Microsoft ad revenue tops $600m

by Tristan O'Carroll, Media Week 18-Jul-08, 10:50

LONDON - Microsoft's global ad revenue totalled $618m (£309m) in Q2 2008, up 18% year on year, although its online services business, which houses its display and search ad operations, remains in the red, with year-on-year pre-tax losses soaring 132% to $488m (£244m).

Microsoft's online services business division posted revenues of $838m (£419m) during Q2 2008, up 24% from the $677m (£339m) in the same period in 2007.

Online advertising revenue increased $93m (£47m) or 18%, to $618m (£310m), reflecting growth in Microsoft's existing online advertising business and the acquisition of digital marketing outfit aQuantive. Agency revenue, which is solely derived from aQuantive, totalled $94m (£47m) during the quarter.

The losses at Microsoft's online services business division increased due to rising data and equipment costs, online content expenses, and aQuantive-related expenses. Research and development expenses increased $74m or 28%, sales and marketing expenses increased $69m or 26%, and general and administrative expenses increased $46m or 192%, primarily reflecting a 39% increase in staff costs.

Microsoft shares dropped more than 6% in late trading in the US after the software giant posted an overall global pre-tax profit that fell short of Wall Street's estimates as it forecast lower-than-expected revenue for the following quarter. Revenues rose 42% from last year's results to $4.3bn (£2.15bn).

Microsoft's results were unveiled as the company continues to be linked with a takeover of all or part of Yahoo. Last week, it teamed up with rebel Yahoo shareholder Carl Icahn to table a bid for Yahoo's search business, which was rejected by Yahoo chief executive Jerry Yang.