I recently read a story on Reuters about Microsoft’s plans to be “one of the top two” in web advertising within the next 3-5 years. Ok now that you’ve caught your breath after laughing for a few minutes I’ll explain why I think Microsoft has set its goals just a tad too high.
First let me explain exactly what Microsoft is hoping to accomplish with its 4 point plan dubbed “10, 20, 30, 40”.
10: Increase page views on sites like MSN.com from 6% to 10% of total Internet page views.
20: Increase share of minutes spent on Microsoft websites, out of total time spent online, from 17% to 20%.
30: Increase share of online search from 10% to 30%.
40: Increase its take of all online advertising dollars from 6% to 40%.
The first two goals seem easily reachable considering the modest 4% and 3% increases respectively. Microsoft recently launched Live.com email addresses and the company seems to be constantly making an effort to improve its selection of free services (e-mail, photo sharing, instant messaging, etc). These types of new services and improvements to current offerings may draw in enough new users in the long-run to provide the needed increases for goals 10 & 20.
Now let us get on to the laughable goals, 30 & 40.
I am not sure who mixes up the Kool-Aid at Microsoft these days but I think presenter Kevin Johnson, president of Microsoft’s platforms and services division, had some spiked with “LOL Dust” just before he went on stage to present this plan at the UBS investor conference in Seattle.
Increase share of online search from 10% to 30%
The only way I can see Microsoft accomplishing this goal would be to purchase Yahoo. Reports have been floating around since early 2006 that Microsoft has been in talks to purchase Yahoo but they have adamantly denied such stories. Yahoo currently holds 23.7% of the search market according to the most recent numbers from comScore. It is also worth noting that new numbers released yesterday by Hitwise show Microsoft holding just 7.42% of the search market versus 10.72% a year ago. Not a promising trend no matter who provides the numbers.
Increase its take of all online advertising dollars from 6% to 40%
Again, buying Yahoo seems to be the only option to reach this goal. Otherwise Microsoft would have to increase its search market share by roughly 6.8% per year for the next 5 years. If buying Yahoo is not on the table I would love to know how Microsoft plans to grow its share so rapidly. According to Johnson, Microsoft is planning to invest between $1.5 and $1.7 billion this year on data centers and servers to meet the growing demand for its web services business. I hate to rain on Mr. Johnson’s parade but building more data centers and installing more servers will not result in 6.8% growth per year. Data centers and servers will equal faster searches and a larger index but that is all that is for certain.
Microsoft seems to be taking PR hints from Muhammed Saeed al-Sahaf. I am referring to the ex-Iraqi Information Minister who made memorable statements such as, “I triple guarantee you; there are no American soldiers in Baghdad.” Outrageous claims like parts 30 and 40 of Microsoft’s four part plan will not be taken seriously until some sort of viable plan is presented to investors explaining roughly how they will be accomplished.
I have a few suggestions how Microsoft can “fix” its current situation:
#1) If you are serious about increasing your share of online advertising dollars how about whipping together an AdCenter editor? (ala: Google’s Adwords Editor) Out of the three majors engines Microsoft’s setup is by far the most soul destroying to work in on a daily basis. For the largest software company in the world to not offer a standalone editor for its online advertising operation is despicable. It seems I am not alone in my disdain for AdCenter.
#2) Lay off the sauce and get to work on fixing your current core business, operating systems. Vista is a miserable failure no matter how you look at the numbers. Nobody wants to run it because it is expensive, it is SLOW, the licensing model is a joke, and according to recent reviews the SP1 (Service Pack 1) beta offers little to no improvements over current offerings. If your flagship product is a piece of junk why would you expect people to look to you when it’s time to pick a search engine?
#3) Pray to the clouds above that there is another leader besides Steve Ballmer to head the company after Bill Gates steps down in July ’08.
I’ll triple guarantee you that Microsoft needs to pull its act together or it will continue its current trend of over-promising and under-delivering.