Transcript of Remarks by Yusuf Mehdi, Senior Vice President and Chief Advertising Strategist, Microsoft Corporation
Microsoft Strategic Account Summit 2007
May 8, 2007
ANNOUNCER: Ladies and gentlemen, Microsoft Senior Vice President and Chief Advertising Strategist, Yusuf Mehdi. (Applause.)
YUSUF MEHDI: Wow, wow. I mean, what a day. I was sitting back there the whole time, kind of watching the whole thing and just, hmm, I mean in terms of things covered, which is my job for this last 25 minutes. I think that Joanne gets the pleasure of wrapping up the day, and share with you some of my thoughts having spent the last 12 months really looking at the future of advertising, future of content development, future of marketing. So I’m going to kind of walk you through some stuff.
Let me start first with a question. How many people saw that demonstration from Gary Flake, and were just kind of amazed? Just put your hand up. (Applause.) Well, let me ask the real question. How many people knew what was going on in that demo? Except for Irvin Gottlieb (?), I think most of us didn’t know, but that thing is truly amazing. That was real code running real time with a browser, doing all of that sophistication. What you saw there really is the future of what the Internet experience is going to be like, and we got a taste of it. We don’t even know what it means exactly. Gary showed a bunch of great examples, but you look at that, you look at what Bill talked about with advertising, the depths of which he talked about advertising now, and how far we’ve come just internally with us thinking about that is sort of one part of what kind of makes me say wow, or inspired as we have up here.
This is really just the stuff on the cause marketing, and people’s passion for improving the world for social causes, as Bobby Shriver or some of the other efforts that you saw there, pretty impressive.
And then really kind of the future of how advertising will be done, and you see Maurice Levy, you see that great video from [David Kenny and David Droga] and what he did with UNICEF to get another thing out there in terms of not just advertising but marketing as a whole, impressive.
And then finally the last panel, which was also kind of surprising, which is really the future of content as it’s going to be developed in the new medium. It’s been fairly static for a couple of decades, and now you see Allen Shapiro, Kevin Wall, Ben Silverman basically redefining how content is going to come. And that’s just some powerful stuff. That kind of really just sort of inspires what’s going on.
And really then the most important audience and the most important player in this system is basically you all, because you’re bringing the money that funds the development and the advertising and content development and in many ways the technology development to happen, because of how you spend dollars to bring customers to your product.
So what does all that mean for you? What does everything you just saw today mean for you? I’m going to answer that — I’m not going to have you answer all that, but what I am going to do is tee up for you some ideas of what I do think it means — what it means for us as partners with that broader ecosystem. And I’m going to do it in a way that basically is less, let’s say, visionary and more sort of flat-footed meat and potatoes: What is the inspiration of the here and now? What are we doing today? Because in many ways I personally get inspired by two things. I get inspired by great big thinkers like boy-genius Gary Flake, and I get inspired by the here and now of what our customers do every minute, every second of every day, right now. In the time that I will talk in this talk, we’ll have 17 million people issue a search and click on some sort of results. And there’s learning in beta about what customers care about in that experience. So I’m going to talk about those two things, about the here and now, what gets me excited about MSN, and hopefully put forward for you some ideas on what that can mean for you from the business perspective.
But I think the main takeaway, the main message really is, as kind of Joanne and I were just talking about backstage — we’re going to open for business. We are open to work with you to redefine what the future of the Internet looks like, what type of content should come online — as Ben Silverman said, advertising is what really created the whole concept of television show programming. And we’re here to kind of work with you to figure out what sort of software products and where to take the future of the Internet as we do our small part in that whole ecosystem.
I’m going to do that, and I’m going to show you some things that we’ve got. And I also want to do it in the sense of just what I’ve seen in the last 12 months. So a year ago I sat on this stage here, talked to many of you, and we were just launching Microsoft Ad Center, our four years’ worth of hard-core engineering. And at the time I was running the Ad Center development team, the search team, and MSN.com team. What I’ve just done recently now is I spent the last year basically as a one-man team going out and meeting with content providers, with advertising folks, with technology companies, and trying to glean some things on what’s going on in the Internet.
And basically what I found is four things I spent my time on last year — and these are not representative of what’s on the Web. It’s just what I’ve come across. One was the explosion of video, and how video just came of age — whether that was BitTorrent, YouTube, iTunes music sales videos, MySpace hosting, what have you. Video really came of age. The second thing is all the flurry of deal-making in terms of buying inventory on the Internet. You’ve seen people guaranteeing a billion dollars to MySpace, to get that advertising inventory. What does that mean for you, the advertiser who is going to spend on that? What about all those other deals and acquisitions? I’ll spend time on that. The third thing was just the future of search, just where does search go from now, because it’s really still just search. And lastly just all the emerging media; all of the excitement about when does IPTV happen, what’s going to happen with mobile? What’s going to happen with gaming? Where does all that come into play? So I spent time on those four things, and I kind of want to talk to you a little bit about those and then show you what we’re doing in those areas here at MSN, so I can give you my perspective.
So let’s start by jumping in on the very first topic, which is sort of what’s happening with video. And, like I said, a couple thoughts on video as it relates to what I saw in the industry right now. Why did video pop? What was the big deal? A couple of things I saw. One was just the growth of broadband and the ease of distribution. You get movies that are actually getting out on BitTorrent, and you can actually watch a movie before you get to the theater, and the explosiveness of that. The second thing is basically user empowerment. Now you can actually write your videos to the Web. You can take a video and you can prop that thing out to the Internet and put that out there. And finally social networking, collaboration and discussion about it.
So what are we doing about it with MSN? Here’s a little bit of — videos — on what we’re doing on MSN Video. We wanted to do a couple things. We were one of the first folks to enter that video world back in 2004. We were the first people to take video advertising online seriously and started with MSN Video. At that time it was basically one service. We had one advertiser, which was Star.com — kind of a future thinker with us. So we started. Now we’re live in over I think 11 countries. We have 200 different content providers, and we really are the leader in terms of what’s going on with video advertising. The breadth of content providers and some of the things you saw about today are really growing. And as we develop the future of video, as you saw with the Silverlight demo in Bill’s example — we’re going to put users more in control. So if you add experience in that, we’ll also get richer — you know, more rich.
Examples of what will happen in that, one of the best examples I think that we talked about was what Allen Shapiro talked about with the Golden Globe. And I just thought I’d bring up a look at that. He talked pretty well about it, but this is really, again, I sort of reinforce, a pretty amazing thing what we do on video. If you want to reach customers at a massive scale, you can come and partner with us — in this case Allen is really the brainchild behind things — let’s take things — he’s doing an on-air broadcast, bring them online, do unique things online. We create a whole service to you on MSN Video behind it, with Citi as the advertiser, and the results on this were amazing. We had over 165 million page views of this campaign across the MSN network. I mean, those numbers are of mind-boggling proportion that we could bring to Citi, and to put that capability on the thing. It’s pretty impressive in terms of the user experience. And the engagement numbers — you know, it’s basically people spending seven minutes on average with the brand in front as they look at this experience. So video really and the video advertising opportunity on MSN — there are a lot of things out there. There’s YouTube. But if you want to come and get really across media brands and do brand listing, we can do some pretty impressive stuff here today. This happens today on MSN Video.
Let me talk about the second topic, which is related to the concept of brand. This is the MSN Homepage, and I know that in terms of looking at scale and content and brand we’ve done a huge number of things on MSN, but the homepage is still probably the biggest thing. If you want to break a brand, you come with MSN. Just the time that we have, as I said before, 17 million people, by the time I am done, will have clicked something on this page to come get information, come get educated about the world — in Joanne’s parlance, the “I know, I can, I care.” They will have come and participated with that. What do those numbers sound like? Those are some big numbers. Basically it’s 25 billion page views per month. It’s basically 25 times the total number of customers that go through Heathrow, Tokyo and Atlanta airports combined — think of all the people passing through — that’s what we do on MSN. And we’re able to do some pretty amazing things.
One of the things that we did here, really working with Procter, is we did a big promotion for bunco. Bunco is the game that my wife taught me about. I didn’t know much about it, but apparently it is a very hot game with a target demographic of women between 35 and 54. And what we did was we did a promotion on MSN homepage, because we knew that this was a very rich target that we have on MSN homepage, which is women demographic 35 to 54. And the results we drew on this thing was pretty amazing. We built a special game for them in the spirit of how do we partner together to do unique things. We built a special game for bunco that you could come and plan parties and run the service. And the results are pretty amazing. The average time spent on MSN [Gaming] Zone — and MSN Games is probably one of the highest usage times. If you want to find out where do people spend a lot of minutes online, they spend a huge amount of minutes online on Gaming Zone — averages about, on average for all things there’s 7.8 minutes. This promotion we did with bunco averaged almost 45 minutes. So think about not a 30-second impression but a 45-minute impression of time with your brand, with the special game that we built for the demographic. We see it all as sort of expectations on brand and metrics. And the key thing is we’ve continued to basically renew this partnership on this service. So two things that I think really kind of get out there in terms of this service.
Now I want to talk about the second topic, which is what’s going on with all this deal-making on the Internet? What does it mean when people are going out and guaranteeing Web site providers hundreds of millions or billions of dollars just to serve the advertising? And I’ll leave it to you to decide who’s — Yahoo, Google, Microsoft in this picture — we’re the pretty dog, I think. But basically — you know, a couple of things that really come out. What does it mean? What does it mean? A few things.
One is that basically people are really looking to go out there and get breadth of scale — breadth and reach for their ad network, because as you all know as advertisers the opportunity to reach some people in scale — let’s say you want to break a brand in a very powerful way. Let’s say you want to launch a new product — there’s a new movie coming out, and on the day of the movie you’re looking at the early results and the numbers are just adding up, and you say, Hey, in a day — in a day I’ve got to pop my brand. I’ve got to get huge brand. The way you do that is you get Internet-wide scale. Some of these things where people go out and buy these deals are to get that.
So here’s the thing: I think you have to question yourself, what does that buy you as an advertiser? And we have basically been quite selective about what we’ve done, because we think a couple of things are important. One, quality of the user; knowing who the user is, being able to target to the user, and being able to have a high quality content experience matter. You don’t just want raw tonnage. Just because someone can come and say, “I can deliver for you a billion clicks” — but you don’t know where that scenario is, what the context is. That’s not necessarily a good thing. So as we thought about what we want to do, we really focused on two things: really building the rich plays we have on MSN and doing a couple select partnerships like we did with Facebook to bring in unique and valuable audience to our segment.
I want to talk about two examples just to give you a sense. One I want to talk about is Hotmail, our e-mail product, which is — it is the largest reach e-mail product on the planet — 280 million people use Hotmail, this page, once a month on a daily basis. We can now target within this thing 25 behavioral segments. So we can reach, for example, men 25 to 35 who are looking to buy a car. We can actually start the target and serve ads within this context. And the amount of page views within this thing will boggle the mind. I won’t even go through the numbers, but it’s a pretty impressive thing from the user perspective.
But it’s more than just what happens on the usage and reach number. I think sometimes we get sort of lost in the fact that, oh, there’s billions of page views in x number of minutes. The usage of these products and the depth — I talked about Bunco. I want to give you an example here of another one on Hotmail. This one that said, “Well, how is Hotmail used?” This is Aaron Levitt (?) and his wife Amy. They met, long-distance relationship, and they had that relationship over e-mail while they were dating, you know, before they got married. And they sent all sorts of messages back and forth. And as a user he basically saved every mail message — Aaron did — and put it in a book he gave to his wife — and don’t ask me how, but I got that out of Aaron’s hands. And I want to give you an example of that just to show you this is sort of — this is, as we said here, the beginning, where they met, some of the places — and these are all the different e-mail messages — basically the history of the relationship as it started. And he’s captured that. And this is just one example of two people, of the 280 million people on Hotmail, and the type of dialogue that they have over the services that we’re using. So the depth of experience is amazing. And I could tell you all sorts of other stories of what people have done. But that gives you a sense of it of how our products are used.
Now, what does that mean then? What are we able to do from an advertising perspective? A couple different things. Coming back to what we talked about, here’s an example where we had a partnership here with Cingular. And their goal was basically to say, “I want to do a one-day roadblock of Hotmail.” So basically they bought every high-value impression on Hotmail, and every — on every inbox, e-mail that you see here, every sent-mail page. And they said, “We want to really drive massive awareness of the new Cingular product offering that’s coming out. We want to try to reach a pretty good demographic, which is males 18 to 24.” So we did a bunch of work to launch that, ran a campaign, and the results on that were pretty amazing. Of the people who clicked through to the ad, 83 percent of the male users basically said, “I’m willing to discuss a new cell phone purchase in e-mail.” So they signed up and said, “Yes, I’m actually very interested. Let’s have an e-mail discussion of what that cell phone purchase would look like.” The brand aided awareness in one day — went up basically 23 percent unaided brand awareness — and it was equivalent to the entire marketing campaign that they had been running across the Web on a number of things. So the ability to really pop their brand, and what Cingular did here with this bold move kind of shows you the power of the reach that we have on the network.
The same story on Messenger, our other very global reach. We have 280 million Messenger users. Same thing. One of the most powerful things that you all know now in the world of Internet is that word of mouth is really the thing that drives marketing as much as anything. And what we’ve done here is we had a promotion for a brand-new movie that was coming out, “Children of Men,” a DVD promotion, and we did this with Universal Pictures. And what we did is for the first time ever, as you see down there in Messenger, we had rich media window in Messenger for a video. And if you choose to hover over, you get this rich media interaction, which is what you see here. And we put that in there. And based on the creative, and just the breadth of the network, we ended up getting just over two million expansions of that advertisement. Two million people actually chose to go hover over it, see the expansion. And then of that, 12 percent actually interacted with the site — went and looked at the trailer, looked for more information, and had an interaction with it. So when you think about those numbers, you know, the ability to have that pop up and go through — and people actually choosing to interact with the advertisement is mind-boggling. Now, granted movie trailers are one of the highest interacting features, but those are some things we can do on scale.
And the last thing I want to show you is basically what we’ve done with the purchase of Facebook. And, as I said, part of what we want to do with MSN, one of the privileges we want to offer you, is we want to offer you the broadest reach network possible, so you can go out and really reach some people. Facebook, obviously a very powerful tool for teens, people in college and coming out, a demographic that we had in different places, but now we’re able to bring online in a pretty full way. And we take the Facebook users, which are 129 million users, and you combine that with our own social networking product, called Windows Live Spaces — 93 million spaces and 115 million unique users — and you get something that on any given month is doing two and a half billion page views. So when you want to reach young folks in context, where they’re talking about products and they’re recommending products to other people, be that a new music, be that a new video, be that a new sneaker — you can come in with us and do the same targeting and things we talked about in reaching an amazing audience.
So those are some really impressive things in terms of what we can do with broad reach.
The third thing I want to talk a little bit about is search, what do we see in search. Most of what we saw in search — I found search was more actually, believe it or not, inside of our labs and a little bit about talking to some folks in the industry. My view so far of search today is it is on one hand overhyped and on the other hand underhyped. Now, which is which?
On the underhyped part, I think a big part of that is just the user experience and how much the service of search is just not delivering the full potential. And part of that is really the fact that it turns out still 35 percent of all search queries by consumers don’t give them the answer they’re looking for. And people go in to do research, they go in to do commerce, they go in to buy products, and they want help to go through that, and they’re just not getting the answers they want. And whether that is improvement to the user interface, like you saw with some of the demonstrations, or that’s just better relevancy, there’s a lot of work that has to happen there.
In terms of the overhype part, one of the things we learned about really is the fact that much of search is still — from an advertising perspective — is attributed to just the last click. But as we’ve been studying, and we’ve been talking to some other folks in the industry who are experts in this space, what they found is that many of the dollars that get spent on brand and display are actually getting credited to search, when in fact they’re actually brand dollars that started. For example, someone might be looking for a digital camera, and they start by typing in “Best Buy,” because they want to start typing and looking for the brand. It turns out at the end of the day they start with “Best Buy,” then they get some results and they click on the search link, and every one of us thinks, “Oh, that was a search-driven thing. Search is really converting for me.” It turns out it was actually brand that was helping convert. And part of the problem is that the ad systems today just don’t do a sophisticated job of really understanding the consumer mind and the consumer behavior. So in that sense I think search is overhype. And one of our jobs, or one of our things that we’re going to do with our tools for you is help you figure out how to get better intelligence on what’s going on.
Now, what’s going on with Ad Center in terms of our progress? A couple of things. As I said, a year ago we launched, first time ever, and in a year we’ve done a couple major milestones. We have now over 80,000 advertisers — hopefully most of you in the room — in Ad Center, and participating. We released 14 different versions of that product in the year, and really improved the capabilities. And the yield for search is now ahead of what we did with our previous system from Overture. So we really have a fast start on that. And what you can see here — I’m going to skip ahead on it — you can see what we’ve done. I want to show two ad opportunities in terms of what we’ve done. Let me go back for a second here. One is what we did with Westin on Live Local. How many people have seen the Live Local product, have used our local mapping product? Okay, I want you guys to go try it out: local.live.com. It is the best mapping product on the Internet today, and anyone who can prove to me otherwise, I’m going to owe you something — I’ll show you something. But this is the MSN mapping product. What you get there is you get 3D views as well as a rich fly through of the top major cities in the United States, and we’ll expand internationally. What you see here is we’re in a partnership with Westin, where Westin said, “Look, I want to do — have this consumer prominence of renewal. I want to have a brand experience where people are going out and they’re seeing sort of my hotel, and they’re experiencing what it would be like to go on a vacation.” We did this great integration with Live Local, as you can see the picture here, and we drove not only strong brand performance across metrics, but we got stay intent, which was their goal. And that integration of Westin marketing mix into our Live Local search really kind of popped through into some pretty impressive things.
Let’s talk a little bit about Ad Center, and I’ll give you some examples there. We worked with a lot of folks in terms of trying to improve our service with SDMs, like Robert Murray from iProspect, working with Misty Locke from — the co-founder, president Range Online. And we’ve had some good successes even with Efficient Frontier. We have really been having some good successes. If there’s anything that we need in search it’s basically volume, because the capability is there. If you go and you compare the ROI or even the pops per click of Ad Center versus, say, some of the other systems out there, we’re the best bargain on the Internet. It’s absolutely — you can quote me on that. If you haven’t optimized dollars spent on Ad Center, you’re missing out — not only on targeting ROI, but you’re actually missing on better results and better intelligence of what’s going on on the Internet because of the features we have.
The last thing I want to talk about is really the future of the next medium. And, again, some of you may be saying, “Hey, Microsoft, why aren’t you out there buying print magazine space? What about that demark in radio? Why aren’t you offering radio? Are you behind there too? Is that something that you’re catching up on?” And the truth on that is, no, we have a very crystal-clear vision about what our proposition is to go out and be strong on the Internet. And what we want to do as it relates to emerging media is we really care about the end-to-end IP experience. It’s not enough to say, “Hey, look, we made it simple to go buy online.” But the way that media gets served, let’s say, in print, it’s static. So you don’t know — hey, who — did anyone even read that ad? Who clicked on that ad? Who is the demo of that ad? We believe in having the full and inexplicable. We can give you the proposition that we can do on search and on display, which is we can tell you who saw; we let you target that. We let you serve that just on day parting and when you need to. And that is what’s driven our focus to the emerging media. So we really focus on a couple of areas. We focus on gaming, we focus on mobile, and we’re early in some of the video things. We obviously don’t have the video product today, but I want to talk to you about each of those.
Let me start by talking about gaming, or talking about Massive. Massive is a game we bought for in-game advertising. They’re the leader in in-game advertising. Their strength, combined with our success with Xbox and our partnership with a number of game channels, has put us in a pretty strong position. Let me start by just showing you a little bit of a video of in-game advertising, in case you haven’t seen Massive, so you can see what that looks like.
So you get a sense there of just some of the advertisements you can see there, the forward edge being promoted behind the batter there. You saw in some of the other games here, the game by UbiSoft, Rainbow 6. And you can see probably the shoot ’em up game. And if you’re a fan of these types of movies, there’s a good ad there for Smoking Aces that we’re able to drop in, which has some great weaponry, if you’re into that kind of thing.
And you saw the examples of what we’ve done. So what we’re able to do in this case with Massive is we can dynamically drop in the ad in the content. And the consumer feedback, believe it or not, they say, “You know what? I want the ads in the games because they make the games feel more real.” So, for example, in that Vegas casino where they see the Smoking Aces they say, “Wow, right, that movie is out. This game feels more like the real world than it does if it’s just a bunch of random poster blocks.” So this is a great example of how advertising comes in and actually makes the content better. And we’re really excited about this. Massive has over 50 game titles, and the gaming between this and Xbox Online, we’re talking again about a very hard to reach demographic. We’re talking about teens, boys, anywhere between 13 and 29. You can’t even find them on traditional media. And we have a pretty strong uptake with Massive. So this has been under our belt for one year, and we’re making good progress on that.
Secondly, I want to talk to you about what we’re doing in mobile. So this year was a big year for us in mobile. And what we’ve done is we’ve really improved our product offering in mobile. So let me start out here by showing you a couple of screens. We basically took a lot of our great MSN content, wrote it to fit on the mobile phone, and then — and have now have some really amazing features on here. Anyone who wants to see the Local Live client, just talk to me afterwards and I’ll give you the URL that you can install it on your phone in under 45 seconds, and it basically gives you local traffic, as well as weather and searching — pretty fantastically put on there.
What we announced just about four days ago is we have acquired a company called ScreenTonic, a company based in Paris, and they basically are one of the leaders in doing mobile advertising. And what I have here is some examples of what that advertising will look like on the phone. And what we’re going to do is we’re going to take these great mobile products that we’ve built, and now we’re going to be able to drop in advertisements. And as you can see here ads can fit in in a number of ways. They can fit in on the home deck of navigation. They can become full-screen trailers or videos or images within the application. And basically we’re able to tune that any number of ways, sponsorship as well as content. Mobile, as you all know, is exploding. It’s the next medium. You know, a billion phone users. For MSN content in so many countries, we plan to take our strength in the user experience and now Screen Tonic, and do the same thing that we did hopefully with Massive to have a leadership position in mobile.
So really kind of to summarize what we’ve done on the network today, our goal with MSN, and when we ship it to talk about our product — digital advertising solutions — it’s the broad now, and to get out to all aspects of what people do. When you think about the array of what’s on our Microsoft network — be that Zune, be that Microsoft TV — what we’re doing in the workplace with Office, obviously what we’re doing with MSN at home or Xbox Live, or even the Media Center in the living room — what our proposition is we put out a whole set of products on this network. And really, you know, sort of my closing thoughts to you are: What does it look like? What should the next set of things be that we develop? What are the next type of ad experiences? What’s the next type of content that is going to engage users to bring on to help build your brand? How do even the business models of those work?
You know, the truth is after at least one year of spending time on it I don’t even have the answer for that. But what I do know, and really what our proposition is, that we’re here to basically work with you. And as we think about how you want to build brands every second of every day, we want to come together, work with you, and help put that together. So, with that, thanks very much, and I’ll let Joanne close. (Applause.)