By Yi-Wyn Yen
February 26, 2008

By Yi-Wyn Yen

PHOENIX – In the burgeoning world of online advertising, a top Microsoft executive believes just two competitors will win out — Microsoft and Google.

Brian McAndrews, the senior vice president who leads Microsoft’s advertising and publisher division, says to build a sophisticated ad platform requires enormous resources and capital that only two tech superpowers possess.

“This is incredibly expensive,” McAndrews said during a speech Monday afternoon at the Interactive Advertising Bureau conference. “To constantly scale the network and scale the data warehouse and grow this platform is very significant. There are really only two players who are going to compete long term.”

Microsoft (MSFT) acquired aQuantive last year in a $6 billion deal in an effort to bolster their digital advertising presence, and had made a $44.6 billion hostile bid for Yahoo to catapult its way into the Internet advertising big leagues. Google (GOOG) is waiting for European regulators to approve its $3.1 billion purchase of ad-serving company DoubleClick.

The thought of a duopoly rubbed some IAB attendees the wrong way. “This is a very search-centric notion,” said Bill Gossman, president and CEO of Revenue Science, a behaviorial targeting ad network. “That’s not true in the targeting world. There’s a real unique opportunity for those who don’t want to get sucked into the axis of the two players.”

McAndrews, who was the CEO of aQuantive before his company was acquired by Microsoft, defended the idea of two big online ad players. “It’s better than a monopoly,” he said. ”We’re not saying there can’t be other players. We’re just saying it’s very hard. If you’re making a bet on your website that this is the partner you want to work with, you need to be thinking is this the partner that can succeed long term. Two is better than one.”

McAndrews, who unveiled a new ad management tool for advertisers to track consumers called “Engagement Mapping”, spoke just a few hours after Yahoo (YHOO) CEO Jerry Yang and president Susan Decker gave speeches. Asked to address the elephant in the room, McAndrew replied, “We continue to believe [a Yahoo-Microsoft deal] will be a great combination. Combined we’ll be able to compete much better with Google. That’s the real elephant in the room.”

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