Tuesday, July 17, 2007

Microsoft’s Strategic Adware Initiative

In my last post, I questioned how MS was planning to leverage its investment in extensive web service API's, otherwise known as the "Cloud OS". Along those lines, I've been perusing the Windows Live SDK, and noticed, oddly enough, that MS included the adCenter API as a part of it. That seems like an odd place to put it, given that adCenter's focus is a completely different audience than Windows Live (and the rest of the Windows Live SDK). Unless, of course, MS planned to make advertising a key part of their web services initiative.

In other words – shocker – it sure looks to me like MS is planning to use advertising to make money off of their web services.

Nothing terribly revolutionary there: advertising has always been the way you make money off of services people won't pay for. But the hard part about making advertising money off of web services is the ad format. How do you make money off of a bare API call?

There are three ways I can think of to do it, none of them mutually exclusive:

  1. Include advertising elements in the objects returned from the API call, and require or encourage their use. Microsoft's Virtual Earth UI controls don't do this yet – but there's no reason they couldn't. Or you could also give websites that consume MS web services special breaks if they also become adCenter publishers. Or you could just say, "If I don't see 'x' number of ad impressions or clicks resulting from 'y' API calls, we'll shut down your access."
  2. Use the database of information gathered from these API calls to compile behavioral profiles on users, and target advertising based on past behavior. See #1.
  3. Build advertising into the base OS, so that API calls (and the data riding in them) become just another monetizable context, the way that URL's often are today.

Then a friend pointed out a Slashdot posting on an MS patent application recently made public. This patent application outlines an architecture for "an advertising framework [which] registers context data sources and advertising display clients". And this "advertising framework" is specifically mentioned as being "a part of the OS, an application, or integrated within applications".

In other words – shocker – at least one way MS is thinking about monetizing its server-side investment is through client-side, desktop advertising. "Adware", in so many words.

No wonder MS was so interested in Claria back in 2005.

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