Microsoft Online Ad Revenue Up 23 Percent in Q1

While Microsoft announced strong revenues of $14.4 billion for the quarter ended March 31 amounting to a 32 percent increase over the same period last year, its Online Services unit experienced more modest growth. The unit, which encompasses search, MSN and its adCenter ad management platform, delivered revenue gains of 11 percent and an operating income loss of $200 million, compared to a $24 million loss the year before.

Advertising revenue growth was 23 percent year over year, however, and Chief Financial Officer Chris Liddell said the company is actually ahead of last year’s monetization goals for adCenter.

“We are now monetizing more effectively in the U.S. on our own adCenter platform than we had under third-party Overture at this time last year,” said Liddell said during the company’s earning’s call. “Our display growth was in line with what is a healthy market, driven by an increase in page views.”

Traffic to Microsoft sites has increased four percent year over year, from a three-month average monthly unique audience of 113.7 million unique visitors in Q1 2006 to 117.8 million unique visitors for the period just ended, according to Nielsen//NetRatings. The metrics firm’s AdRelevance division also estimated MSN’s revenue from image-based ads increased 4 percent from Q1 2006 to Q1 2007.

The largest growth in the quarter for the company stemmed from the impact of the Vista operating system and Office 2007 suite of products, Colleen Healy, general manager, investor relations said. She predicted that “the faster the transitions to Windows Vista, the bigger the impact will be in fiscal 2008.”

The company’s revenue drove record profits with an operating income of $6.59 billion and net income of $4.93 billion.

During the quarter Microsoft signed deals with CBS and the recently created News Corp. / NBC joint venture to distribute premium video inventory online.

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