BING COSTS MICROSOFT $5.5 BILLION

Microsoft has lost $5.5 billion, an average drain of $1 billion per quarter, on Bing since it introduced the search engine in 2009, CNNMoney reported on Wednesday. Despite the losses, Microsoft’s Bing reached a 30% share of the U.S. search engine market in April of this year, slowly narrowing the gap with Google, although comScore’s figures pin the search engine’s share at just 14.7%.

Despite the constant drain, Microsoft still has a plan for Bing. During the company’s financial analyst meeting in California recently, Microsoft’s president of online services Qi Lu said his company hopes to use Bing to “reorganize the web” to “change the game fundamentally” instead of taking on Google in a head-to-head dogfight.

“We are able to try things with much more flexibility,” Bing director Stefan Weitz said. “If we make a mistake, it’s not going to take down the company.” Analysts believe Microsoft will continue to lose money, however. “Bing will likely be better than Google over time, but even if it is, users and advertisers still need to go to them,” McAdams Wright Ragen analyst Sid Parakh told CNNMoney. “To be clear, this will take a long, long time to play out. This is something Microsoft will continue to lose money on.”

BIGGEST THREAT TO TV ADERTISING IS SMARTPHONES, NOT DVR

TV viewers are a famously fickle bunch, which tends to drive TV advertisers crazy. The prevalent theory remains that skipping past ads using a pesky DVR is the biggest enemy of marketers, but new research has once again contradicted that received wisdom.

The IPG Media Lab in Los Angeles pulled together a representative group of 48 TV and online video viewers and asked them to sit through some programming while equipped with the usual "devices or distractions" that accompany their viewing habits. Central to the study was the measurement of time each person spent facing the screen and how engaged they were with the content.

The first thing noted was that 94 percent of TV viewers and 73 percent of online video consumers used some other form of media to augment their visual entertainment. Smartphones were the most common, with 60 percent of test subjects resorting to their handset while gawking at the TV. That's resulted in a mediocre 52 percent attention level during actual programs and 37 percent during ads. In other words, two thirds of the time, commercials are being ignored and smartphones are helping people with that heinous behavior.

Ironically, fast-forwarding adverts using a DVR garnered attention levels that were 12 percent higher, mostly because people were trying to make sure they didn't skip too far ahead.

YAHOO BUYS ADVERTISING PLATFORM 5TO1 FOR $28 MILLION

Yahoo has just announced that it will be acquiring advertising platform 5to1 for $28 million.

5to1 first launched in September 2009, and raised around $13 million in various rounds of funding. The startup is an online advertising alliance consisting of major media publishers. Built on a proprietary publisher-controlled platform, 5to1 offers advertisers premium inventory at mass scale.

Yahoo says that the acquisition of 5to1 will enable allow the company “to build upon its publisher partnerships and expand its premium inventory.” 5to1 works with more than 20 premium publishers. The 5to1 team will be joining Yahoo as part of the Ad Marketplaces group.

INTERNET AD REVENUE PASSES NEWSPAPERS

According to a new report from the Internet Advertising Bureau (IAB), annual revenue for Internet advertising surpassed newspaper ad revenues for the first time in 2010. The IAB said the record breaking $26 billion in ad revenue last year was up 15% from the $22.66 billion reported in 2009. Search remains the biggest category in online ads and represented 45% of all revenues during the fourth quarter of 2010, but the IAB says display/banner ads are growing the fastest. Retail outlets were the biggest spenders during 2010, followed by telecom services, banks, and auto manufacturers.

FACEBOOK GOOGLE BATTLE ROYAL CONTINUES

Late last year, Google surprised everyone by suddenly blocking Facebook from being able to import contacts from new users’ Gmail accounts.

When it happened, everyone knew that we were watching two tech giants exchange their first earth-shaking blows for the future of the web. It’s only gotten worse from there as the two colossi have poached one other’s employees and actively bid against each other for important strategic acquisitions like Twitter.

But today, things might have gotten real, as Facebook has decided to shut Google out of their social network entirely by demanding that Facebook app developers only use in-app advertising from approved vendors. Guess who isn’t approved? Google.

Well, not Google specifically, but their two major properties in Adsense and Double Click, which combine to form basically the largest advertising force on the web. If you are a Facebook app developer and your app is serving up ads from Google, you’ve got until February 28th to change your ways or you’re going to get booted.

MOZILLA OFFERS DO-NOT-TRACK TOOL

According to CNet, Mozilla, acting on a U.S. Federal Trade Commission proposal, has offered a detailed mechanism by which Firefox and other Web browsers could prevent Web pages from tracking people's online behavior for advertising purposes.
With Mozilla's do-not-track technology, network data packets from the browser would signal to a Web site that a person doesn't wished to be tracked. Then comes the tricky part: getting Web site operators to cooperate.
Alex Fowler, Mozilla's global privacy and public policy leader, said that with the mechanism, the browser would alert a Web site during basic communications that use the Web's Hypertext Transfer Protocol (HTTP). He also acknowledged that getting Web sites to cooperate is a crucial difficulty in getting the system to work:

As the first of many steps, we are proposing a feature that allows users to set a browser preference that will broadcast their desire to opt-out of third party, advertising-based tracking by transmitting a Do Not Track HTTP header with every click or page view in Firefox. When the feature is enabled and users turn it on, Web sites will be told by Firefox that a user would like to opt-out of OBA [online behavioral advertising]. We believe the header-based approach has the potential to be better for the Web in the long run because it is a clearer and more universal opt-out mechanism than cookies or blacklists...
The advantages to the header technique are that it is less complex and simple to locate and use, it is more persistent than cookie-based solutions, and it doesn't rely on user's finding and loading lists of ad networks and advertisers to work...
The challenge with adding this to the header is that it requires both browsers and sites to implement it to be fully effective. Mozilla recognizes the chicken and egg problem and we are taking the step of proposing that this feature be considered for upcoming releases of Firefox.

Mozilla doesn't appear to be acting alone. Today, "Google is expected to announced a privacy tool called 'Keep My Opt-Outs' that enables users to permanently opt out of ad -targeting from dozens of companies," The Wall Street Journal reported yesterday, citing an unnamed source.

FCC GETTING POWER TO TURN DOWN COMMERCIALS

A new law aimed at keeping TV commercials at sane volumes is now headed to President Obama’s desk. The bill is called the Commercial Advertisement Loudness Mitigation (CALM) Act, and was first proposed by Californian representative Anna Eshoo. Once signed into law, the bill will require commercials to be at the same decibel levels as the programs in which they are embedded. If they aren’t, the FCC will have a mandate allowing them to regulate and enforce volume limits on commercials.

The issue of overly loud television commercials isn’t new, although it does seem to have become a more noticeable practice lately. When submitting her bill, Representative Eshoo noted that the FCC has had complaints about overly loud commercials since the 1960s, and the issue has actually been the number one consumer complaint about television in 21 out of the last 25 FCC quarterly reports.

“Consumers have been asking for a solution to this problem for decades, and today they finally have it,” Eshoo said in a statement. “Consumers will no longer have to experience being blasted at—it’s a simple fix to a huge nuisance.”

Of course, don’t expect any of this to happen right away: the commercial industry has been given a whole year to bring their practices in line with the FCC’s expectations. For the next twelve months at least, expect commercials to be as loud and obnoxious as they’ve ever been. [Geek]

MICROSOFT EXEC CAUGHT IN PRIVACY FLAP AROUND KINECT

Microsoft's Dennis Durkin voiced an interesting idea at an investment summit last week -- the idea that the company's Kinect camera might pass data to advertisers about the way you look, play and speak. "We can cater what content gets presented to you based on who you are," he told investors, suggesting that the Kinect offered business opportunities that weren't possible "in a controller-based world."

And over time that will help us be more targeted about what content choices we present, what advertising we present, how we get better feedback. And data about how many people are in a room when an advertisement is shown, how many people are in a room when a game is being played, how are those people engaged with the game? How are they engaged with a sporting event? Are they standing up? Are they excited? Are they wearing Seahawks jerseys?

Needless to say, sharing this level of photographic detail with advertisers presents some major privacy concerns -- though it's nothing we haven't heard before -- but moreover it's explicitly against the privacy policy Microsoft presents Kinect users. "Third party partners use aggregated data to deliver Kinect experiences (games or applications), to understand how customers use their Kinect experiences, and to improve performance or even to help plan new experiences," the Kinect Privacy and Online Safety FAQ reads, but also "They are not permitted to use the information for marketing purposes such as selling you games or services, or for personalizing advertising" (bolding ours).

In an email to the Wall Street Journal, Microsoft flatly denied that the Kinect would do anything of the sort, whether via third-party partners or otherwise. "Xbox 360 and Xbox LIVE do not use any information captured by Kinect for advertising targeting purposes," representatives wrote. Honestly, some of us at Engadget still think targeted advertising is kind of neat, but we know how seriously you take this stuff. [Engadget]

IS FACEBOOK OUTING GAY USERS?

Researchers from Microsoft and Germany's Max Planck Institute wanted to see if Facebook targeted ads based on sexuality, so they created six fake profiles: two straight men, two straight women, a gay man and a lesbian. They found that the ads displayed on the gay man's profile differed substantially from those on the straight one. This isn't surprising, since a gay bar doesn't want to place its ads on the profiles of straight men. But many ads targeted exclusively to gay men had nothing to do with, and made no mention of, their sexuality—for example, one ad hawked a Florida nursing school. (Half of ads targeted to gay men didn't mention the word "gay" in the text.)

The paper explains why this is a concern:
The danger with such ads, unlike the gay bar ad where the target demographic is blatantly obvious, is that the user reading the ad text would have no idea that by clicking it he would reveal to the advertiser both his sexual-preference and a unique identifier (cookie, IP address, or email address if he signs up on the advertiser's site).

Cookies and IP addresses aside, let's say you click on that ad for the nursing school that targeted its advertising only to gay men. You fill out an application and mention that you saw their ad on Facebook. The school now knows you're a man who is interested in men, even if you've hidden your sexual preference using Facebook's privacy settings.

Of course, if you're comfortable enough to put it on your Facebook profile, you're probably OK with some people knowing you're gay. But whereas Facebook's privacy settings allow you to choose who can see your sexual preference, you have no control over what information Facebook uses to target advertising. Facebook's privacy policy states that it can even use "information you may have decided not to show other users (such as your birth year or other sensitive personal information or preferences) to select the appropriate audience for... advertisements." Anything you put on your profile is fair game.

Facebook's company line is that it doesn't shares your personal information with advertisers, and the only information it uses to target ads is anonymous. But coming on the heels of revelations that Facebook leaked user information to advertisers through third-party apps, this latest snafu underscores how nearly impossible it is for Facebook to both profit from your personal information and to guarantee it will never be shared without your permission. [Slight Paranoia]

MICROSOFT CLOSES ITS IN-GAME ADVERTISING DIVISION MASSIVE

Microsoft has shuttered its in-game advertising division Massive.  Massive was responsible for selling in-game advertising on its popular Xbox platform.  This however relied on the cooperation of mostly outside gaming companies who were reluctant to give up any profits by relying on an outside source and it goes both ways.

According to a report by Media Week, the company has been in trouble for some time. The problem is easy to understand: Microsoft would prefer to advertise on Xbox Live, where it doesn’t have to split the profits with publishers, than in-game. The same is true for publishers: EA recently pulled its business from Massive in order to sell their own in-game ads.

In-game advertising isn't going away though or even be reduced.  On the contrary, there will probably be an increase in this medium for advertising.  With the rising costs of producing games, publishers are looking for any way to make a little extra profit. [Geek]