• by Laurie Sullivan  @lauriesullivan, February 17, 2023

Brands working with Microsoft will have an opportunity to connect advertising to responses from the chat feature in Bing and Edge, Divya Kumar, global head of marketing for search and AI at Microsoft, told Search & Performance Marketing Daily at a small event late Thursday.

Kumar began working on the Bing and Edge chat project with a marketing focus in fall 2022, but the engineering team has been working on the technology for years. 

Bing Search has struggled for years to compete with Google Search, which holds the majority of the search market, but some marketers believe the new technology will put the two companies on a more competitive field for marketing and advertising dollars.

“We’re optimistic,” Kumar said. “That’s why the team wanted to introduce it to the world what we’ve been working on. We want to take it to the general market and hope it will bring more value.”

The chat feature in Bing and Edge is based on artificial intelligence (AI) and large language modeling (LLM) software, built in part by OpenAI.

The hope is that the company will see higher engagement and increased advertising revenue.

In a presentation earlier this month, company executives said ads will become more personalized, and while the user may see fewer ads, they will be of higher value to advertisers.

Microsoft on Thursday afternoon hosted an event at its Los Angeles experience center in Culver City, California. About 50 creators and a handful of journalists attended. The star of the event was its chat technology project codenamed Sydney, built into its search engine Bing and Edge browser.

There have been a lot of positive reviews on the AI technology, but when asked about the responses from negative experiences, Kumar said “that this is such a nascent technology, and we knew going in the incredible potential.”

Kumar said Microsoft knew it would gain positive and negative feedback from early adopters interested in testing the chat feature. She said the company welcomes positive and negative feedback, and as soon as executives see it, a team within Microsoft addresses it.

Users can go to Chat tab in Bing to use the technology, but there is also a feature in the Edge browser that pulls in chat, summary and content experiences as part of the sidebar. In a travel search, for example, it pulls together and compares prices, flights, destinations, and entertainment in one query.  

Other ways to connect advertising could come soon, but Kumar said it’s too early to share details.

The queried results are annotated, bringing in ranking, optimization and additional advertising opportunities, but Kumar did not share information on additional advertising features. Instead, she pointed to an earlier presentation by Amy Hood, Microsoft CFO. 

As people continue to spend more time online, advertising dollars are expected to follow. The overall digital advertising market -- which includes spend from search, social, display and video, was more than half a trillion dollars in 2022 -- growing in the high teens and highly profitable, according Hood.

“Approximately 40% of that market was in search advertising, and we expect this opportunity to continue to grow,” she said in a presentation on the chat technology earlier this month.

During that same presentation, Philippe Ockenden, CFO of Windows, devices, and search business at Microsoft, said the company's two largest digital advertising businesses are search and news advertising and LinkedIn Marketing Solutions.

During the past 12 months, Microsoft’s total advertising revenue was nearly $18 billion, and the businesses remained profitable.

In a search business update, Ockenden shared that the new AI-powered search and browser experience will expand growth opportunities.

Microsoft has more than 1.4 billion monthly active Windows devices and are seeing increased engagement up 10% versus pre-pandemic. New users, higher engagement, and increased advertising rates are estimated to fuel revenue growth.

The total addressable market is more than half a trillion dollars, and within that, approximately 40% is in search advertising. “For every one point of share gain in the search advertising market, it’s a $2 billion revenue opportunity for our advertising business,” Ockenden said.