Microsoft Ad Revenue Up 7 Percent in Q2

Microsoft’s online advertising revenue grew 7 percent, or about $86 million, in its fiscal second quarter, which ended December 31. Ads, in particular search ads, provided a bright spot in an otherwise bleak quarter, as the company reported lower than projected revenue. The Software giant announced a workforce reduction affecting thousands of employees, but said jobs will be added in search and other growth areas.

“Even while we take away 5,000 jobs we will add back a few thousand jobs in areas like search,” said Steve Ballmer, chief executive officer at Microsoft, on a conference call.

Search revenue experienced double-digit growth, display advertising continued to grow, and page views and search queries experienced “healthy engagement growth,” suggesting an increase in queries and impressions per user.

“We continue to see healthy growth in our traffic, both in display and search,” said Bill Koefoed, general manager of investor relations at Microsoft.

As part of a strategy to manage operating expenses, Microsoft said it would eliminate up to 5,000 jobs across its business over an 18 month period, with 1,400 of those jobs being cut immediately. Hiring will occur in key areas of Microsoft’s business.

Job cuts will come from research and development, marketing, sales, finance, legal, human resources, and IT.

Microsoft Live Search received 21 percent more impressions in Q4 than Q3, and gained 18 percent more impressions than Q4 2007, according to a report released earlier this week by search agency Efficient Frontier. In terms of click-through rates, Microsoft Live Search had higher CTR in the first three quarters of 2008, beating out all other search engines. Microsoft Live Search’s lead dipped below Google during Q4, the crucial holiday shopping season.

Across all operations Microsoft posted revenues of $16.63 billion for the quarter, a 2 percent increase over the same period of the prior year.