It looks like Microsoft has decided what its next big bet in the gigantic company will be. Satya Nadella’s company wants to double its advertising revenue and that would take them up to 20 billion in revenue. If Microsoft manages to achieve this goal, it would become the sixth largest digital advertising provider in the world, overtaking Tencent, according to estimates. Rob Wilk, head of Microsoft’s advertising division, said: “We think we deserve our moment in the sun, and we get it”.
Advertising at Microsoft: from sale to giant
This could be an indication that the company is in a better position compared to 2015, when Wilk was considering whether or not to join the company. At the time, Microsoft had just sold its Atlas ad server to Facebook (now Meta) and outsourced its display advertising business to AOL. This made Wilk think that the company was not ready to fully enter the advertising business.
Flash forward to recent times, Wilk now leads the advertising division, which has improved remarkably, especially since the acquisition of AT&T’s advertising unit, Xandr, which was closely followed by its partnership with Microsoft. , which revolved around a Microsoft-backed level of advertising support. .
Matt Prohaska, advertising consultant, points out that Microsoft could eventually become a global advertising player. “the size of the big four”. This is so despite the fact that it is currently facing tough economic times and, at the same time, fierce competition from companies like TikTok and Apple.
What would it take for Microsoft to achieve this goal? Bing search, Xbox, MSN and hundreds of other websites are among the Microsoft advertising properties that use Xandr to sell digital advertisements. According to ad buyers, Microsoft needs to consolidate all of its properties into a single point of contact which, in turn, makes it easy for them to access them.
Furthermore, they added that Microsoft needs to differentiate itself from competitors, especially those that interact with similar properties but have “more mature advertising companies” like google. Wilk countered, however, saying the company was partner-focused over Google.
Microsoft’s smart partnership with Netflix
However, ad industry watchers have indicated that Microsoft’s involvement with Netflix has given it an edge and is a step in the right direction in terms of differentiation. Netflix began rolling out its new tier of ad support in November, which now allows advertisers to buy ads through Xandr. This indicates that Microsoft will get a reduction in reseller fees. Tom Triscari, programmatic economist at Lemonade Projects, added that “It won’t take much for Netflix to generate $10 billion in ad sales. The right offer is rare and highly valued.
There are doubts about the sustainability of this fact and whether Netflix will maintain the partnership with Microsoft in the long term. A credible source familiar with the partnership said it was only short-lived. Netflix’s hiring of advertising executives Jeremi Gorman and Peter Naylor could be an indication that Netflix may be cutting ties with Microsoft in the long run. Wilk declined to comment on the longevity of the contract, saying only that “It’s not 10 years, but more than two. »
Activision-Blizzard, another door to advertising
Another avenue ad buyers think Microsoft could use to achieve this would be games. Even though the deal with Activision Blizzard is still ongoing, in-game advertising could launch the game. Especially if those ads can only be purchased through Xandr.
It seems that Microsoft does not want to get into it and prefers to take some time and assess the situation to avoid any reactions that may arise from players. “We’ll do what we normally do, which is we won’t be the fastest, but we’ll be the most thoughtful”Wilk said. It looks like we’ll likely see Microsoft go down this route when it finds an acceptable way to integrate ads into games, even though it already sells Xbox home screen ads.