Observers of Microsoft’s product development over the last couple decades have noted the Company’s exceptionally poor timing. They were late to the Web and let Netscape own the browser at first. They were late to “software as a service” and let Salesforce.com grab the early lead. In fact, they continue to play catch-up in several categories like online music (iTunes), digital video in the living room (Tivo) and sponsored search (Google and Yahoo). However, notwithstanding its inability to innovate, Microsoft was been great at immitating.
Sponsored search, the core of Google’s multi-billion empire, has been a thorn in MSN’s side. No more (maybe). Today MSN launched the beta version of its adCenter. The service, although a bit quirky, seems robust. Although it may not be as advanced and flexible as Google’s AdWords, it may in fact be better than Yahoo’s ad tool, Overture.
Look for Microsoft to aggressively grow this high margin business. And, as important, as Microsoft begins to extract value through sponsored search, they could be in a good position to take another page out of the Google and Yahoo playback — buying startups with broad market appeal (think: Flickr, Keyhole, Del.ico.us, etc.). This is good news for the startup entrepreneurs and the VCs who develop content-oriented services.