Mr. Softy's Hard Sell

Crashing the search party that Google (Nasdaq: GOOG  ) and Yahoo! (Nasdaq: YHOO  ) figured they would own between them, Microsoft (Nasdaq: MSFT  ) debuted its MSN adCenter prototype last week in what promises to be an interesting addition to the paid search landscape.

What exactly is paid search? Well, you see those sponsored text ads on search engine result pages and an ever-growing network of content sites? Those are examples of a paid search. An advertiser can pay as little as a nickel through Google AdWords or a dime with Yahoo! Search Marketing Solutions (formerly Overture) for each click-through. Since the advertiser is bidding on specific keywords and is charged only per click, it is an attractive and fully accountable segment of any marketing strategy.

Google and Yahoo! offer their ads to other sites in exchange for a piece of the action. Microsoft is currently showing Yahoo! spots on its popular MSN.com site.

Now, for those of you out there who despise Microsoft -- and it's obviously a bigger group than those of you reading this on your Apple (Nasdaq: AAPL  ) computer -- you may think that Microsoft is biting off more than it can chew here. Most sponsors are more than happy with a two-pronged approach of bidding up search terms through both Yahoo! and Google. If those two aren't enough, you have plenty of smaller search specialists like Ask Jeeves (Nasdaq: ASKJ  ) and FindWhat.com (Nasdaq: FWHT  ) . Why complicate things with a new product -- especially when it was already being fed well by Yahoo! and its ad distribution system?

Microsoft is promising a more complete targeting experience. While Google and Yahoo! offer sponsors the ability to aim for a certain geographic audience, Microsoft will allow its paid search advertisers to determine the age, sex, and lifestyle of their target audience -- while also allowing for the ads to run during specific hours of the day.

Mr. Softy will never be able to deliver on all of those counts -- tracking technology isn't that far along, and computers are often shared -- but it's an interesting ambition. Although Google and Yahoo! will probably have something similar in place by the time adCenter launches, it puts Microsoft in the position of pioneer -- even in a niche that it was clearly late to adapt to.

Microsoft will have to now work on growing traffic to its sites while also building out a network of third-party sites to display its ads, as Google has so skillfully done with AdSense. Incidentally, I'll be back on Thursday to go over the one potential wrinkle in Google's plan for world domination, but, until then, Microsoft's got a plan, and it's a much better plan than the market is giving it credit for.

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Longtime Fool contributor Rick Munarriz believes in the paid search sector, and he does own shares in FindWhat.com.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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