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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 24, 2007 at 8:05 PM

Microsoft’s Facebook coup

Inventory is the word I kept hearing when Microsoft and Facebook announced their deal today.

Kevin Johnson, president of the Platforms and Services Division, twice mentioned how much inventory the deal was providing for Microsoft’s AdCenter business.

“This deal brings more inventory and more value to that ad platform. At the same time it enables both parties to collaborate as Faceook looks to develep new ad type as it relates to the social experience.”

By inventory he was referring to space where Microsoft can place ads for clients. It may seem like there’s an infinite number of Web pages, but there’s actually a limited amount of premium real estate for companies to hang their billboards.

That’s why the online ad titans are so aggressively pursuing contracts like the one Microsoft made to be Facebook’s exclusive ad platform.

It’s also one of the great tricks of search advertising – every time you click search, you’re helping Google or whoever create a page with inventory that can be sold to advertisers. But that’s high-volume, low-rent stuff.

Facebook is like a prosperous new suburb, a place with lots of opportunities for a developer like Microsoft to build and rent space to companies.

What I have trouble reconciling is the scarcity of inventory and the difficulty Web startups have breaking into the major leagues. I guess users are limited in the amount of personal-time inventory they have, and hot sites like Facebook are allegedly where they spend more of that time.

People are quick to write off Microsoft’s ad business because Google seems to have it all. But Facebook helps Microsoft’s inventory build critical mass, and it’s a great place for Microsoft to develop and show off its new, post-search ad technologies.

The companies didn’t share other details, but Microsoft has to have access to Facebook user profiles, at least as much access is needed to target ads.

Facebook and other social networks are like honey pots. They attract users who share their interests and friends’ contact information. This creates a detailed list of profiles that can be used to target advertising.

Combine that with all the profiles Microsoft gathers through other ad partners and its own sites, and it’s pretty formidable (and spooky).

Maybe Microsoft will finally have a chance to show in the great online ad race. But how long will it take? A decade ago the company invested billions in telecom companies, hoping to win a seat at the table. It’s hard to measure when and how those investments paid off, but in comparison the $240 million it put into Facebook is less than pocket change.

Comments | Topics: Digital media, Microsoft, Web

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