Microsoft launches mobile display ads

Mobile advertising still emerging

Microsoft on Tuesday began letting advertisers display banner ads to mobile users of Windows Live Messenger and Windows Live Hotmail, following other companies already supporting mobile banner ads.

Mobile users in France, Spain, the U.K. and the U.S. will see the banner ads when using the Microsoft services.

Google made a similar announcement in April, inviting AdWords advertisers to display banner ads instead of only text on mobile phones. Yahoo, AdMob and Third Screen, which is now owned by AOL, are among other companies that also display banner ads on mobile phones.

Microsoft also said it plans to support keyword advertising on Live Search Mobile. The beta-test version of the keyword advertising service is available in the U.S., and Microsoft expects to expand it in the second half of the year.

Microsoft also announced that Windows Live for mobile is now available in 49 markets, an increase from 22. Windows Live for mobile offers mobile access to Hotmail, Messenger and Spaces, a social-networking site that lets people blog and share photos and other content with friends.

Microsoft and the other Internet companies are competing for a foothold in the mobile market, where they see a potentially large opportunity for future advertising revenue. The use of the mobile Internet is still quite small relative to the number of mobile phones on the market, and mobile users don't yet have a strong allegiance to any particular search or portal provider.

"We think mobile is a tremendous opportunity going forward," said Robbie Bach, president of Microsoft's entertainment and devices division. Only about 150 million of the 1 billion phones expected to be sold this year will have the capability to display rich advertising, he said. But that number is expected to triple, so that in a few years 400 million to 500 million phones able to receive audio and video advertising will be sold each year, he said.

Bach and the other Internet companies that are equally excited about the mobile market may have overinflated expectations, however. A new report released on Tuesday showed that mobile-phone sales in the first quarter in the U.S. declined 22 percent compared to the same quarter last year, according to The NPD Group. NPD blamed looming economic concerns. Without a large base of users of higher-end phones, none of the Internet companies will be able to execute on their mobile advertising plans.

Microsoft made the mobile advertising announcements on Tuesday at the Advance08 conference, the company's annual advertising get-together. By midday, Microsoft executives hadn't yet made reference to the company's failed attempt to buy Yahoo, which Microsoft hoped would help it expand its online advertising business. The two companies are currently in discussions about other opportunities besides an outright acquisition.

Instead of talking about possible Yahoo deals, Brian McAndrews, senior vice president of the advertiser and publisher solutions group at Microsoft, emphasized the company's end-to-end services for advertisers, ad agencies and publishers.

He announced that Microsoft is unifying its advertising initiatives, many of them based on acquisitions of companies such as ScreenTonic and Massive, under a single brand, Microsoft Advertising. The group will continue its work on existing established advertising methods, such as online ads, but will also innovate on emerging technology platforms, including mobile phones, games, IPTV and video on demand, he said.

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