Microsoft is baking a replacement cookie technology that would share content between mobile and desktop PC browsers, and even the Xbox, in an effort to take the growing market for mobile ads and target them even more effectively at the end user.
Ad Age reported that Microsoft is working on the technology, with no timetable given for when it could be rolled out to advertisers. Microsoft didn't return a request for comment on whether the reports are true. Google has also been rumored to be at work on its own replacement for the cookie.
Microsoft's technology also wouldn't necessarily be a "cookie," a crumb of digital information that could be passed from advertiser to advertiser around the Web. Instead, Microsoft would "own" the user data. That might eliminate concerns about digital information being sold to other third-party companies and spread widely over the Web, but it would also allow Microsoft to build a more comprehensive digital profile of a user. That profile could conceivably include all kinds of information, including demographics and what kinds of products a user prefers.
"Microsoft believes going beyond the cookie is important," a Microsoft spokeswoman said in a statement. "Our priority will be to find ways to do this that respect the interests of consumers. We have nothing further to share."
All this reported cookie tinkering comes as revenue from traditional search and desktop banner ads dip, according to a Wednesday report from the Interactive Advertising Bureau and Price Waterhouse Coopers. Overall, the total ad spend for online ads has grown 18 percent to $20.1 billion during the first half of 2013, according to the report. But the percentage of search ads dipped from 48 percent to 40 percent versus the first half of 2012, while display-related ads (banner ads, video, and other rich media) also fell from 33 percent to 30 percent. That, not surprisingly, was sucked up by mobile, which saw its share of the online ad market jump from 7 to 15 percent: $3.0 billion in all, the report found.
"Consumers are embracing new screens, new content and transforming how they shop, communicate and consume content at an accelerated clip," said Sherrill Mane, senior vice president of research, for Analytics and Measurement, IAB, in a statement. "And, in response, marketers are turning to those same interactive arenas just as quickly."
An IAB spokeswoman said that she was unaware of any proposed ad technology from Microsoft as referred to by the Ad Age report. But she warned against the nature of proprietary advertising mechanisms.
"The dominance of cookies as an advertising-relevance mechanism is clearly ending, as cookie-less mobile devices claim more and more of consumers' Internet time and attention," the spokeswoman added. "At the same time, cookies have been the centerpiece of a digital advertising industry that now boasts revenues of $40 billion in the U.S. alone, and has generated enormous wealth for small publishers and small retailers especially. We should be very wary of any one company or a cartel attempting to replace this remarkable business-development engine with its own, less-open mechanism for advertising value-creation. Unless the ecosystem is pulled together to coalesce around an alternative--as IAB is aiming to do in our Future of the Cookie Working Group--the health of the digital marketing industry will be at great risk."
Although lawmakers and consumers tend to eye Google suspiciously, a cross-platform ad technology from Microsoft that spans the phone, the PC or tablet, and the Xbox would be able to build a profile arguably more comprehensive than Microsoft's competitors.
Although Microsoft would like users to buy Windows 8 and its IE11 browser, Net Applications puts IE10's share in September at 19.43 percent, versus 12.78 percent for Chrome. And while Windows Phone's 3.2 percent share among U.S. smartphone platforms in August pales to the 51.6 percent share owned by Android, Microsoft dominates the console market, and neither Sony nor Nintendo offer a phone or desktop browser. What this all means is that at least some percentage of users will use IE, a Windows Phone, and the Xbox.
The latter platform will become increasingly more important as Microsoft rolls out the Xbox One, which already will supply an Internet Explorer browser and supplemental data, such as fantasy football statistics, to make viewing an NFL game more enjoyable. It's not hard to believe that Microsoft could push a "click-to-call" discount ad for the local Domino's Pizza during halftime of the local football game, using the One's built-in Skype technology, plus its knowledge of a user's location and the user's preferences.
If that indeed is the case, will users see that as a terrific feature? Probably. Consumers seem to be willing to trade their privacy for a measurable benefit.
We don't know what Microsoft plans to do here, nor whether this technology will move to market in any meaningful way. But the model is clear: offer a set of services so compelling that users treat it as a necessary crutch, not as an optional benefit to dip into when the mood strikes them. As our devices become ever more sophisticated, so do the revenue streams that subsidize them.
Updated at 12:11 PM PDT with a statement from Microsoft and the IAB.