The web has become a hive of convergence for new technology, multimedia applications, interactive information and e-commerce. The "digital lifestyle" is now a reality.
Broadband has fuelled this trend, with faster connections and wider bandwidth resulting in increased content for consumers online. Watching films, playing video games, listening to internet radio, downloading music and video quickly and cost-effectively; today's internet world is one of limitless possibilities, with the consumer firmly in control.
The internet has become part of people's daily lives both at work and at home, not only as a source of information and entertainment but also as a primary means of communication.
In the media world, the advent of broadband and the resulting availability of richer and more engaging online experiences are driving shifts in media consumption. Jupiter Research published findings in early 2006 that state Americans are now spending as much time online as watching TV, while recent European Interactive Advertising Association figures reveal that the internet is Europeans' most preferred medium throughout the day.
Traditional media owners are realising online media assets are at least as profitable as traditional channels. Most people are probably familiar with Rupert Murdoch's recent comments. He said "After the dotcom bubble burst in 2000, I thought the digital revolution would just limp away. Well, it hasn't and it won't. It's a reality we had better get used to - and fast."
Driven by these changes in the software and media worlds, we are experiencing a rapid revolution in the advertising industry. The change we are experiencing isn't new. But the speed of the change is: we are on the brink of the most dramatic shift in advertising patterns since the introduction of colour TV in the 60s.
Advertisers and their agencies are being forced to review their business strategies as consumption of online media continues to surpass that of traditional media. Furthermore, internet users have evolved beyond simply passively consuming information. People now enjoy more autonomy online, actively seeking out information and entertainment for themselves. For example, our blogging service, MSN Spaces, has exploded from zero to more than 40 million MSN Spaces since its launch in December 2004.
As the software world and media world have converged online, it's unsurprising the internet has become the centre of people's digital lives. Similarly, we're putting the internet at the centre of our business strategy to enable advertisers to take advantage of these shifting consumer patterns.
Windows Live will bring all the elements of the consumer's digital life together seamlessly in one place, accessible at any time, anywhere and from any device, extending Microsoft's online audience beyond search and MSN to the delivery of software and services over the web.
With the launch of Microsoft adCenter, we're also expanding our portfolio of advertising properties in the digital space, giving advertisers new opportunities to connect with consumers as never before.
The focus of successful search marketing is about to undergo a subtle but significant shift - from clicks to conversions. This will allow advertisers to enjoy lower costs per sale while enjoying a higher return on investment.
A high level of traffic is still desirable, but clicks have a cost. By converting more clicks into customers, marketing directors will be able to manage the effectiveness of their budgets with more precision than ever before.
At the same time, targeting is becoming a key weapon for advertisers as consumers demand an intelligent, relevant online experience. Microsoft adCenter allows advertisers to target their audience by day of the week, time of day, country and city, and also increase their bids by age, gender and geography, thus increasing the probability of their ads being seen by the desired audience. When this is combined with detailed reporting, the advertiser will have a comprehensive package of in-depth data that will allow them to maximise their return on investment and make confident decisions about refining their campaigns.
Advertisers will know who is clicking on their keywords, by age, gender, location and time of day.
Consumers will be more likely to convert, as they are being offered products that are highly relevant to them, at a convenient time. For example, adCenter has the ability to target men aged 36 to 50 in Manchester who are searching on a Friday between 11am and 2pm, or women aged between 51 and 65 in Southampton who are most likely to purchase goods online at weekends, thus enabling advertisers' investment to work a lot harder for them. It's a virtuous circle, ensuring advertisers and consumers can interact more cost-effectively.
Notably, we're researching the power of combining display and search advertising to drive both direct response and brand metrics. This "better together" story promises to bring more impact for advertisers in the battle to interest and engage online.
As the Microsoft media network expands, advertisers will also be able to take advantage of new and innovative advertising opportunities through a broad range of Microsoft products and services such as Xbox Live, Office Live and Microsoft.com.
Now the software world and the media world have converged online, we think Microsoft is uniquely positioned to lead the way as an innovative online media owner. The launch of Windows Live is creating exciting opportunities in the online advertising space and offers brands the chance to shape the future of marketing in the evolving media landscape.
- Chris Ward is the commercial director of MSN UK.