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Microsoft takes a giant step back as AOL takes over its ad business

Microsoft Corp. has reportedly struck a deal with AOL to take over
responsibility for sales of display, mobile and video ads on Microsoft
properties in the U.S. and eight other markets.

According to a Wall Street Journal report, all of Microsoft’s roughly
1,200 advertising employees — from engineering to sales — will be getting offer
letters to join AOL.

Microsoft Corp. has reportedly struck a deal with AOL to take over
responsibility for sales of display, mobile and video ads on Microsoft
properties in the U.S. and eight other markets.

According to a Wall Street Journal report, all of Microsoft’s roughly
1,200 advertising employees — from engineering to sales — will be getting offer
letters to join AOL.

Over the past decade, the company has invested in almost every corner of
digital advertising – from ad-serving to automated marketplaces – in an effort
to compete with Google Inc. and other big players. But many of those efforts
failed to bear fruit and Microsoft has steadily retrenched.

Under the AOL pact, Microsoft’s Bing search engine will power search
results and advertising on AOL’s properties for 10 years. Bing is displacing
Google Inc., which had long provided search technology for AOL, reports the Wall
Street Journal.

According to the report, 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.

 “I can go to market now with a
pretty comprehensive scale play. We now consider ourselves to be a must-buy,”
Bob Lord, executive vice president and president of AOL, told the Wall Street
Journal.

Microsoft Chief Executive Satya Nadella, who has been in his post for 17
months, has made clear–including in an employee memo last week–that Microsoft
needs to concentrate on technology areas where it has the biggest opportunities
for success, and make “tough choices” in fringe areas.

 Nadella’s mandate, which has led
to the company’s biggest layoffs in history, has prompted the shuttering of
projects like an initiative to create original programming for the Xbox
video-game console.

Just yesterday, we had reported that Microsoft would be selling some of
itsdigital mapping assets to Uber Technologies Inc., and executives have
publicly said they plan more cost cuts in its hardware businesses.

The company will still continue to sell search ads. The dramatic scaling
back of its ambitions has been years in the making, according to the report. Back
in 2006, then-Chief Executive Steve Ballmer declared in a famous speech that
advertisers, not software developers, were the backbone of the company. The
following year Microsoft shelled out $6.3 billion to acquire the online
advertising firm aQuantive, which was aimed at helping it compete with Google.

But then as time passed, Microsoft shut down its own automated, or
“programmatic” ad sales platform and decided instead to partner with an outside
company, the ad technology firm AppNexus. Microsoft also shuttered businesses
aimed at tackling in-game and even TV advertising. By 2012, the company took a
$6.2 billion write-down over the aQuantive deal.

 

 

 

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