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Wednesday, May 3, 2006 - Page updated at 12:00 AM

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You can't spell new Microsoft without A and D

Seattle Times technology reporter

Yusuf Mehdi's new job at Microsoft is to develop the advertising strategy across the entire company — even in products like Windows or Office, where ads were once considered taboo.

Internally, he has to persuade executives and developers to start thinking about including ads in places they wouldn't have before.

Externally, he needs to persuade advertisers to consider Microsoft alongside Google and Yahoo! when making spending decisions.

So last week, Mehdi was out shaking hands with some of the Web's major advertisers, touting Microsoft's technology and proposing partnership ideas for the future.

This week, he'll be on stage as Microsoft shows its work to some 650 attendees at the company's annual Strategic Advertising Summit. The event is sold out, and two passes were sold on eBay last week for $760.

"I'm getting a very positive reaction for no other reason than people want an alternative to Google," said Mehdi, a senior vice president at MSN who became chief advertising strategist in March. "So many companies out there, they're just a little threatened by the dominance of Google."

Count Microsoft among them.

The company sat on the sidelines for years while Google and Yahoo! forged new paths in the nascent online-advertising business. Those rivals began bringing in millions, then billions, of revenue every year, and the industry is projected to continue its fast-paced growth.

Time, once again, for Microsoft to play catch up. The company has thrown itself into the business, pouring money into advertising research and building a broad platform it will use to sell ads on the Web, in software applications, on television and in video games.

Advertisers are paying attention, according to the company. "The Microsoft-Yahoo!-Google Internet phenomenon today is to the business world what Nick and Jessica are to the tabloid world," said Joanne Bradford, corporate vice president of global sales and marketing at Microsoft. "Everybody wants to know. Everybody wants every detail of what we do."

Chairman Bill Gates and Chief Executive Steve Ballmer are scheduled to at the summit. Other presenters include sales executives from Yahoo! and Google. Advertising executive and television host Donny Deutsch and performer Jay-Z will add a bit of star power.

Several items will likely be high on the agenda. Microsoft will be touting adCenter, the online ad service the company is close to launching in North America.

It's also moving to sell its own ads alongside its MSN Web search results. In the past, the company hired Yahoo! to run those ads.

In addition, MSN is announcing today at the summit that it will create a fund for Reveille, a television-production company, to make Internet-based programs and other entertainment. In return, MSN will get a one-year, exclusive option to run any content produced by Reveille, which created shows like "The Biggest Loser" and the U.S. version of "The Office."

Microsoft could also confirm rumors that it's buying Massive, a two-year-old New York company that places ads in video games. Mehdi wouldn't comment on the acquisition in an interview this week but said Microsoft considers gaming fertile territory for ad placement.

The problem Microsoft struggles with is that it doesn't have enough "high-value inventory" to offer advertisers, Mehdi said. In other words, it's selling out its advertising real estate on its MSN sites and in other areas.

Mehdi's mission is to find new inventory, and that doesn't mean just doubling the number of Web sites on the MSN network. Advertising might be appropriate for a person who wants to find music similar to the songs in the My Music folder in Windows, he said.

There are also opportunities to place ads in Xbox Live, the online-gaming service offered alongside the Xbox game console.

"In all of our software we want to try and figure out how to educate people that they can make software and services better to consumers by connecting them to the Internet," Mehdi said. "Within that, we can start talking about which part of that inventory is worth monetizing."

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2006 The Seattle Times Company

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