Microsoft's MSN Platform Drive

Investors may typically ignore Microsoft's(MSFT) MSN division, but a recent flurry of news about the relatively small Internet business suggests its growing importance to the software giant's future.

"MSN is becoming its own development platform for providing services that will accentuate the value of other Microsoft products and platforms," says Joe Wilcox, a senior analyst with JupiterResearch who follows Microsoft.

The oft-cited example is Microsoft's use of MSN to deliver updates and patches to its Windows operating system instead of spending years developing a massive overhaul, as is currently the case.

"Right now, Windows is on a slower development cycle, whereas MSN is almost like a machine gun," Wilcox says. "MSN is a way to get some of these tactical technologies quicker to the consumer."

Microsoft's MSN unit has shifted into a higher gear as Google(GOOG) has encroached more on Microsoft's turf, most notably with a desktop search product.

Largely in response to Google's new desktop search program, Microsoft unveiled a competing product late last year, far earlier than planned.

Last year, Microsoft also launched its own algorithm-based Internet search engine, which replaced the Yahoo!(YHOO) technology formerly used on MSN.

System of Survival

Monday's launch of adCenter, MSN's own paid-search advertising platform, in France and Singapore precedes testing of a U.S. version in September. That platform will eventually replace the rival system from Yahoo! used by MSN, and compete against Google's.

The MSN system offers at least one advantage that advertisers may salivate over -- the ability to target ads based on such demographics as gender and household income, says Charlene Li, who covers media and marketing at researcher Forrester.

"The others don't have that capability at this point," she says.

Beyond just talking about boosting ad revenue, Microsoft also is touting the new platform as a way to drive sales of other Microsoft products.