The world of online display advertising as we know it is bifurcating.

The display ad market, which accounted for $8.0B of the $22.7B in total internet advertising revenues in 2009 – and is projected to grow to $13.4B by 2013 – is rapidly headed in two very different directions.

One direction leads to a land of increasingly complex, but incredibly engaging and custom solutions that make full use of the digital palette. The other direction leads to the land of “scale display”, where programmatic buying, measurement, and constant refinement yield search-like efficiencies long promised in display but not yet delivered. And in the middle… well, going forward there won’t be much left in the middle. The bread and butter of the display advertising market today – those old-fashioned sponsorships and simply-targeted audience buys – are rapidly being cannibalized by the superior solutions down one of the two aforementioned roads.

Microsoft Advertising is committed to compelling offerings for marketers heading in either direction, and of course we expect most to build robust marketing campaigns that include elements of both.

Custom Brand Solutions

A sizeable chunk of the business is headed down one road and is becoming more custom, more premium, more integrated, and more interactive. Big brand advertisers – accustomed to launching campaigns via a flood of 30 second spots – are pushing online publishers to deliver on the full promise of the digital canvas with interactive solutions that help them stand out. “One of a kind”, “never been done before”, and “big idea” are phrases commonly found on RFP’s. To win this business and snag some of those big TV budgets that everyone in digital advertising salivates over, publishers are going to greater lengths than ever before to accommodate big brands via deep integration into site content, intense collaboration between advertiser and publisher, and large, custom ad formats.

Microsoft Advertising continues to aggressively target this “high rent district” of display advertising, with captivating rich media executions on the new MSN Home Page, three screen solutions across the PC, TV, and mobile devices, custom integration opportunities on Wonderwall, and Glo, and other offerings too numerous to count.

Scale Display

The other road leads to an increasingly crowded market full of new intermediaries including demand side platforms, ad exchanges, agency trading desks, pub brokers, dynamic creative optimizers, and data providers who are sharing what was an already crowded space full of hundreds of ad networks. These players, both new and old, are rushing to create a niche for themselves in the emerging world of scale display, which promises to bring the efficiencies of search marketing to online display advertising.

Increasingly, scale display and the participation of these intermediaries is dependent on the efficiencies enabled by an advertising exchange. Microsoft is moving aggressively to provide our customers with access to our owned and operated inventory, as well as partner inventory, via our exchange. This move is in addition to our expansion of the Microsoft Media Network, which combined with the exchange, provides a holistic solution for our customers.  In recent weeks we have on-boarded US Windows Live inventory - including Hotmail and Messenger - into our exchange, providing a highly liquid pool of high quality inventory to demand partners on an RTB basis. We have integrated with each of the major DSP’s to ensure that our customers can work with the partner of their choice in accessing inventory.

Moving forward we will make available the rest of our US owned and operated inventory and partner supply. We’re excited about the efficiencies offered by an exchange-enabled ecosystem, and are committed to providing a foundation that enables innovation by allowing third parties to add value in a transparent, trustworthy ecosystem.

There is additional good news for Atlas clients in that over the next six months we will be integrating DSP’s into the Atlas Technology Partner Alliance. This will enable Atlas advertisers to seamlessly partner with the DSP of their choice to extend their buys onto RTB exchanges while enjoying all the benefits of campaign tracking and optimization that Atlas already provides.

The digital advertising landscape continues to evolve and be an exciting place. At Microsoft Advertising we’re working hard to provide marketers with compelling solutions no matter which road they are on.

Thanks,

Eric

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