Microsoft and AOL Announce Advertising Partnership
By Rob Norman, Mindshare
On June 28th Microsoft and AOL announced a partnership via which Microsoft would exit the display advertising business and AOL would handle the aggregated ad sales businesses. The same announcement featured a 10 year agreement for Bing to become the default search engine across all AOL properties.
This deal brings together Microsoft properties MSN, Skype, Xbox and outlook.com with AOL’s Huffington Post, aol.com, Adap.tv, TechCrunch and Engadget.
The markets concerned are USA, UK, France, Germany, Spain, Japan, Italy and Brazil. This represents, in our estimation, close to 70% of Microsoft’s advertising revenue. In other markets Microsoft inventory is likely to be sold entirely programmatically via a separate deal with AppNexus (in which WPP is a minority shareholder).
What does it mean?
The acquisition of AOL by Verizon and the announcement of the Microsoft deal are potentially transformative for AOL. They now have significant volume in both display and video and the ability to sell both programmatically. In this sense the deal is somewhat significant for GroupM and our clients, but ultimately does not represent a significant change in either the volume or quantity of media supply or quality. Further, there is no obvious coherence between the combined assets and there seems to be no special focus on mobile, the fastest growing consumption state.
For Microsoft, the deal tidies up an area of long term corporate discomfort and maintains a revenue stream – believed to be about 25% of sales – and wider distribution of Bing and its Cortana voice assistant. The latter requires a reassessment of search budgets between Google and Bing powered platforms.
Competitively, we see limited short term impact on Facebook and Google but further challenges to Yahoo which, like Microsoft and AOL, have struggled mightily in recent years. One factor, as yet unknown, is what the new enterprise will be able to do to challenge and compete with others in respect of user and device level targeting. All of Outlook.com, Xbox and Skype have significant potential in this area and subject to privacy permission and the ability to connect these identities with Bing search data this move may prove more significant than it does today.
AOL and Microsoft are long term commercial partners of GroupM and its global agencies and we expect even stronger relationships in the future.