Blogs

Microsoft is planning a pilot program to test ads on Zune Social, the social-networking site connected to its Zune music software and devices. In a limited way, it will also test the concept of ads on the Zune devices themselves. The initiative is expected to be announced today at the company's advance08 advertising conference in Redmond.

It's one of the first projects to emerge from an advertising business group established inside Microsoft's Entertainment and Devices Division, working quietly behind the scenes since last fall. See this story from Tuesday's newspaper for more on that group. It's one of the ways that Microsoft is trying to expand its footprint beyond standard online display ads and Internet search ads, where the company has struggled to gain ground against Google.

Mark Kroese, the group's general manager, and Sean Alexander, its director of product planning, showed me a prototype of the Zune Social advertising concept during a demonstration in their offices. In basic terms, the pilot program will expand the concept of Zune Social profiles to include pages for artists and events, with related advertising.

The prototype involved a Zune Social page for the rapper Bun B, connected to the CMJ college music festival, with related advertising for Doritos. Under the pilot program, Zune users who befriend Bun B and other sponsored artists on Zune Social will get access to related content, such as special video segments and music playlists.

Users will also be able to synch related playlists to Zune devices, just as they would with playlists from other Zune Social users they've befriended. In the demo, the Doritos branding was visible behind the Bun B content on the Zune screen, accessible via the device's Social menu category.

Kroese was quick to acknowledge that the concept of advertising on a portable media player might raise eyebrows for people when they first hear about it. (It would probably border on sacrilege for iPod users.) But the Zune Social site is the main focus of the advertising pilot. The advertising only appears with the related content, and it's purely voluntary for users. People will be able to decide whether that sponsored content is worth seeing the ads.

In that way, Kroese cited the Zune Social pilot as an example of how the group is approaching the idea of advertising within Entertainment and Devices, which also includes the Xbox 360, Xbox Live, Microsoft Surface, and Windows Mobile software.

"We're thinking about the integrity of the user experience, and the appropriate way of doing this, where it feels like there's value exchange, as opposed to, 'Oh, this is just ads,' " he said.

Robbie Bach, president of Microsoft's Entertainment and Devices Division, is among the speakers at the advance08 conference in Redmond today. Others include movie producer James Cameron and former Disney CEO Michael Eisner. Microsoft Chairman Bill Gates speaks Wednesday, along with Satya Nadella, the executive in charge of Microsoft's search and advertising engineering initiatives.

The event is taking place against the backdrop of Microsoft's failed Yahoo acquisition bid, and its latest attempt to strike a deal with the Internet company. Whether or not the subject is addressed explicitly, it will be on the minds of the online advertisers that Microsoft is courting at the event. The timing will force Microsoft to attempt a balancing act -- trying to show that it can be relevant in online ads at the same time it's implicitly acknowledging that it needs Yahoo, the No. 2 search engine, to gain ground in a big portion of the market.

I'll be covering the conference and posting updates here.

The Zune Social advertising pilot is set to launch this summer.