Microsoft’s Ad Business: More Akin to AOL than Google

When it comes to digital advertising, Microsoft still has a lot more in common with Yahoo or AOL than it does with Google.

In its earnings report yesterday, the company reported online ad revenues declined 16 percent during the quarter just ended, primarily due to a significant drop in ad rates. The decline was somewhat offset by growth in both page views and queries on its search engine.

Naturally Microsoft would like to reverse those clauses — boasting to advertisers that strength in search was partially brought down by weakness in display ad rates. Alas, with 40-plus media products in the market, and the vast majority of them reliant on display, rich media, and other types of graphical advertising, that’s not happening soon — unless, that is, Steve Ballmer and Yahoo CEO Carol Bartz shock the world by striking a search ad deal of some sort this quarter. The likelihood of that outcome is anybody’s guess, but few believe an agreement is imminent.

On a somewhat brighter note, Microsoft’s recent “I’m a PC” campaign appears to be paying off. During the Q1 earnings call, execs boasted internal research found consumers professed a 10 percent increase in preference for Windows machines since the ads launched.

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