• by Mark Naples , July 1, 2005

Let's say you're Microsoft CEO Steven A. Ballmer. After being part of a decade of dominance in the 1990's, you've watched Yahoo! beat you to the web portal business, then beat you at Search.

You've watched Google pass you at Search, then pass you again in building an ad platform for not just online directories, but for web publishers too.

You've watched as a truly intriguing business called behavioral targeting has made huge strides, with major players in that space reportedly in deals to link their robust user data with the Search Engines' data to provide far more precise targeting. Behavioral targeting, something of a nascent darling in interactive circles these past two years, has grown into a $500 million business across the web.

Because some behavioral targeting companies have been on the record in their dealings with the Search Engines, developing new models that could further distance these companies - Google and Yahoo! - from yours, you assign someone very high up in your organization to close this gap now.

If I were the guy assigned to do this by Mr. Ballmer I'd look at the largest player in this space first - wouldn't you? Far and away, that largest player is Claria, with more than 20 percent market share.

The guy Mr. Ballmer assigned, according to Thursday's New York Times, is Yusuf Mehdi, the senior vice president in charge of MSN and Microsoft's search business. According to The Times, in a news report reflecting seemingly unfettered access to sensitive information within Microsoft, Mr. Ballmer has instructed Mr. Mehdi to be more aggressive in closing the gap with Google, including making acquisitions.

All over our industry yesterday, people kept talking about validation for Claria's model and practices. But, it's important to keep in mind that news reports have indicated for months that Claria has been building a publisher platform that provides individualization for users. They've long since settled their legal disputes with publishers and advertisers. And their Privacy Officer, Reed Freeman, has done an amazing job at removing the spyware spotlight from the company.

The Claria technology is designed to work with publishers in ways similar to how other technology does, in terms of ad delivery. But, it is also designed to work in sync with search engines and in content delivery. Online newspapers and other kinds of publishers have begun to realize that such personalization is the grail to higher CPMs and more revenue in an inventory-strapped market. Smart publishers have been working with third parties, like Tacoda, Revenue Science, Intégrent and yes - Claria - to develop such technologies.

Companies that provide better user experiences... better search.... a better content experience... these would be pretty high-value companies, no? So, if Claria really did generate more than $100 million in revenue last year, as has been rumored, then maybe the question we should be asking is why is this offer so low?

If I were Mr. Mehdi, I could care less about Claria's adware/spyware legacy. What I would focus on is their personalization platform, which (remember) never dealt with personally identifiable information (PII) anyway. I'd get my hands on that platform and distribute it across my enormous footprint.

I'm Microsoft, after all. So, as MarketingVox's Tig Tillinghast and others have surmised, I could claim that I'm going to enter this behavioral field as I get to finally dip my toes more meaningfully in Search (sorry MSN - being third place won't do anymore) while becoming a serious enough player in the interactive ad space to even be part of the solution in terms of writing standards for adware.

This all seems pretty straightforward all of the sudden, doesn't it? Okay then, let's assume you're Mr. Medhi's counterpart at Yahoo! You work for a company that has a hand in as much as 30 percent of Claria's revenue. Are you going to stand idly by and let your rival in Redmond snatch them up without a fight?

Summer just got a lot hotter - watch this one as it develops. There is no way Microsoft is going to let its rivals beat them again in a growth market segment - and there's no way $500 million will be enough for this company.