On content and advertising

Last week I spoke to Grant Watts, head of MSN for Southeast Asia who talked about how MSN's content offerings was being beefed up and localized. We also spoke about online advertising which is a red hot sector right now especially with news of Google buying up DoubleClick for US$3.1 billion and Microsoft quickly following suit and buying aQuantive for US$6 billion.

A few years back, MSN decided to focus on services and its content offerings for its Malaysian portal became incredibly sparse. Watts says that's going to change soon.

"In Malaysia we are making considerable investment into the content space," he says. "In the next 12 months, you will see considerable differences in the content site."

One example is Al Gore's Live Earth concerts. "You can view this through MSN on 7/7/07," he says. "The only way you'll be able to view it is online."

Live Earth is the name for a series of concerts of pop and rock music scheduled to take place on July 7, 2007 to raise awareness about global warming. Plans for the concerts were announced at a media event in Los Angeles in February by former US Vice-President Al Gore and other activist celebrities.

When I asked Watts about whether there would be any localized content offerings, he gave an unusual example of content that would be delivered interactively through MSN Messenger, which sees some 27 million messages transacted per day in this country.

The new service, which has yet to be launched is a "movie buddy" which sits on your Messenger's buddies list and which you can interact with to ask questions about movies being shown on local cinemas, such as show times and so on. The content is being offered through a tie-up with Cinema Online (www.cinema.com.my).

Watts says that offering localized content in Malaysia is generally tougher than say, in Thailand, because over here, English is a common language and so the offerings are usually in English. When you do that, you're competing against English content from the rest of the world, he says. In contrast, in Thailand, where localized content is in Thai, there is no competition from the rest of the world.

But MSN is more than just a content portal. It's a whole suite of services. "We can provide a seamless experience across Windows Live, Search, Messages, Hotmail, Spaces," he says, adding that in Malaysia, 60% of everybody online uses some form of MSN services. "About 33% of the total population is touched by us," he says.

As such, the potential for online advertising is huge. At the moment, online advertising is still at its nascent stage in this country but Watts expects the trend to pick up here just as it has in the West, or as he puts it: "Advertisers are fishing where the fish are."

I asked him why it took so long for online advertising to make any kind of impact in the West. We first heard about online advertising in the late 90s during the height of the Internet bubble. Online ads were supposed to take over the world but it limped along until lately when everybody's excited about online ads again.

"I think it's just that the Internet is no longer a start up industry," Watts says. "It's a more stable industry now."

And it's an industry that Microsoft has set its eyes on. Watts says when he first joined MSN, it was on the periphery of what Microsoft was doing. Now, it's at the epicenter. "Bill Gates says he is going to spend the rest of his career competing against Google and win in advertising," he points out.

But Microsoft is a software company, right? True, but as Watts readily points out, software is a US$131 billion a year industry, while advertising is a US$560 billion dollar a year industry.

It makes sense to focus on online advertising, which though worth only US$40 billion per year right now, is the fastest growing sector in the advertising arena, with between 7% to 10% growth per year.

I asked Watts about MSN's focus on the CPM (cost per mille) model of charging for online ads. That model is also known as cost per thousand (of impressions). Some in the online ad industry view this as an archaic model that is no longer relevant. MSN rivals such as Yahoo! and AOL, for example, are now big on behavioural targeting and offer CPC (cost per click) options, where advertisers only pay when the consumers actually click on the online ad.

Watts argues that most advertisers are interested in brand or product awareness and that does not require people to click on the ads, just to see them. As such, CPM is a fine model for charging.

"Advertisers that focus on click-through rates are the direct marketing types of companies," he says, adding that Microsoft has a division called Direct Response that offers display ads on a CPC basis. However, about 80% of online ad money is for above-the-line advertising and brand awareness is what it's all about, he contends.

What about behavioural targeting? Again, Watts is not big on that concept. "It's great to talk about but advertisers are not asking for it, at least not in this market, except for the DM (direct marketing) guys," he says. "If the advertisers want it, we will make it available, but right now the economics aren't driving the uptake."

I wasn't totally convinced with his position on CPC or behavioural targeting. I think both concepts are only going to grow in popularity among advertisers who increasingly demand more accountability for the performance of their ads. But the online ad industry is still one that's in flux and which approach will prevail and become the industry standard is still up in the air. It'll be interesting to see how it all plays out.