Microsoft switches online focus to ads in bid to challenge Google

The growth of online advertising will outpace all other revenue streams at Microsoft over the next few years as it strives to compete with Google, says Microsoft chief executive Steve Balmer.

The renewed focus on online advertising marks a u-turn for the company, which has seen online advertising growth slow recently. The initiative comes despite the launch of its new operating system, Vista, which is expected to boost alternative streams of advertising revenue.

Speaking at a Microsoft Digital Day in London last week, Balmer said: “I expect advertising to be the single fastest growing part of the Microsoft revenue mix over the next several years.”

He also told the attendees, including advertising agencies and brand managers, that “understanding what you need, what consumers need – that is absolutely a priority issue and opportunity at Microsoft. There will be nothing we will not do to understand what you need.”

Search marketing is likely to be the strongest element of the online advertising mix, following the launch of its AdCenter platform. Balmer acknowledged that the company still trails Google and needs to get its search engine more widely distributed around the Net.

He added: “We’re committed to taking a significant piece of the search opportunity over the next few years. While we may be in a ‘coming from behind’ position today we have been in that same position before.”

The company, due to release its latest results tomorrow (Thursday), sells $2bn (£1.07bn) of advertising a year. It is now hiring more people in its advertising division than anywhere else across the business. MSN division’s ad revenues grew by a 9% in the past year, down from 16% the year before.

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