Microsoft sees Google's $500m, raises $500m

Microsoft Corp will spend over $1bn on R&D just in its MSN unit, for the fiscal year starting in July, chief executive Steve Ballmer told an audience of would-be advertising customers.

The money, part of the surprise spending package that recently gave Microsoft's share price its biggest single-day drop in five years, comes as the company struggles to catch up to Yahoo Inc and Google Inc in the search and online advertising market.

Ballmer and MSN chief Yusuf Mehdi introduced adCenter, Microsoft's answer to Google AdWords and Yahoo's Publisher Network, gave some hints at what features are coming up in the near future, and promised to put its money where its mouth is.

"Our R&D spend just in our online MSN area has gone from a $500 million in our fiscal year '05, to a projected $1.1 billion in our fiscal year '07," Ballmer said. "We will invest as much in this online opportunity in R&D as any of the other big players in the market."

Last year, Yahoo invested about $547m in product development and Google invested a more modest $484m in R&D, according to those companies' financial reports.

Microsoft's total investment in R&D, across all its business units, in the company's fiscal 2007, will be $6.2bn, Ballmer said. Unlike Yahoo and Google, Microsoft has obvious cross-pollination advantages due to the breadth of its product catalog.

"We have told our R&D folks that our number one priority, number one priority is software as a service," Ballmer said. adCenter is one such service.

Mehdi demonstrated the features of the service, currently restricted to search-based advertising, and previewed context-based advertising features that will compete with AdSense and YPN. He said it will differentiate itself in two key ways. [CBR Online]

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US says world safer, despite 11,000 attacks in '05

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