• by Wayne Friedman , Staff Writer, July 19, 2022

For many analysts, Netflix picking Microsoft as the main TV advertising partner may seem like an out-of-the-box selection. After all, what real experience does Microsoft have in the world of TV advertising? Slim. That’s for sure.

And what about the media overall? It gets slightly better marks. Sure, it sells some ad time on Xbox, LinkedIn, and Bing.

But that’s not much -- and not in the same arena as premium, wide-scale, big TV series and movies.

What about automated/programmatic media buying and selling?

If you believe that with more live person-to-person contact, legacy TV sales operation is a real necessity, then you would be right to criticize the move.

But if you think the new automated programming world of TV/streaming advertising is most important, Microsoft -- as least directionally -- is the right move.

And that's where Microsoft's Xandr acquisition comes in -- in terms of demand-side and sell-side business. So what's their performance so far after a few years of operation? Guess you would have to talk with former WarnerMedia execs about that one.

And there is this: For all of 2020, Xandr's revenue was up 3% to $2.1 billion. I

In December 2021, WarnerMedia sold Xandr to Microsoft for $1 billion.

And by the way, WarnerMedia is in the process of laying off 1,000 advertising staff. So draw your own conclusions over that, even considering necessary synergistic savings promises to investors.

However, recognize that in the near term, linear TV is still key for marketers -- representing around 80% to 90% of all premium TV advertising buying (linear, streaming). So Microsoft then has some competitors to contend with -- the likes of Disney Advertising, NBCUniversal, and Paramount Global.

In Microsoft's favor is an expanding gaming division to help with Netflix's own effort around gaming, and nascent but growing ad sales. Much of this can be connected to the prospect of getting to the next generation of TV and/or media users.

Another positive is that Microsoft is a global company -- just like Netflix. That can be a key difference to more U.S.-centric legacy TV-based media companies. At the same time, Microsoft looks for growth, against other strong digital players.

So will Microsoft rate with Google, Facebook, or even Amazon anytime soon?

Near term, the question is whether Microsoft's Xandr can deliver top advertising dollars with high-level CPMs (cost-per-thousand viewers) compared to other major premium streaming platforms.

Mark your calendar for Spring 2023 to get an early reading. That's when TV's upfront marketplace gets going.