Microsoft Moves ‘Beyond the Browser’ to Provide Targeted Advertising Opportunities in Video, Gaming and Mobile Environments

REDMOND, Wash. – May 20, 2008 – Advertising leaders from across the world are converging on Microsoft headquarters this week for the advance08 Advertising Leadership Forum. Formerly called SAS (Strategic Advertising Summit), advance08 provides a forum for discussion on the latest trends in advertising media. Attendees this year will hear first hand from Robbie Bach, president of Microsoft’s Entertainment & Devices division, about the vision behind the division’s newly-formed Advertising Business Group and its goal of delivering relevant advertising content to effectively engage consumers in Microsoft’s “beyond the browser” media environments: gaming, video, music and mobile.. PressPass spoke with Advertising Business Group general manager, Mark Kroese, to get the lowdown on what this division will mean for advertisers and consumers.

PressPass: Can you tell us more about your role and the vision behind the Advertising Business Group?

Mark Kroese, General Manager, Microsoft Advertising Business Group

Kroese: I approached Robbie Bach last year with the idea that we should start thinking of the Entertainment & Devices (E&D) division as a publisher of user advertising funded experiences. Robbie liked the proposal and we spent three months drawing up a strategy to create advertising that really delivers value to each individual consumer.

The Advertising Business Group (ABG) grew out of this meeting. As a business unit within the E&D division, ABG focuses on creating appealing advertising opportunities for the mostly non-browser E&D products, by which I mean advertising within gaming, video, music and mobile experiences. We work within E&D to develop appealing opportunities for prospective advertisers in these targeted non-browser venues. Once these opportunities have developed into solutions, Microsoft Advertising, led by senior vice president Brian McAndrews, serves these ads through a comprehensive advertising platform. From the point of view of Microsoft Advertising, ABG is essentially another publisher customer, such as MSN, Facebook or Windows Live. We just happen to offer advertisers additional environments – beyond the PC screen – to reach consumers.

PressPass: What are some of the biggest trends and opportunities you’re seeing for advertisers?

Kroese: Traditionally, when people think of digital advertising, they think of search advertising or the banner ads they might see on MSN or the Yahoo! home page. This kind of content used to account for at least 90 percent of digital advertising, but we’re seeing tremendous growth in digital advertising for the beyond–the-browser environments.

Today, fully one-quarter of all digital advertising is being done in the so-called “beyond the browser” environments of gaming, video, and mobile – areas that were previously considered to be niche advertising opportunities. Search and display ads will continue to be a very large market and Microsoft Advertising will continue to invest in them, but ABG’s focus is on opportunities in gaming, video, music and mobile where we see the growth of ad inventory and advertiser interest in connecting with audiences.

Companies are also becoming more cost-conscious amid current economic conditions. This is driving increased demand for advertising that is cost effective and demonstrably delivers results. At the same time, advertisers want to provide ad experiences that feel personal to the consumer- the ability to offer the right ad to the right person at the right time in the right place. This allows each member of the viewing audience to feel that the ad was designed specifically for them, and that it represents an informational tool they can actually use.

Xbox LIVE subscribers have access to engaging programs and entertainment offerings sponsored by relevant brands. Nike created a branded destination experience call SPARQ that lets people download training video, pictures and more – all by clicking on the Nike banner on this page.

The environment and context within which an ad is offered is central to reaching this goal. For example, the Xbox is an incredibly effective platform for reaching the 18-34 male audience. But this is just the first layer. If you dig deeper, your target consumer is an 18-34 year old male who just finished watching a particular movie that they downloaded from the Xbox marketplace. When you consider all these factors you can then assemble a very rich array of deeply contextual information that can be used to serve up a highly relevant advertisement.

PressPass: Why should advertisers consider video games, mobile devices and digital video in their marketing mix?

Kroese: There are three essential reasons why advertisers should consider advertising in these areas: reach, engagement and impact. In terms of reach, our collection of video, gaming, music and mobile ad inventory today encompass more than100 million unique users per month. That’s a huge audience – larger than that of many cable operators.

In terms of engagement, most of us can identify with having worked on our computers with the television playing in the background. In most cases, the laptop is the primary focus because it’s highly interactive. The same can be said for playing a game or viewing an ad on your phone. These environments offer highly engaging, active experiences. For instance, with Xbox Live we’ve seen a twelve percent click-through rate. That’s phenomenal engagement – especially when compared to the industry norm of .5 percent for a traditional banner ad.  The reason for this increase is that people are engaged with the advertising; they’re paying attention because it’s a primary task for them.

Thirdly, these click-through rates deliver tremendous impact, so we generate a high rate of repeat business from advertisers undertaking campaigns with us. They recognize that the campaigns represent money well spent.

PressPass: How does advertising tie-in to Robbie Bach’s vision of connected entertainment?

Kroese: One of the simplest and most iconic ways of describing Robbie’s Connected Entertainment vision is that users want a three-screen experience. That is, they want to take the same content and view it as a 10-foot experience via Xbox or on the big screen in their living room, a standard two-foot PC experience and a two-inch experience through an MP3 player or mobile phone.

This concept of media free flowing from one form factor to another is central to our connected entertainment vision. And as it turns out, advertisers want the same thing; they want their advertising experience to follow the consumers across the three-screen experience. That’s a big reason why our advertising strategy is directly linked to this overarching Connected Entertainment vision – so we can give advertisers a way of getting a three-screen experience that connects with their audiences across all those environments and user scenarios.

People are constantly on the move, so the ability to download a movie to their Xbox and then transfer it to a PC or mobile device is highly desirable. It’s no longer about the TV or PC on their own; it’s about both plus the mobile phone or music device. The gaming console is no longer just about gaming; it’s about gaming and video. The phone is no longer just about voice; it’s about voice and search and video. And the MP3 player isn’t only about music; it’s about music and video. Consumers are demanding content that spans these different screens. It’s only natural that advertisers will want to span these three screens too.

Fans of the Xbox racing game, Forza 2, could participate in online tournaments and download Nissan race cars, videos, pictures and more.

ABG’s goal is to help advertisers connect with their audience across these different screens with an ad inventory that‘s easy to buy, easy to sell. That means using common ad formats and minimizing the need for advertisers to build new creative for our ad inventory. After all, producing such content is expensive, so they want to take the creative assets they have and, with little or no repurposing, run them across the different environments. We’re creating an ad inventory that enables them to do that.

PressPass: How and when does Microsoft plan to bring this vision of connected advertising to reality?

Kroese: In many ways, it’s already happening. Today, advertisers can buy advertising that’s incorporated within our Web-based, casual gaming environment. They can have their ad campaign flow across the various parts of Xbox, the gaming tab in messenger and in to MSN Video.

At Advance ’08 we’ll be demonstrating how our ad inventory is driving growth in our Windows Live and Xbox Live platforms. Soon, we’ll be extending many of these opportunities to mobile, music and video experiences as well, so we expect these areas to take off also. Finally, we’re experimenting with ad inventory in Windows Media Center’s free internet TV offerings as well as on the Windows Mobile smart phone.

PressPass: Are there any companies that are already benefiting from this vision?

Kroese: Yes. Nissan’s “Forza2” campaign, which incorporated advertising into the blockbuster game title (program drew over 35,000 participants), and McDonald’s sponsorship of a free Austin Powers video download of last year, which turned out to be one of the most popular download we’ve had to date.

Both of these campaigns are great examples of what we call “value exchange”- the viewer receives something of value, which in turn helps shift their perception of the ad experience and increases their awareness level of the advertiser. In McDonald’s case, the Austin Powers download is an example of a movie that was picked because of its affinity to the Xbox demographic and this was borne out by very favorable user feedback. At Advance ’08 we’ll also talk about Nike’s SPARQ Training ad campaign, which presents a whole new way of thinking about the Nike brand. We worked with Nike to create a landing page on the Web that immerses them in the Nike brand and offers extensive information about the company.

This is a great example of beyond-the-browser ad experiences that are highly-targeted and deliver value to both consumer and advertiser. Creating such experiences is the focus of the Advertising Business Group.

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