Microsoft's online chief: "Paid search is getting more credit than it deserves"

Microsoft CEO Steve Ballmer believes the online advertising market will reach $40 billion this year and grow to $80 billion by 2010. Last year, Microsoft earned only $2 billion from it. Google claimed $8 billion. This disparity upsets Ballmer and so he's put his man Kevin Johnson to the task of remedying the situation. Since most of Google's revenues come from search marketing, Johnson's first plan is to acquire more search queries for Microsoft. Hence the bid to acquire Yahoo, or at least its search business. But Johnson knows more search queries for Microsoft won't unseat Google alone, and so his second step is convince advertisers that Google's search advertising isn't worth all the money they spend on it. To make that argument, Johnson will rely on a tool Microsoft acquired when it purchased aQuantive last year: engagement mapping, a system that will tell vendors which ads consumers saw on the Web before they purchased a product.

The idea is that engagement mapping will convince advertisers that the ads consumers saw before they searched actually led to the purchase of their products, not the search ad that took the consumer to the vendor's online store. "We think paid search is getting more credit than it deserves," Johnson told Fortune. He hopes engagement mapping will convince advertisers to spend less on search and more on types of advertising Google doesn't have completely locked up.

This is a misconception of what search advertising is. It's not "brand advertising" meant to convince consumers to purchase a product. It's a way to make sure a product is highly visible when consumers are looking for it, no matter how they decided to look for it. If a series of ads on content sites convinced a consumer to purchase a product, that product's vendor better be the top search ad when that convinced consumer goes searching for it.

The good news? Engagement mapping — an effective way to tell how well a brand advertising campaign is working — won't erode the power of search, but it will take money from less measurable TV, radio and print advertising. The bad news? From the top, Microsoft may be too obsessed with Google to notice.