Microsoft Aims for Dominance of 3rd, 4th Screens

Microsoft is like the earth. When it moves, people notice.

Among the Redmond, Wash., softzilla’s recent maneuvers are its purchase of Massive Inc., of New York City, and its imminent — if The Wall Street Journal is to be believed — acquisition of Third Screen Media, of Boston.

Massive provides a platform for delivering advertising into video games. Third Screen is a standout in the cell phone advertising field and runs TSM|Network, the world’s largest, single-source mobile ad network and MADX, the only Web-based, mobile ad management and delivery platform that connects agencies, publishers and carriers.

Eyeball Quadrumvirate

Microsoft’s interest in these companies is a sign to some analysts that the company is moving early and forcefully to dominate the advertising market for the third and fourth screens of the eyeball quadrumvirate — the other two being the Internet and television.

The Massive acquisition “is a proof point that Microsoft is continuing to deliver on its vision to provide next generation advertising solutions across its assets,” a company spokesperson, who asked not to be identified by name, told TechNewsWorld.

“Advertisers are having a tough time connecting with the elusive 18-to-34-year-old male demographic because this group continues to spend less time watching TV and more time playing video games,” Microsoft’s Chief Media Revenue Officer Joanne Bradford said in the statement announcing the Massive acquisition.

“Massive and Microsoft,” she continued, “can help lead with our shared vision of delivering more targeted, measurable and effective opportunities for advertisers to reach today’s youth audience in a largely untapped market.”

Comfortable Fit

The Massive play is a comfortable fit with the software maker’s current business goals, according to Matt Rosoff, an analyst with Directions on Microsoft in Kirkland, Wash.

“Microsoft as a company is focused on advertising right now as an important new source of revenue so this acquisition fits in with the broader company strategy,” he told TechNewsWorld.

Microsoft hinted at that broader strategy in its Massive acquisition statement where it disclosed that it had begun exploring how to apply Massive technology to incorporate dynamic advertising into other online environments, such as Windows Live and MSN, and to extend it into Microsoft’s adCenter advertising platform.

One of the things Microsoft wants to do with its adCenter product is offer demographic targeting, explained Greg Sterling, principal analyst with Sterling Market Intelligence, of Oakland, Calif.

“Gaming is a perfect environment for that because you have young males playing those games,” he told TechNewsWorld. “It represents a type of inventory that they can offer advertisers, and very desirable inventory for certain advertisers.”

Covets Competitors’ Revenues

Microsoft’s advertising initiatives are an indication that the company is coveting its competitors’ revenues.

“They’re looked at what other companies like Google and Yahoo have done and they said, we have to do a better job of capturing some of that growth,” Rosoff observed.

He foresees advertising revenue for Microsoft being on a par with some of its biggest products. Google’s ad revenues will be more than US$8 billion in 2006, he noted. Sales this year of the Windows operating system will be around $12 billion.

“If you can imagine Microsoft earning as much as Google, and you can imagine the Internet advertising market continuing to grow overall, I can see those businesses might become equal in terms of revenue,” he explained.

Third Screen Enigma

While video game advertising appears like a natural fit for the maker of the Xbox, the predicted move into the mobile pitch arena through Third Screen puzzles some.

“I can’t understand why it would be perceived valuable to Microsoft,” Mark Slater, founder and managing partner for Boston Capital Advisors in Boston, told TechNewsWorld.

“It’s not an intellectual property play,” he continued. “There isn’t any secret source to the technology behind what Third Screen and many of its peers do.

“They’re using commoditized technology,” he explained. “It’s not stuff that hasn’t been done.”

Microsoft may be hungry to capture third screen advertising before its competitors, but Slater questioned its approach. “It’s a media 1.0 approach to a new medium,” he said.

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