By Miguel Helft, NYT
Seattle: Bill Gates, Microsoft's chairman, spoke to hundreds of marketers and advertising agencies here on Tuesday amid rumblings about his company's struggle to compete against Google in online advertising and about its efforts to court Yahoo for some sort of partnership.
But Gates skirted those issues entirely and focused on what Microsoft has done best over the years: software. He demonstrated new technology that brings interactivity to online video and the ability to preview search results, which he said would open new doors for advertisers.
Software, Gates said, is going to "revolutionize not only advertising but the whole way people consume media, the way they communicate and the way they create."
Microsoft's display of technological wizardry and the talk of the company's potential to deliver more targeted ads to users appeared to have the intended effect. Many of those attending said they came away feeling that Microsoft would become a stronger competitor to Google and others in online ads -- eventually.
"They actually have a fairly bold vision," said Kevin Lee, executive chairman of Did-It.com, a search marketing firm, speaking about Microsoft's efforts to aim video ads at specific viewers. "I never count them out."
Still, talk persisted about deals, real or rumoured, heightened by the planned appearance of Yahoo's chief executive, Terry S. Semel, at the close of the two-day event today.
Last week, reports that Microsoft might buy Yahoo sent Yahoo's shares soaring. But people close to the companies said that no merger talks were active, and that the two were only discussing potential business partnerships.
Microsoft executives played down the prospects of any major announcements at the conference here.
Both Yahoo and Microsoft have struggled recently as Google has grabbed an increasing portion of the online advertising market. Google's gains in search advertising have come at the expense of Microsoft, in particular. Many analysts, meanwhile, contend that Google is poised to extend its dominance from text-based ads into graphical advertising through its planned $3.1 billion acquisition of DoubleClick, the advertising services company.
Microsoft and Yahoo were also interested in acquiring DoubleClick, and Microsoft has asked federal regulators to scrutinize the deal.
In the face of Google's growing power, some advertisers suggest they would like to see stronger competitors to the search giant.
"As long as MSN has the audience it has and the technology initiatives it has, it can only get better," said Mark D. Goldstein, vice chairman and chief marketing officer for BBDO North America.
He pointed to a demonstration by Gates of technology that allows users to preview search results without having to click on a link as an example of Microsoft's strength. "I turned to my partner and said, 'That is cool,"' Goldstein said.
Some participants took the speculation about a Microsoft-Yahoo merger in stride. Sean Finnegan, managing director for digital at OMD, a global advertising agency, said the same rumours had surfaced around this time last year.
"It was almost perceived as an April Fool's, where everyone had heard this before," he said about last week's rumors. "It was certainly interesting. At the same time, I am not sure the two need one another to compete with Google."