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With ad budgets tighter than ever and TV commercials easily skipped, branded content looks like an appealing way to engage with a targeted group of consumers. That's what Microsoft (NASDAQ:MSFT) is counting on as it builds a branded content business, partnering with hit TV production house Reveille on four web shows over the past year. Today Reveille and Microsoft are launching a series that promotes Microsoft's own business software.

The series, "It's Everybody's Business With Jack and Suzy Welch" debuted yesterday on MSN and is being promoted across the web and in Business Week. Microsoft is pulling out all the stops, hiring two of the biggest names in business to give advice to Microsoft customers.

The series feature Microsoft software, enabling the company to show ads featuring different products throughout the 20 minute show. And the potential of being featured on the show and getting some Welch advice seems like a pretty appealing lure to new customers. Other web-exclusive shows feature brands like Grape Nuts, Toyota (NYSE:TM) and Subway. These webisodes have been viewed millions of times on MSN and on Microsoft's XBox 360 LIVE.

Microsoft tells me that this approach is much cheaper than traditional 30-second TV commercials, despite the high price the Welchs must charge. But even more important, Microsoft is hoping these ads will be far more effective: they're targeted to a very specialized group of decision-makers at companies. And because the content and the ads are online, the company can easily track how people consume and interact with the content. The more of this kind of info, the more the website and branded content can be tweaked to grow results. None of this would be possible with a 30-second spot.

Microsoft has put together a total of about 30 different pieces of branded entertainment over the past four years, the most recent ones with Reveille. The tech giant doesn't dominate the market when it comes to search or display ads, but it has a foothold in this new, growing business. And the more successful Microsoft and Reveille's campaigns are, the easier it'll be to convert new customers and grow the business.

This market is bound to grow; just yesterday Nielsen reported that the time people spend viewing video online was up 49 percent over last year. People are watching more videos online, and if it's exclusive high-quality content like a Jack & Suzy show, I don't think they'll have a problem if it's sponsored by a company.

Source: Microsoft Makes a Big Bet on Branded Content