How could a company as big and as strong as Microsoft struggle online? I have been sitting and waiting to see what these guys were going to do to solve their online advertising problem, and now they have announced a plan. They launched the MSN AdCenter.
But the problem is they are at least three years too late. I can remember talking to MSN people a few years ago at conferences and trade shows. The message coming from the top was ‘The Future is Premium Services!’ I thought it was a strange message, but who am I to question Ballmer and his strategy team?
Well, he was wrong. After spending years and billions of dollars into MSN and their overall online strategy, they are sitting ducks. They are losing market share in the browser world. They are losing users to their online portal. Their ISP service is almost defunct. They are no-longer seen as the innovating online property.
This all comes down to one major decision from the top. The decision was to leave the subscription ISP business alone. The decision was to ignore online advertising. The decision was to move quickly at premium services and walled garden content. MSN was looking at the online world in a new and creative way. The problem was, they were totally off base.
The growth of broadband in the home has increased by 20–30% year over year. The increase in online advertising is around 40–50% year over year. The path they choose, premium services, is growing at less than 10% year over year, and it is 1000’s of times smaller than the other two businesses.
I question a lot how a CEO can really make a difference. There are many ways they can make an impact and set the tone. But in this case, the CEO made a difference, he killed the business. Now, don’t get me wrong, MSN is not going away. Microsoft has too many hooks into our computers to let it go. The market moves quickly and Microsoft can put money against the problem.
Ballmer put his money where his mouth is last week, announcing that the advertising R&D budget for MSN would hit $1.1 billion in ’07, more than double the $500 million spent last year. “We are a patient, long-term participant in everything we do,” he said, stretching the sentence out to hammer the point home. “We are going for a more significant footprint in the advertising arena. We’re making a deep commitment.”
So, MSN is in a rebuilding year. They need to start innovating and pushing new products out the door. They can catch back up, because the others out there will lose some ground. Ballmer just needs to hope the rebuilding years are not as long as Detroit Lions or Chicago Bears.