"Yahoo has a real difficulty, because it is standing out there all by itself with nothing to shield it from what needs to happen," he said, without elaborating.
Berkowitz praised Yahoo as a good and highly profitable company, but argued it did not have the "luxury of size." Microsoft's market value is roughly twice that of Google and eight times that of Yahoo's $37 billion market capitalization.
This week, Yahoo unveiled a management reshuffle and split itself into two main businesses, one focused on media and the other on ads and e-commerce. A third will focus on technology.
"Yahoo has far outperformed MSN in both graphical and search advertising," Yahoo spokeswoman Joanna Stevens said, responding to Berkowitz. "The numbers speak for themselves."
COSTLY WEB
Microsoft knows firsthand the costs of competing on the Web: it plans to spend an additional $500 million this business year at its online services group. But Berkowitz said once it digests the initial outlay, the profit margins are huge.
Until a few years ago, Microsoft did not have a search engine of its own or a clear Web advertising strategy, relying on an advertising system owned by Yahoo.
It has since launched adCenter, which Microsoft sees as a one-stop shop for advertisers across many platforms. The company has also unified its various Web services -- e-mail, instant messaging, search -- under the "Windows Live" brand.
Microsoft gets about 450 million users a month visiting its various Web services, and Berkowitz said it must boost the time the existing audience spends in the Windows Live world.
This is similar to how retailers try to increase sales with impulse items near checkouts for customers already in the door, since getting them in the store is the hard part, he said.
"We have a large audience but our engagement is not as deep as it needs to be," Berkowitz said. "It was a negative to my predecessors, but to me it's an asset, because if I can increase the engagement of the audience then I am going to be able to increase share without spending marketing dollars."
*www.ciol.com/content/news/2006/106120903.asp
Web pioneer Yahoo Inc. may end up on the outside looking in on the coming competition for online advertising dollars, said Steve Berkowitz, head of Microsoft's online services group, who recently left a smaller rival.
In an interview, Berkowitz said companies must have the financial might to attract and retain a Web audience, lure advertisers with information about their audience and build powerful data centers.
Microsoft's online services group, formerly known as MSN, currently trails Yahoo and Google in the lucrative areas of online search. The unit is losing money even as its competitors generate rich profits from online advertising.
Berkowitz said the key for Microsoft to close the gap on rivals is to get the hundreds of millions of users who use its e-mail and instant messaging to visit more often, stay longer, and use other services like Web search or social networking.
It will also require heavy investment that only the largest players can afford. Microsoft can rely on the cash spun off by its lucrative desktop computer software business, while Google's advertising business generates hefty profits and its stock enjoys the benefits of a high valuation, he said.
"You have to be able to invest at a level that only right now two companies in the world can invest at and that's Google and Microsoft," said Berkowitz, who joined in May after quitting as CEO of IAC/InterActiveCorp's Ask.com.
The Microsoft executive knows the consequences of not having enough scale on the Internet. Ask drew rave reviews for its search technology but had trouble attracting users.
"Yahoo has a real difficulty, because it is standing out there all by itself with nothing to shield it from what needs to happen," he said, without elaborating.
Berkowitz praised Yahoo as a good and highly profitable company, but argued it did not have the "luxury of size." Microsoft's market value is roughly twice that of Google and eight times that of Yahoo's $37 billion market capitalization.
This week, Yahoo unveiled a management reshuffle and split itself into two main businesses, one focused on media and the other on ads and e-commerce. A third will focus on technology.
"Yahoo has far outperformed MSN in both graphical and search advertising," Yahoo spokeswoman Joanna Stevens said, responding to Berkowitz. "The numbers speak for themselves."
COSTLY WEB
Microsoft knows firsthand the costs of competing on the Web: it plans to spend an additional $500 million this business year at its online services group. But Berkowitz said once it digests the initial outlay, the profit margins are huge.
Until a few years ago, Microsoft did not have a search engine of its own or a clear Web advertising strategy, relying on an advertising system owned by Yahoo.
It has since launched adCenter, which Microsoft sees as a one-stop shop for advertisers across many platforms. The company has also unified its various Web services -- e-mail, instant messaging, search -- under the "Windows Live" brand.
Microsoft gets about 450 million users a month visiting its various Web services, and Berkowitz said it must boost the time the existing audience spends in the Windows Live world.
This is similar to how retailers try to increase sales with impulse items near checkouts for customers already in the door, since getting them in the store is the hard part, he said.
"We have a large audience but our engagement is not as deep as it needs to be," Berkowitz said. "It was a negative to my predecessors, but to me it's an asset, because if I can increase the engagement of the audience then I am going to be able to increase share without spending marketing dollars."
*www.ciol.com/content/news/2006/106120903.asp
