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Kinect's ad potential could be in augmented reality

Kinect's motion tracking prowess can be seen in its initial batch of games, but how will Microsoft use it in advertising?

Microsoft's Kinectimals may be a precursor to the future of Microsoft's advertising on the Xbox 360.
Microsoft's Kinectimals may be a precursor to the future of Microsoft's advertising on the Xbox 360. GameSpot/CBS Interactive

SAN FRANCISCO--Kinect is already proving to be a hot seller for Microsoft, but some of the real revenue opportunities could lay in ads that make use of its cameras.

Speaking to a crowd as part of a panel discussion at the Web 2.0 Summit here, Yusuf Mehdi, who is Microsoft's senior vice president of Online Audience Business, said that Microsoft's gaming peripheral could one day end up offering Kinect owners a more tangible experience at trying out products right in their living rooms (emphasis mine):

"The amazing thing is, you can use your hand to manipulate. And there's a little game product that my daughter was playing with this tiger where you can effectively pet the tiger. And you can imagine that that's an open IP platform. And you can imagine that as people are going around, they can look at a product, and you can imagine they can actually pick it up and take a look at it.

And what would you pay to have someone pick up and sort of hold your brand, and look at it, and know--oh, this person--they were actually looking at it, as opposed to on the other aisle looking at the other product? And so the number of different experiences that will open up platforms is going to be so rich--and I think John [Hayes] said that, is that you just have to kind of steal yourself from the fact there will be a lot of opportunities and that you just have to pick and choose which ones deliver value."

Mehdi's possible future use for Kinect, which cannot currently be found on the console, comes less than a week after Microsoft VP Dennis Durkin suggested to audience members at BMO Capital Markets' Digital Entertainment Conference that the company could use the Kinect to serve up different ads based on things like who was using the console or how many people were in the room. Microsoft was quick to issue a statement that such a system was not currently in place but did not deny that it might come at a later date.

Kinect's true advertising prowess and Microsoft's plans for it in that capacity are sure to unfold more extensively as the peripheral ages. As it stands, the company is only selling one third-party ad spot on the Kinect Hub--a specialized version of the Xbox 360 dashboard, which is already speckled with advertising--including ones with motion and sound, which were introduced as part of the pre-Kinect system software overhaul. Building more interactive experiences into that spot could certainly demand bigger ad dollars, especially with detailed information on the person who is using it, as Mehdi had suggested.

Besides talking about the future possibilities of Kinect, Mehdi also talked Bing--specifically some of the things the company does to test and take the product forward. Part of that includes running what Mehdi says are around 100 different versions of the search engine at any given time. Each one has slight variations on things like on-page marketing, keywords, and color. The company then sees the effects of those tests in real time and can make decisions about updates based on the data.

One thing Mehdi says the company still spends a large amount of time on, and what it continues to build out, is how people accomplish tasks. Mehdi cited a situation like trying to look up flights and going to three of four different carriers being made simpler by adding some of those destination functionalities inside of Bing's product. To take that one step further, Mehdi said that same kind of problem is happening with mobile phone apps, so to get beyond that part of figuring out which app is the best, Mehdi envisions Bing delivering that basic function instead.

"Even today, the little apps that we talk about become a problem when you have so many of them," Mehdi said. "If you want to plan a night out, the question is do I install and run Urbanspoon or Yelp or Opentable, which of these do I pick? They're all good services. It would be so much easier if I could say 'hey book this table,' or 'I want to plan a night out, what are my options?' and have the options come to bare."

You can catch a replay the whole panel, which also includes Google's Nikesh Arora and American Express' John Hayes, below:

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