Shulou(Shulou.com)11/24 Report--

On November 26, Microsoft never gave up its exploration in the field of advertising. In fact, the company has ambitious advertising plans to double its size to $20 billion in annual revenue.

Rob Wilk, head of Microsoft's advertising business, recently gave an interview about the company's strategy to achieve this goal. Microsoft recently signed an exclusive advertising sales agreement with streaming giant Netflix and is building a Xbox advertising platform.

Wilke considered joining Microsoft's advertising department as early as 2015, but doubted whether the company was really committed to advertising. Microsoft had written off almost all of its $6.3 billion acquisition of display advertising company aQuantive, sold its Atlas advertising server to Facebook and handed over its display advertising business to AOL.

Today, Wilke manages Microsoft's advertising business, with annual revenue of about $10 billion. In 2022, the unit acquired Xandr, AT&T 's advertising division, which helped it reach an ad sales agreement with Netflix. Wilke's team also had senior support, with Microsoft CEO Satya Nadella (Satya Nadella) praising the advertising department's performance during a recent earnings call.

Mr. Wilke said in an interview that Microsoft is now seeking to double the size of its advertising business, but he did not provide a timetable for when that goal might be achieved. It is estimated that if Microsoft's annual advertising revenue reaches $20 billion, it will overtake Tencent to become the world's sixth largest seller of digital advertising.

But Microsoft faces the challenge of a bleak economic outlook, which has slowed the growth of advertising giants such as Meta and Google, and it continues to face fierce competition from TikTok, Amazon and Apple. Matt Prohaska, an advertising consultant, said that despite these challenges, Microsoft could eventually become the four largest global advertising giants.

Microsoft Advertising needs to integrate all product audience data. The assets available to Microsoft's advertising department include Bing search, Xbox, MSN and hundreds of other sites that use Xandr to sell digital ads. At the same time, Microsoft has recently introduced vertical-specific advertising forms, including credit card and car ads. The company also expanded Microsoft's audience Network (Audience Network) to 66 new markets in October.

Ad buyers say Microsoft needs to introduce easier access and use audience data across the product portfolio to make it easier to buy ads. But according to a technology executive in the advertising industry, Microsoft teams rarely communicate with each other these days. In response, Wilke said he wanted to make it easier to buy advertisements for these assets, and admitted that "we have a lot of channel work to do."

Microsoft also needs to distinguish itself from competitors such as Google that have similar assets but are much more mature in advertising. Mr Wilke says Microsoft is more "partner-oriented" than Google. But for many advertising observers, the partnership with Netflix gives Microsoft a new point of difference.

Netflix launched a new ad-supported subscription service in November, and as its exclusive advertising partner, advertisers can buy ads through the Xandr demand-side platform, from which Microsoft will charge a resale fee. Although Netflix initially asked for a CPM (cost per thousand people) of more than $60, many advertising experts predict that demand from big brands will be strong over time.

"it doesn't take long for Netflix to generate $10 billion in advertising sales," said Tom Triscari, a programmatic economist at Lemonade Projects, a market research firm. "after all, high-quality advertising supply platforms are still scarce and getting more and more attention."

The test for Microsoft is how many people will actually buy ads once the hype subsides, and it is unclear whether Netflix will continue to support Microsoft's advertising business in the long run. It was previously reported that Microsoft beat competitors such as Google to win the Netflix contract because it provided a more competitive revenue guarantee.

But sources familiar with the details of the partnership said the partnership would be short-term and Netflix's hiring of Snap advertising executives Jeremi Gorman and Peter Naylor suggested it might want to take it all in at a later date.

Games may become an important advertising asset for Microsoft. Games will become another key driver of Microsoft's advertising business growth. If Microsoft succeeds in acquiring game developer Activision Blizzard, its advertising revenue will rise sharply, although the proposed $68.7 billion acquisition is facing intense regulatory scrutiny. But advertising buyers say that if in-game ads can only be purchased through Xandr, this could become a unique selling point for Microsoft.

Meanwhile, Microsoft has sold ads on the Xbox home screen and is developing a platform to bring ads to free games and Xbox cloud games.

John Lee, a former Microsoft advertising executive, said that while Microsoft's advertising sales team had made some progress in starting to sell Xbox inventory, it would not have been very successful without bundling it with the rest of Microsoft's advertising portfolio. John left Microsoft last month to join the advertising agency Clix Marketing.

Wilke said Microsoft will be cautious about placing ads that gamers think are acceptable. He added: "We will do what we usually do: we will not be the fastest, but we will be the most considerate."

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