• by David Goetzl , March 2, 2007

LAS VEGAS -- Not surprisingly for a tech behemoth, a top Microsoft executive said Thursday that in three years, the bulk of its nearly $1 billion in U.S. ad spending will be in the digital sphere. "We're actually pretty confident that by 2010, the majority of our media mix will shift to digital," said Mich Mathews, senior vice president of the company's central marketing group, at the AAAAs media conference.

A massive collection of dollars could be in the balance. Microsoft spent $945 million in just the U.S. in 2005, according to Advertising Age.

In what Mathews termed the "Era of Customer Participation," she said the company is simply following its consumers, who are increasingly migrating to the Web and an array of nontraditional outlets for information and entertainment. Plus, Microsoft is attracted to the potentially helpful accountability data that digital marketing can provide.

Despite Mathews' commitment to a possible shift of more than $500 million in U.S. ad spending to the digital realm, she said TV and print will continue to play tactical roles.

However, in preparation for what would be a mass repositioning of ad dollars, Microsoft has allocated 3% of its current ad budget for a multi-continent experiment to test a series of emerging media, Mathews said. Mobile and IPTV are being gauged in Europe, interactive and out-of-home in Asia, and the effectiveness of satellite radio and RSS feeds in the U.S.

The test involves a slew of countries and regions, because digital consumption and bandwidth differ around the globe. Such distinctions can affect the insights gained.

Like many marketing leaders--including P&G marketing chief Jim Stengel who spoke before her--Mathews hammered home the message that the days of pushing ads and announcements at consumers are behind us. Instead, there is a need for a push strategy centered on involving consumers in a brand.

That mantra has become so critical that it's taken into consideration when creating TV spots and other video ads, particularly for the company's Xbox 360. Providing content that consumers can take ownership of via mashups and other tinkering is key. "It's now a factor in the creative process," Mathews said.

For example, an Xbox spot for the "Gears of War" game featured creative from agency McCann-Erickson that an amateur mish-mashed into his own version, complete with the "Stayin' Alive" track from the Bee Gees. It generated loads of streams on YouTube.

As for TV and print, she cited a current example of Microsoft serving as a title sponsor for an on-air promo for a coming episode of NBC hit "Heroes"--essentially an ad within an ad--rather than the episode itself. The voiceover said the promo was "brought to you by WindowsVista.com" and the following scenes appeared within a mini-screen with the Windows Vista logo on the bottom. "These blends of digital and traditional will continue to be important," she said.

One area she cited where TV would lead: A need to advertise in sportscasts to reach key business decision-makers that control loads of purchasing power. (Showing at least some commitment to TV, Microsoft is a member of the steering committee planning an eBay-powered online buying and selling market for national cable time.)

But other target audiences, such as IT experts, young Xbox-ers and even "elites" (top government and education leaders who also make decisions on purchasing hardware and software), are going Web-ward or migrating to podcasts and blogs. And Mathews said Microsoft will chase them.

Mathews said she is so committed to digital dominance--or at least its strong role in an integrated campaign--that she wants her digital marketing team in all planning sessions.