Microsoft Corporation’s MSFT display advertising business has a new owner — AOL.
Per a deal signed between the Redmond-based technology giant and AOL, the latter will take over sales of display, mobile and video ads on Microsoft properties like Outlook.com, MSN and Xbox gaming consoles in the U.S. and eight other markets. Financial terms of the deal were not disclosed.
On the other hand, AOL will use Microsoft’s Bing search engine replacing the Google GOOGL search engine for a period of 10 years. AOL was recently acquired by Verizon for $4.4 billion.
Why is Microsoft Parting Ways with its Display Ad Business?
Microsoft is parting ways with its Ad business, as CEO Satya Nadella is increasing focus on three prime areas: cloud platforms, personal computing, and business productivity.
According to Bloomberg, “Since becoming CEO early last year, Nadella has been streamlining the workforce, acquiring mobile and cloud software makers, and paring units not central to his strategy.”
Microsoft has endeavored to compete with Google by investing a lot in advertising technology. Last week in a memo to its employees, Nadella said the company would have to make some "tough choices" as it focuses on seizing "new growth."
According to Gerasimos Manolatos, a spokesman for AOL (as reported by Bloomberg), AOL will hire about 1,200 Microsoft workers in display ad sales, marketing and engineering.
According to Bloomberg, while AppNexus will take some Microsoft employees, the remaining employees will be offered various jobs at Microsoft
Last Word
Microsoft is stepping back from a business that has declined in importance of late.
According to figures compiled by industry analyst Jan Dawson of Jackdaw Research, revenue from display ads," had fallen to about $250 million in the last quarter, or about 15% of all Microsoft ad revenues”. "Display advertising is a tough business for them. Search is more lucrative," Dawson said.
Keeping that in mind, it’s a good thing Microsoft is letting go of its display ad business.
The company will continue to run its Bing search advertising business, which in fiscal 2014 grew 39%.
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