Microsoft’s Online Ad Unit Revenue Increases 11%

Microsoft announced their first quarter earnings for 2007. The Online Services Business unit, which is comprised of adCenter and other MSN properties, noticed an increase in revenue of 11%, earning $623 million. However, they due to significant investments, the Online Services Business unit lost $200 million this past quarter, which is $176 million more than Q1 2006.

The transcript of the earnings call from Seeking Alpha says:

In our Online Services business we saw continued improvement in our advertising platform monetization, which resulted in advertising revenue growth of 23%. Revenue for our Online Services business overall increased 11% to $6.2 million, driven by the growth in advertising revenue, partially offset by an expected decline in access revenue. Search revenue benefited from a higher number of search queries, and increased revenue per search on both a year on year and consequential basis. We are now monetizing more effectively in the U.S. on our own Ad Center platform than we had under third-party Overture at this time last year. Our display growth was in line with what is a healthy market, driven by an increase in page views. This quarter we forged content partnerships with Newscorp, NBC and CBS to enhance MSN’s premium video inventory.

And more about adCenter:

That is a reflection of a number of factors. One is display growth revenue growing broadly in line with market. The second is the benefits now of Ad Center are coming on stream. So we have talked with you about this a lot. We said that we would lap our previous monetization rate on Ad Center at some stage in this fiscal year. Well, we did that in that third quarter. So we’re a little ahead of ourselves. We were expecting more like fourth quarter, but we did it in the third quarter. So we are ahead of where we were on the Overture platform of a year ago now and obviously on an appreciating trend. When you look at the number of advertisers that we are getting on the platform, we’re getting at or above the rates that we were expecting and with considerably less advertisers than on the Overture platform, we’re getting a higher monetization.

So we are feeling very good about the rates that we are seeing in terms of Ad Center overall. That is feeding through to the revenue growth numbers that you see, if you exclude the Access. Again, we will try quarter by quarter to give you that advertising number to give you a sense of the health of the underlying business.