Microsoft Discusses MSN, Internet Ads and Search (MSFT)

Jan.29.06 | About: Microsoft Corporation (MSFT)

From Microsoft's Q4 earnings conference call (full transcript here):

MSN revenue was $593 million, down 2%, driven by advertising growth of 12%, offset by an expected decline of 33% in narrow-band access revenue. We are pleased with the display advertising, which grew in excess of 20% for the quarter. We improved display advertising pricing and increased our inventory while increasing the number of users of our services. Active Hotmail accounts grew to 230 million, compared to 191 million in the prior year. And, active Messenger accounts grew to 205 million, compared to the 156 million of the prior year.

As you know, we’re in the middle of a transition in search advertising business, moving from Yahoo’s platform to our own proprietary platform called MSN Ad Center, which we began testing in the US during the quarter. The ramp-up of a new ad platform requires significant investment from Microsoft, both in development costs as well as in reduced revenues related to fewer numbers of overall advertisers and resulting lower key word pricing. The good news is that response to our platform has been great and we are ramping up deployment by rapidly envoying advertisers and moving more search traffic to the platform.

On algorithmic search, we are continuing to grow query volume, improving relevance and are investing in several search verticals. We have recently launched mapping, the birds-eye flyover mapping service and are soon to launch news and images. We continue to invest in search for long term and believe there’s lots of innovation yet to come.

The decline in our narrow-band access revenue is in line with our expectations as customers continue to move on to broadband.