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May 2, 2007

Mix07: Bach describes transforming world of marketing

Posted by Benjamin J. Romano at 1:28 AM

LAS VEGAS -- Microsoft has been talking up its connected entertainment strategy for a while now. The idea is to give people access to their chosen music, games, videos anywhere and anytime they want them through a host of devices, such as the Xbox 360, Windows Media Center PC, and Zune music player.

On Tuesday, Entertainment and Devices Division President Robbie Bach talked about the strategy from a different perspective: advertisers. It followed Ray Ozzie's presentation here Monday focused on new technologies for developing rich Internet applications -- the "how." Bach talked about the "why" -- the business opportunity Microsoft sees for itself and its customers.

"It's an interesting thing to note that the same technology [that] is transforming the way development is done, is transforming the world of marketing," Bach said. "How we reach people in this digital age is changing."

Here are several examples of Microsoft's recent work with advertisers that Bach outlined. For more, check out today's story on privacy concerns around targeted advertising.

Disney: The entertainment and media company is working with Microsoft and large OEMs selling computers in China to install a software gadget on new PC desktops that pipes in content meant to attract people to the company's Hong Kong theme park.

Bach showed several other branded on-screen gadgets. Gadgets, a feature of Windows Vista, are small applications that run on the desktop and typically draw information, such as current weather conditions, from the Internet.

"If you think about it, it's some of the most valuable real estate in the home," Bach said of the PC desktop. Advertisers see the branded gadgets as another opportuntiy to engage with customers. "Now your brand is front and center with them," he said.

PC makers have long loaded up new computer desktops with trial software, sometimes to the dismay of customers who have to rid their machines of unwanted applications.

The Disney gadget is aimed at an emerging Chinese middle class that does not have the history with the Disney brand that Americans do, said Edward Kummer, a Disney executive in charge of online promotions of the company’s parks and resorts.

The gadget is constantly being updated via RSS feeds with news about the theme park and also includes long-format video, itinerary planning tools and other interactive content.

"This is effectively having a Disney application on the PC," Bach said.

No details were provided about the size of the application, the computing resources it uses or whether consumers could remove these branded gadgets.

Burger King: With a target audience that's spending more time playing video games than watching TV, the No. 2 burger chain developed three small Xbox games featuring the King character and other company images. Distributed through its stores, the company sold more than 3.2 million copies in a six-week period. Action in the game, such as pocket bike racing, was mirrored in TV commercials.

"If you had asked me a year ago, 'Gosh, you’re going to do a promotion with the Burger King guy on Xbox Live Arcade and it’s going to generate headlines in the business press about how they've helped Burger King's sales?' I would have been truly surprised," Bach said. "In fact, financial analysts on Wall Street started giving Burger King a higher multiple on its stock price because of the success of the promotion."

In game advertising: Bach said gamers appreciate the presence of in-game advertisements because it makes them more realistic: Dairy Queen billboards in racing games and a Subway banner advertisement behind home plate in "Major League Baseball 2K7," for example. The ads rotate, real time, as you play the game, Bach said.

Microsoft acquired in-game advertising provider Massive Entertainment a year ago and now has about 60 advertisers on board. The company plans to have the in-game advertising deployed in 100 games by year's end, Bach said.

Nissan: The car maker is building interactive commercials that would play through Windows Media Center PCs linked to TVs.

"TV is still the most important advertising screen in the household," Steve Kerho, director of media and interactive marketing at Nissan, said on stage with Bach.

He demonstrated a linear video ad for a car that was overlaid with interactive content that would allow a viewer to click on specific elements of the vehicle and learn more about it, "bringing a certain element of the Web to the television," Kerho said.

Microsoft has showed this concept before, such as at its Strategic Account Summit last year.

The program also allows Nissan to show different advertisements to different viewers, something Kerho said the industry has been wanting to do for a long time.

"If I'm in the market for a mattress, I don't mind seeing a mattress ad. If I'm not, it's just noise and the advertiser is wasting their money," Kerho said.

After Bach's presentation concluded, a panel of marketing and media experts explored the topic further. The discussion was heated, with Andrew Rashbass, publisher of The Economist magazine, providing some of the most biting, contrarian opinions of the entire event.

One comment in particular might be reason enough for Microsoft to reconsider inviting Rashbass next time.

"It's great, by the way, that Robbie Bach is giving a talk, which 2,000 people attend, about monetization and business and he just lost $300 million in the past quarter," Rashbass said. Ouch.

That, of course, was a reference to the performance of Bach's division in Microsoft's third quarter. It was actually $315 million in the red. Microsoft as a whole raked in $6.59 billion in operating income in the period.

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Tricia Duryee
Tricia Duryee

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Angel Gonzalez

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Kristi Heim

Benjamin J. Romano
Benjamin J. Romano

Mark Watanabe