Windows XP to Give Microsoft Boost in Streaming Ad Space

Microsoft is quietly hatching plans to build a streaming media ad network, based on the newest version of its Windows Media Player software, which will ship with Windows XP.

According to the Redmond, Wash.-based software giant, the new Windows Media Player will have ad-insertion features that ostensibly allow it to place an ad before any video or audio stream, anywhere on the Web — as long as it’s encoded in Microsoft’s media format.

The new ad type comes amid a new push by the software giant’s Web portal MSN to ramp up its advertising business. Earlier this year, MSN unveiled a new, $100 million program (termed “Advantage Marketing”) that would see Microsoft bundling both MSN ad inventory and marketing services with its own software and consulting. A related effort, MSN’s Agency Alliance, is designed to encourage ad agencies to sell the services to clients.

In conjunction with the Advantage Marketing program, MSN rolled out new rich media ad types — which it terms “Next Generation Advertising Products” — that join a stable of animated, drop-down and database-linked banners.

The new streaming ad insertion offering is “just one of the new ads available,” said MSN lead product manager Sarah Lefko. “So with Advantage Marketing, we’re looking for what different ads we can use with the technology we have available, to help advertisers build their brand.”

“With Windows Media technology, we have a great opportunity to help advertisers take their offline — say, television — creatives, and bring them to the Internet,” Lefko said.

Lefko said that although Microsoft theoretically could insert ads into any Windows Media stream it wanted, it said it would naturally work with publishers of streaming Web content in a revenue-sharing arrangement.

When Windows XP ships in late October, the first ads that users will see by way of the new offering will spotlight Toyota, which earlier this week signed an advertising deal with MSN and AOL Time Warner. Through the agreement, 15-second ads will run prior to streamed content on MSN Web properties.

The offering not only heats up the competition with Seattle-based RealNetworks — the provider of the other dominant form of streaming media on the Web — it also brings Microsoft firmly into the fray with streaming ad insertion startups like Lightningcast. Additionally, it feeds the fears of those who believe that Microsoft already has control over too much on the Internet — even if it claims it will use its power responsibly.

To wit, Microsoft said the developments would help Web publishers monetize their streaming media traffic, and encourage advertisers to boost their online marketing.

“It’s great in general, and will make it really simple for advertisers,” Lefko said. “MSN can go and encode the ad and then make it available — so it’s really easy to get your online advertising done by working with us.”

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