MSN Advertising Up, More Investment Upcoming

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Advertising revenues grew 12 percent year-over-year at MSN in Microsoft's fiscal second quarter amid ongoing investments in the area the company said would continue. Microsoft executives announced MSN's results as part of its earnings report for the quarter, which ended December 31.

While overall ad revenue, including search, was up, display ad dollars saw an even bigger gain, growing 20 percent in the quarter as compared to the year-ago period. Part of that increase came via a hike in advertising rates, said Microsoft CFO Chris Liddell. Microsoft yesterday announced the promotion of Joanne Bradford to oversee a global media sales force.

Total revenues at MSN, which also include subscription dollars, came in at $593 million, resulting in operating income of $58 million. That represented a 2 percent year-over-year decline in revenues, due to investments in MSN and a 33 percent decline in Internet access revenues, which was expected.

"As you know, we're in the middle of a transition," said Liddell, noting that the company is switching from Yahoo Search Marketing ads and will soon solely display its own ads on search engine results pages. "The ramp up of a new ad platform requires significant investment for Microsoft….We are ramping up deployment by rapidly onboarding advertisers."

Specifically, Liddell said the company would invest in global infrastructure to support the adCenter platform, which is in use in France and Singapore and being tested in the U.S. The company is also hiring customer service people to deal with advertisers, development talent to increase the range of capabilities and geographies served by adCenter. Microsoft recently launched a Beijing-based R&D center, adLab, aimed at driving advertising innovation.

In the search arena, the company said it would continue to invest in making its results more relevant and in introducing new verticals. Part of that strategy may involve making acquisitions, likely of small- to medium-sized firms, said Liddell.

Microsoft as a whole reported revenue of $11.8 billion for the quarter, which was a 9 percent increase over the same period last year. Company executives noted it was the highest quarterly revenue in Microsoft history. Profit for the quarter was $3.7 billion, or $0.34 per share, up 5 percent from the year-ago period.