Microsoft Sees Growth in Advertising

Microsoft continues to see revenue growth in its overall business, along with a 33 percent increase in its Online Services division, which incorporates its advertising and display ad businesses.

The Online Services business saw $688 million in Q1, compared to $580 million for the year ago period, bringing fiscal year-end revenues to $2.5 million, compared to $2.3 million for the prior year. Operating income in Online Services did see a loss of $239 million, compared to $187 million in Q1 2006, and a loss of $732 million for the year, compared to $74 million for last year. Microsoft’s overall revenues were $13.4 billion for the quarter, a 13 percent increase over the same period last year, and $51.12 billion for the fiscal year, a 15 percent rate of growth.

Microsoft executives hailed the revenue growth for Online Services, including a continue growth in display advertising.

“From the quarter point of view, the underlying advertising revenue was up 33 percent, and it was across the board,” said Chris Liddell, senior vice president and chief financial officer for Microsoft.

Liddell said the acquisition of aQuantive would have a positive impact on the prospects for adCenter and the properties and services it serves. “These acquisitions represent an important next step as we build out our central advertising platform,” he said. “We will continue to build out our data services for Online Services.”

Microsoft expects to close the acquisition of aQuantive next month, following a shareholder meeting and vote, which will have an affect on that quarter’s revenue and operating costs. It pegged revenue growth for Online Services in the 20 percent range for the next fiscal period.

“Mid-twenties or higher is a good result for the business overall. Clearly we can do better, but it’s not all that bad,” Liddell said. “Overall, having revenue of advertising growing at better than 20 percent is a good starting stage.”

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