Display Keeps MSN Afloat

Microsoft’s MSN division saw advertising revenues increase by $60 million, or 20 percent, in the first quarter of its 2006 fiscal year, as compared to the same period last year. Revenues overall remained flat, largely due to a 30 percent decline in the unit’s dial-up Internet access business.

Ad revenue growth is mostly attributed to strong growth in display on MSN’s portals, channels, email, and messaging services worldwide.

Though Microsoft is making a big push into search, the company said paid search doesn’t yet account for a significant portion of ad revenues. Microsoft said it was experiencing “pressure” on search advertising prices, which is keeping revenue from growing as fast as the company would like.

The future, as Microsoft sees it, lies in adCenter. The product is available in France and Singapore and a U.S. beta test is beginning.

Over the rest of fiscal 2006, Microsoft said profitability for the MSN unit may decline as it continues to make investments in search, the advertising platform and the development of a field sales force.

In the Q1 2006 quarter, MSN brought in $564 million in revenues, down sequentially from $598 million for the fourth quarter of fiscal 2005. As compared with the $559 MSN brought in during the same period last year, the division’s revenues were slightly higher. As for operating income, MSN generated $83 million, up slightly from $80 million in the year-ago quarter.