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Microsoft Tests Deals Ads to Replace Hotmail Banner Ads

Microsoft Tests new Deals Ads for HotmailMicrosoft in an effort to make the ads look better in its webmail service Hotmail replacing conventional display ads with “ads for Deals,” including Bing Deals and MSN Offers.

Microsoft’s Director for the Windows and Windows Live Business Group, Dharmesh Mehta, believes users will prefer the new ads, as they will be “less distracting” and less “creepy” for users.

However, not all Hotmail users will see the new ads immediately, as Microsoft is currently testing consumer response to deals ads vs. traditional email display ads in selected cities.

Mehta is interested in delivering a “less distracting ad” to users, and admits that Microsoft, along other companies that offer web-based email like Yahoo and Google, make over $1 billions a year via banner ads. However, even he admits that some of the ads can be inappropriate or even “creepy.”

Switching to a new style of ad banners might result in a reduction of revenues from Hotmail but Mehta says that Microsoft isn’t concerned about that, saying, “We’re focused on making a great product.”

Mehta said that, based on “early qualitative feedback” Microsoft has received, he is confident people will prefer the new deal ads. He added that there would likely be “a lot of refinement” as the new units roll out.

In a blog post Greg Sterling describe the new deals ads stating:

“The new deals ads will be initially targeted by country, language, age and gender. However Microsoft might allow users to select categories of interest later on.

I asked Mehta about the deal sources Microsoft is using. He said that some were sourced by Microsoft directly and some are aggregated from partners. The business models and the way Microsoft gets paid also probably vary accordingly. The company said it will be testing out different models and approaches.

Microsoft now has several distribution points for deals, including Bing Deals and MSN Offers in addition to the new email deals ads.”

The following are examples of an actual display unit in Hotmail (left) vs. a screen capture of the new deals unit (right):

Hotmail conventional display ads vs. new deals ads

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