Microsoft looks toward in-car advertising

In a conversation with Martin Thall, the General Manager of Microsoft's Automotive Business Unit, he laid out a vision for the future of infotainment systems in cars, which included connected services supported by in-car advertising. Mr. Thall suggested that five years from now, car infotainment systems will be networked and provide the latest information on local services and traffic, as just two examples. This sort of car system should offer daily relevance, so that you could have it give you the best way home from work each day. Or, you could use local search to find a particular item for sale, or a restaurant, and the car would give the best route to that location. Your preferences for the route could vary from quickest time, the most scenic, or the route that will cause the least amount of emissions and save the most gas.

But, as Mr. Thall points out in a lesson learned from OnStar, supporting the infrastructure for a connected car is expensive. As an alternative to making consumers pay a subscription fee for their connected car, the navigation screen could display ads or businesses could offer incentives for you to stop in, such as Starbucks loading a free MP3 track into your car if you stop by. While Web advertising is measured in pennies or fractions of pennies per impression, Mr. Thall says "click-through value for in-car advertising could be measured in dollars," because the driver is already out of the house and is more likely to follow through on the ad's suggestion. Although the idea of ads in cars may sound like an invasion of personal space, drivers are already very used to the concept. Drivers see advertising along the roads every day and hear it over the radio. Having ads appear on an infotainment system wouldn't be too much of a stretch, and could be the incentive to more quickly connect cars to useful services such as real-time traffic.

We gained other insights during our conversation with Mr. Thall. Microsoft's automotive efforts are rapidly gaining ground after a slow start, and the company has no major competition in this area. The Automotive Business Unit, part of Microsoft's Entertainment and Devices division, has two products: the Windows Automotive platform and the Microsoft Automotive platform, the latter including the technology behind Ford Sync. Many in-dash navigation units are built on Windows Automotive, although the interfaces are designed to completely hide that fact from the user. Ford Sync is the more recent success story. Mr. Thall's philosophy behind that technology is to keep it very cost effective and put it in mass market brands, such as current partners Ford and Fiat. In North America, Ford has an exclusive on the technology until November 2008. Mr. Thall says to expect other car makers to announce their own versions of the Microsoft Automotive platform this year, offering similar features as Ford Sync. In a tantalizing hint, he suggested that, as the technology is already in Europe and North America, Asia is the next logical region. Given the mass market push for the Microsoft Automotive platform, we will go out on a limb and predict that Toyota is the next likely partner.