Peter Neupert, Vice President of News and Publishing for Microsoft. Since
joining Microsoft in 1987, Peter Neupert was most recently Senior Director of
Strategic Relationships before becoming Vice President of News and Publishing
for Microsoft. He is responsible for Microsoft's online advertising and media
business partnerships. In addition he oversees the online magazine Slate and
leads the Microsoft side of the MSNBC cable and interactive joint venture.
I would like to know a little bit
about my audience. How many of you are
from agencies? How many of you
are from advertisers?
What do advertisers want? It is
really simple, really straightforward.
What advertisers want is to move
boxes out the door, put people in seats
if
your hollywood, if your an e-commerce
company, you want to maximize sales,
and so its all about moving the top
line. And the promise and hype of the
interactive medium, the hype of being
able to track major
know-your-customer relationships have
gotten people very focused of a
direct correlation between any
expenditures on-line and how they move
people through the sales process.
That is the way it should be for all
advertising, but it is not true
today. And we have to figure out as an
industry collectively, whether as
advertisers, publisher, agency, what
have you, how we can deliver on the
hype. How we can deliver on the
promise of the interactive medium.
I don't think that is something that
is going to happen in the next two
years, it will take ten years, as we
go through the evolution, both from a
technology point of view, a banwith
point of view, and a customer
behavior point of view. The good news is, I
am very happy to be a technology
company in the coming environment. When
I think about all the tracking,
customer preferences information, I just
think about all the servers that are
going to be out there in the world,
and all the software that is really
effective and to deliver on the
promise. That said, what I want
to do today is talk a little bit and wear
different hats. Chuck talked
about how I am very focused on the
publishing hat of Microsoft, driving
our on-line revenue activity, being a
larger publisher with MSNBC and
Slate, in its own right, participating in
the other of our content sites.
But I thought I would start this morning
a little bit talking Microsoft as an
advertiser on the web, and how we are
thinking about our expenditures and
our on-going market activity. Talk a
little bit about what's working,
what's not working from our point of
view, from the research that we have
done the last couple months, and then
briefly talk about some activities
that we would like to do to move the
industry forward. To move from
the promise to the hype, to be really able
to deliver on some of what
advertisers need. So first, let's talk a
little
about Microsoft as an advertiser.
One of the messages I heard yesterday
was how many advertisers were
thinking of on-line in the experimentation
phase. From our perspective, we
have moved from a budgeting activity, we
have moved beyond
experimentation--on-line is working for Microsoft--we
may be a special case--on-line users
map to our targeted customer segments
quite well. So we have moved,
since 1996 and 1997, a significant account
of our budget into the on-line
activity. Everyone in the product group
have stated to take advantage of
on-line, whether its Windows, whether its
Back Office, whether its the
Greetings Workshop, the customer activities,
all the product lines have moved a
significant amount of their
marketing activity into the on-line
phase, and we consider we are beyond
experimentation at the budget level.
We are only going to see that
increase we are going through right
now through our next years planning,
and your only going to see our
commitment to on-line increase. From an
implementation phase, we are still
experimenting, anybody who is not
experimenting, not thinking of ways
they can be more creative, more
effectively use the medium should
think about what things work concerning
customer acquistion vs down-load,
whether it is events or banners, or
particular things. We are
experimenting from and implementation point of
view, but I think the core message
here is that we put our money into the
on-line space, we view it as one of
the most effective things we can
do--we're only going to spend more
money on-line as we go forward. So
that is the good news.
We are very typical, as an
advertiser, in what we look for when we go out
and make the buy. We want what
you would expect most advertisers would
want. We want to be able to
target the audience. If I'm the IE group, I
don't want to keep communicating my
message to people who already have
IE4. I want to be able to
communicate my message to people who have
using different browsers. I
want to be able to go after those people and
tell them the benefits of using
IE4 and where they can get it and how
they can bet it, and have promotions
and programs for them. So, I want to
be able to target my audience.
When I'm trying to draw my market share of
the on-line space reasonably
significant, I need a large audience, so I
need a large size, I need to huge
reach. Many of our products are
relatively mass products for this
medium. At the same time, we want to
make sure that we are with the
appropriate content. We buy a fairly large
number of sites today, but we still
need to have, and still impose,
certain content standards. We
want to make sure our brand, our product,
the quality that we worked a lot of
years to put at a certain bar, is
associated with the right level of
content, and not just on any old site.
We want to get the results out of the
ads that we buy, and so one of the
issues as site designer that we spend
a lot of time on is the quality
of the ad placement. And that
time as a publisher, and trying to deliver
that value to our partners, our
advertisers, we impose back on people who
want to get our money as an
advertiser. We want to have a quality ad
placement. We want it to be
above the fold, we want it to make sure that
it can be in the users face at the
right time, in the right way. We
also, because we have a lot of types
of programs and a lot of different
needs, given the types of products,
we expect in this experimentation of
implementation phase to get
flexibility from the publisher. And I think
as publisher, one of the real
challenges that we all face is how can we
create an environment where we can be
flexible, and work with the
ever-changing number of programs that
our advertisers want and still have
a reasonable margin left, not have to
grow our stocks, not have to grow a
lot of custom work, and still deliver
the service. The flip-side of
flexibility is that it is very hard
to service. And so one of the things
we are looking at as advertisers is
that perhaps I should narrow the
number of sites I buy so that we can
be more consistent in getting value
out of that experimentation and
reducing the service burden we are putting
the these sites. And of course,
I think we have the reputation of being
pretty hard on sites, and I think
that is true of anybody spending tens of
millions of dollars a year on on-line
space. One of the other messages
that I heard yesterday was about the
Internet--this concept of universal
connectedness of consumers was
potentially going to alter the value chain
of many industries. From the
Microsoft perspective as advertisers, we are
already in that phase. We are
moving beyond thinking about the on-line
medium as just an ad medium, or just
a communication medium. We are in a
phase of thinking about how we
re-engineer our whole sales and marketing
activities to take advantage of
opportunities created by the internet in
all phases of our sales and
marketing. Microsoft.com is a huge budget
item in terms of our overall
marketing spin. It has millions of customers
a day, it has a wealth of information
for various sets of stake holders,
whether your in-user, whether your
the channel, whether you are a
site-builder partner, whether you
want to participate in a certain seminar
or Back Office program--it is a key
vehicle for us to communicate with the
various customer sets, with the
press, with the investor relations group,
and we put a lot of emphasis in this
as a key vehicle for us to
communicate our messages to those
various customer segments. We have also
managed to change our relationships
with a number of our customers. If
you look at the on-line knowledge
bases that we have put there, whether it
is the Microsoft Developer Network
and the updates to it, our product
support database, we have managed to
take--we are servicing about 20,000
calls a day--through our telephone
product support service--as we put our
knowledge bases on-line, we found
that we could service another 20,000
users a day and their questions with
no increase in personnel. So, we
have managed to reduce cost and
increase customer satisfaction by using
the Web, and that was a very early
implementation. This is relatively old
data that I am repeating now.
And so we are figuring out how to use the
Web to reduce our post sales support
costs. We are in the process now of
figuring out how we can use it to
help our channel and help move customers
who have gone from the awareness
phase to the buying phase and find a
channel partner, and move them
through to a channel partner. The web will
integrate all of our sales and
marketing so that we can be more effective,
deliver more value, and get greater
penatration at lower costs. And I
think all the advertisers in the room
should think about it just from "how
will this change my advertis8ing
spin?" You have to think about it from
the point of "how is it going to
change my marketing and sales spin?"
"How wil it change my
relationship with my channel?" "How will it change
my
relationship with my end user?"
and all the steps in between. "How can I
run programs that will be more
effective? Or lower my costs for seminar
attendees--for a seminar like this by
using the Web?" And that is the way
we are thinking about it--we think
this is happening right now in many
industries and that people better
move very quickly from the phase of
experimentation on one side--into
really thinking about how they are going
to re-engineer their whole sales and
marketing activities. This is a
brief look that even within the
Microsoft.com--I'm sure many of you have
seen it--we are now integrating
Microsoft.com, which has been our
corporate website, which is very much
focused on customer needs and
information activities, with our
media website. And so we are going to
make it ways for people who have come
to Microsoft.com to get product
support or customer information, to
find out about our media properties,
the Microsoft network, and our
constellation of properties, and move
people through. Historically,
we have had things somewhat seperate, and
we are moving forward as we integrate
more of our product site--to
thinking about it as our
constellation of sites.
And that is a good transition for me.
I am going to take off the
Microsoft ads advertiser hat and put
on the Microsoft desk publisher hat
and talk about what Microsoft as a
publisher is trying to do, where we are
going, and the kinds of things we are
thinking about. We have become very
focused on helping business do
business on the web. We have a set of
technology, technology products that
help business do business on the web.
And we have built a constellation of
quality properties that is only going
to expand, that will help businesses
communicate with customers. Also to
advertise on the web to get done what
they need to get done by having a
large reach site with high frequency
of customer relationships, whether it
be e-mail, or the news side of the
business. And we are going to partner
with a number of businesses,
advertisers, e-commerce merchants to make it
easy for them to communicate with our
customer. We have gotten focused in
our failing to offer service to those
set of advertisers. We are putting
in an infra-structure to make it easy
for us, more confident for us to
service your business and your
business needs. We view that as a very
major focus for our on-line sales
effort. We think-to date- the way
people are packaged and purchase
on-line products, doesn't always fit the
needs of the advertisers. So we
are working hard to figure out new ways
that we can package the quality of
content that we have, and the number of
users that we have and deliver them
in a way that delivers value to the
advertiser. We recognize that
while we have a significant amount of
traffic, we haven't focused as much
as the traditional media companies
have in how we promote a certain set
of activities to that traffic. And
we have gotten very focused, as we
have all our products, in this motion
of using promotions as a vehicle to
deliver values, not only to our
advertisers, but to our users.
And you'll see, as we communicate with you
about the opportunities on the
Microsoft network of properties, you'll
hear
us talk a lot about the promotional
opportunities that exist, how we think
that will change the dynamics of the
people on our properties. And I
think there will be a new way of
doing business with us and perhaps others
in the industry. One of the
things, because of our platform heritage, or
at least I ran the operating systems
group in my early days with
Microsoft, and we always thought
about the ways in which people drove the
industry. When you are trying
to evolve a new product which is dependent
on adoption by software developers,
as well as adoption by consumers. We
always thought about the programs we
could do to make it easy for people
to get done their needs, whether it
is write software applications, or
test against the given environment,
or test against each other, and things
like that. We have a heritage
about thinking about how we can remove
obstacles to get the industry to grow
by being a centralizing function, a
centralizing force. And we are
thinking about that in the on-line
advertisers space as well.
There are many obstacles in getting the
industry to grow as quickly as we
can. And we would like to participate
in helping the industry grow more
quickly, solve some of those problems by
removing some of those obstacles.
Whether it is by putting people against
he issue, money against the issue, or
resources againste teh issue. We
would like to help grow the industiry.
I am not going to spend a lot of
time on our constellation of
properties, other than to say we are in the
top five reach, probably higher wit
the way Hotmail is growing-growing
about 70,000 new users a day--it is
just a phenomenal growth rate--MSNBC
has been number one since its
conception two years ago. We are going to
celebrate our two year anniversary in
July. We have established a
position and new brand for news on
the web, in conjunction with our cable.
And the interesting thing is that we
have a bunch of cross media
opportunities, which I will talk
about, and a number of other properties,
whether it be travel, or investments,
or a new company like Slate. And
many of you have heard how we are
going to make this into an overall
start, or portal. This is the
constellation that we have--they are very
different today, they have cross
media capabilities, or
cross-navigation--where everyone of
the products that is implemented
now--the capability to mover from the
news sited to any one of the other
properties, with a very simple click
-navigation scheme. You will see
that of all over time to where we
make it very easy for customer, who
have come in to any one of our
customers acquistions vehicles, whether it
be news or travel, and move to
any one of our other properties. This is
an area where I have my publisher hat
on, where we are very much in the
experiment. Steve Balmer, again
many many years ago, hammered into our
overall culture to do it, try it, fix
it. There is no way that we can
figure out long term, three year
solutions, to the problems that we have.
The only way to operate is to get out
there, do it now, test it, really
understand, focus on a few things,
fix it, improve it, and iterate it. Be
very fast at iterating it. And that
is the way you'll see if you have a
relationship with us as a publisher.
You'll see us acting over the next
couple years. Where we are
going to focus in terms of what product should
we build, where should the ad
be--where should the promotional spaces
be--how should that work? We
are going to pick some partners who want to
work with us in this experimentation
phase and help us build the best
value--both for them as an advertiser
and for our user--we are very much
focused on the user on terms of
delivering value and speed. We are going
to experiment on how you buy web
advertising with us. We think that
selling a set of impression in bulk
is not the best vehicle, that
advertisers would rather buy the true
reach and frequency, or a true set
of unique users in frequency.
And we are building and changing some
technology so that we can deliver
that very easily and in a forward way
from day adn date, to any other way
you want to buy a set of unique users.
In order for us to accomplish that,
we have to put in a bunch of vaccumed
operational support--as I took on
this on-line sales and advertising, of
the things I consistently stumble on
is how new the infra-structure is.
How we are really in a beta mode with
a lot of the technology, the ad
delivered technology, the information
technology, the measurement of
technology, in order to deliver on
the ideas that we have. We are beefing
up our technology investment,
integration investment to be able to deliver
on the operational support
required for us to understand our business,
but
also to understand your businesses
and how we can deliver on those needs.
And probably most importantly we know
that we can't do it all
ourselves--we need a partner with
many agencies and people in the
advertising value changing in order
to make this happen. We are very
focused on figuring out how we can
work effectively with the breadth of
the industry and the breadth of the
value chain in order to be able to
deliver on what the advertiser wants.
So one of the things, after I took
over this job, was to go out and talk
to a number of agencies, and just
to a top line "where are
we?" What are you doing in the constant
evolution of the marketplace?
What is going on? Where should we focus?
How can we be better? These are
the things we are focusing on based on
all the things that we heard.
Distribution matters, so you see us change
our products to where we have the
biggest distribution of anyone out
there. We are very focused that
we have to have significant reach in
order to play in this game. And
we need to find ways to market this
distribution once we acquire it.
We have this reach with Microsoft. com
and home.Microsoft.com, but we
haven't chosen to monotize it. We will
choose to leverage that for other
partners. The back end is key, it is
not just he delivery of the gif. so
that you can get the ad impression,
it is al the other aspects of it.
Most importantly, I think there is a
big
opportunity out there for customer
data management that we are not going
to fill, but that other people will
come in and fill on a very standard
basis. We are also very focused
on trying to deliver service. Back to
the
advertisers, that is what we expect
when we go buy--so if that is the
standard that we go when we go buy,
we better be in a position to deliver
it when asking for someone elses
money. And it is something that we heard
a fair amount. There are a lot
of models about how we should partner in
the transaction space--we are not
sure we know which ones work yet. But I
think it is something that everyone
is focused on.
Tracking-we have all head about it.
What is going on with it? We mainly
sit around and whine about it, try to
improve it. But if we can't get a
good understanding about what the
user is doing, we will never deliver in
the promise of interactive.
More importantly, we need to realize that
sites are never going to deliver on
all the needs of advertisers. So
there needs to be compromise against
a number of sites, and that we
collectively, as publishers, need to
focus on a set of standards that we
can measure and that have meaning to
advertisers, so that we can deliver
on a cross-site buy that really makes
sense and that has value to the
advertiser. A unifies
campaign-as I talked earlier about re-engineering
your sales and marketing activities
in more of a wholistic perspective,
campaigns need to be thought of in a
wholistic perspective as well. From
a cross-media point of view, how does
that URL in the magazine or on
television really matter? There
are a number of things where you can
create calls to action, where you can
leverage the benefits broad reach of
television. Interactive
capability, the customer acquistion capability of
the web to be a more effective total
buy. People need to think about how
to do that from the beginning.
Buying on-line is working, that is
the hot spot to be in right now--begin
on-line merchant, that is where
people are spending the big bucks, buying
exclusive positions. Those
sometimes are the weak sites, but also as a
blocking function. Part of us
try to create share in the on-line merchant
space. Our view is not of a
long-term phenomenon, and it the short view,
it is certaincly the spot to beat.