Commentary

Observers See Win-Win In AOL and Microsoft Display Ad Biz, Bing Agreement

Microsoft announced yesterday that its Bing search engine will power search and search advertising across all AOL sites under a 10-year agreement and that AOL will sell all its display advertising, including mobile and video, across nine markets. Observers generally hailed the deals as a good — and necessary — moves for both companies.

“For years Microsoft tried to compete with Google by heavily investing in advertising technology, points outUSA Today’s Jessica Guynn. “In a memo to employees last week Microsoft CEO Satya Nadella said the company would have to make some ‘tough choices’ as it focuses on seizing ‘new growth.’”

“Display advertising is a tough business for [Microsoft]. Search is more lucrative," Jackdaw Research’s Jan Dawson tells the AP’s Brandon Bailey. Display ad revenue fell to about $250 million in the last quarter — about 15% of all Microsoft ad revenue, according to Dawson.

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But display “is central to AOL, which will gain access to Microsoft’s youngest, most sought-after users,” points out Dino Grandoni in the New York Times. “The two companies will split money made from ads sold on each other’s products, according a revenue-sharing arrangement, the terms of which have not been disclosed. The deal will last 10 years, the companies said.”

Microsoft’s 1,200 advertising employees will be offered jobs at AOL.

“[Microsoft] is hyper-focused on three areas: personal computing, cloud computing, and business productivity. The rest can go,” reads the subhed to Robert Hackett’s story for Fortune.

“For AOL and its new parent Verizon Communications Inc. — which recently completed a $4.4 billion acquisition of the company — the Microsoft partnership will give it a lot more ad inventory to work with as it tries to become a bigger force in the digital ad industry,” write Mike Shields and Shira Ovide for the Wall Street Journal.

“I can go to market now with a pretty comprehensive scale play. We now consider ourselves to be a must-buy,” AOL executive VP and president Bob Lord tells Shields and Ovide.

“By introducing one selling motion across AOL’s world class portfolio of sites, such as Huffington Post, Engadget, Adap.tv and TechCrunch and Microsoft’s much-loved consumer services, including MSN, Xbox, Outlook.com, and Skype, we are uniquely positioned to deliver more scale of premium inventory and target audiences across display, video and mobile,” Rik van der Kooi, Microsoft corporate VP of advertising and consumer monetization, and Frank Holland, Microsoft corporate VP of A&O, wrote in a joint blog post.

“Our advertising customers will have one consistent experience as we transition our sales and trade marketing employees in these nine markets to AOL, subject to compliance with local law and employee consultation obligations.” 

Former CEO Steve Ballmer “drove Microsoft’s push into display advertising, running on a belief that it was the only way to combat Google,” writes Duncan Riley for SiliconANGLE. In 2007, Microsoft “famously” bought aQuantive for $6.3 billion; it wrote it off for $6.2 billion in 2012.

“The short version is Microsoft royally screwed up, and this announcement closes the door on the last chapter of this sordid failure,” Riley writes.

Microsoft also announced yesterday that AppNexus would be Bing’s exclusive programmatic technology and sales partner in 10 European markets.

 “This expanded partnership shows Microsoft’s heightening efforts towards growing programmatic access to advertisers in its European markets,” writes Alex Wilhelm for TechCrunch. “It noted in a blog post that it’s seen more than 50% of business in its Nordic countries turn programmatic, something that’s allowing it to take this larger step forward today.”

Finally, Microsoft announced that it has sold its map-generating technology to Uber. “It is believed the firm will use the technology as part of its plans to develop a self driving car,” writes Mark Prigg for the DailyMail.com.

Uber already uses a combination of map services from Google, Apple and China's Baidu and a source tells Reuters’ Bill Rigby that it will continue to do so.

“Although Microsoft will no longer collect mapping imagery itself, Microsoft said it will continue to work with imagery providers for underlying data on its own maps,” Rigby reports. “Microsoft already gets much of its map data from Finland's Nokia.”

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