Peter Kafka

Recent Posts by Peter Kafka

Microsoft Sticks a Cautious Toe Into the Ad Exchange Business

Is Microsoft is finally ready to a launch its long-delayed advertising exchange? Just barely.

Redmond is set to roll out AdECN, the “real-time” ad exchange it bought in 2007, within the next two weeks. But only in the most cautious of tests: Microsoft (MSFT) will open up AdECN to a handful of ad buyers and says it will only allow them to purchase a “select, limited amount of Microsoft inventory.”

Which means that even as Google’s AdX exchange, relaunched last fall, continues to gather momentum, Microsoft will still be dabbling around the edges. And some industry sources tell me they’re not sure that Microsoft is convinced it wants to launch an exchange at all.

The promise of the exchanges is that they allow ad sellers and buyers to haggle over specific pieces of inventory at the moment Web surfers are engaged with them.

That’s theoretically important because it means an ad buyer can determine if a visitor who is, say, looking at this Web page at this very second is worth more or less than the one who was looking at it just before. Or after. Etc.

Entrepreneurs and investors in ad technology think this is a big deal, because it will allow dollars to flow into online display ads much more efficiently. Traditional publishers, though, fear that the exchanges will simply function as more traditional ad networks do–that is, they will commodify most of their ad inventory and push prices even lower.

Microsoft itself is having that debate about its own exchange, sources familiar with the company tell me. They tell me that some executives in Redmond are desperate to launch AdECN in order to compete with Google (GOOG)–and likely, Yahoo (YHOO), which is testing its own real-time platform. But others aren’t eager to launch a product that may end up pushing down prices on Microsoft properties like MSN.

That would explain the long delay in launching AdECN, which has been promised for many months. Most recently, industry sources were telling me that Microsoft would launch the exchange in January.

It appears they’ll be off by a few days. Here’s Microsoft’s statement to me in response to a question about AdECN’s launch date and plans:

To date, we’ve been piloting the AdECN Federated exchange system internally with Microsoft Content Ads and through the Microsoft Media Network. In the next two weeks, we are extending it to a select group of advertising network partners in a test phase, which will enable participants to bid for media in real-time across a select, limited amount of Microsoft inventory. We’ve been intentional in our launch approach–by initiating this test with a small group we believe that will help us to refine and build future functionality. We expect to share more details about this test and our strategy in the coming months.

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