Martin KihnAdExchanger Contributor
This text relies on interviews with contributors. It was impressed by Microsoft’s supposedly stunning choice as Netflix’s advert tech companion. However pushed by the acquisition of AT&T’s Xandr, that’s simply the newest chapter in a wide ranging journey of pivots, write-downs, partnerships and potential.
At first had been these phrases …
Invoice Gates:
The way forward for promoting is the web.
The event was the IAB Have interaction convention in London in 2005. On the time, Microsoft had MSN, an advert community and content material offers with Fox, NBC and others. However it was centered on one explicit upstart in Mountain View. Having misplaced a bid to accumulate Overture, Microsoft launched its personal search engine, initially code-named Challenge Moonshot.
Jed Nahum (director, product administration, Microsoft adCenter): Google made about two occasions what we made on every key phrase. We had this performance which enabled you to bid for age and gender on prime of key phrases for search. It was our differentiator – nevertheless it wasn’t sufficient.
Eric Picard (director, advert tech technique, Microsoft): Microsoft was centered on search, however Invoice Gates acknowledged it was larger – that advertisements might be one other MS Workplace or Home windows-sized enterprise. We checked out investments in Xbox and PC gaming, video advertisements on Microsoft TV and Media Participant and MSN Video. We checked out advertisements in Workplace. Round this time, Brian Burdick wrote a paper … that principally invented RTB.
Brian Burdick (principal group program supervisor, adCenter): In 2005, a pair folks on my staff and I wrote a proposal for an On-line Listings Change. … We had been piloting a contextual advert program that competed with [Google’s] AdSense. Microsoft had offers for content material managed by a premium show system. I spotted on a drive dwelling from work in the future that if the income per impression between the contextual and premium methods was materialized in actual time, any exterior third celebration may additionally take part.
Nahum: The perception of Brian’s paper was principally that what advert networks want is the Consumer ID – like a cookie, IP header information, and a URL that corresponds to the context and site of the advert. If we may go these three issues to advert networks, they may consider on an impression-by-impression foundation.
Burdick: Gates was super-bullish within the assembly. He had a bunch of feedback. He stated, “That is daring and impressive and one thing we should always do.” … Ultimately, quite a lot of different groups needed to piggyback on the thought, and our ask was for a whole bunch of engineers. It didn’t get accepted.
Microsoft additionally took a have a look at Proper Media, a pioneering change that allowed advert networks to bid on each other’s stock. That assembly didn’t go so nicely.
Brian O’Kelley (CTO, Proper Media): We went in to Microsoft to speak with a Technical Fellow. He put us by the ringer. I bear in mind he requested us, “What number of man-years did it take you to construct the platform?” I stated, “You’re lacking the purpose. It’s liquidity you’re shopping for as a lot as know-how.” Again then, Microsoft had swagger. I got here away from Redmond feeling they had been boastful.
Proper Media was later acquired by Yahoo, and Microsoft set its sights on one other goal, then owned by non-public fairness agency Hellman & Friedman.
Nahum: Hellman & Friedman pitched DoubleClick to us. On my staff, we had been f*ing terrified. We understood the worth of DoubleClick and what it could imply if it went to Google. After a low bid from Microsoft, Google and DoubleClick went right into a quiet interval. … We had been very depressed. … Steve [Ballmer] quietly bid $3 billion, however Google threw in one other $100 million to close down the dalliance. We had been left feeling burned. We had been in a state of affairs the place we needed to get a competitor to DoubleClick.
Picard: We left that assembly the place we misplaced DoubleClick, and per week later Steve [Ballmer] had me and some others within the room. He says, “That is like that scene in Animal Home the place Belushi rallies the troops.” And he says, “Okay, we misplaced DoubleClick – what else we acquired?”
Microsoft ended up shopping for aQuantive – together with the company Razorfish, the DrivePM advert community and the Atlas advert server – for $6.3 billion. On the identical day, it acquired the AdECN change for, reportedly, someplace between $50 million and $75 million. Invoice Urschel and a rising star named Jeff Inexperienced ran AdECN.
Invoice Urschel (co-founder, AdECN): They purchased us and it occurred fairly rapidly. It was at an Advert:Tech [event] … Eric Picard and Jed Nahum got here by our sales space and requested all types of fascinating questions.
Picard: We walked up and began chatting. We talked about what they’d constructed – it was fascinating. Jed, [Microsoft GM] Joe Doran, Invoice, Jeff and I had a elaborate dinner and acquired alongside nicely. We had been kindred spirits.
Jeff Inexperienced (COO, AdECN): Everybody needed to see Microsoft do nicely. The AdECN technique was to get Yahoo and AOL to hitch up and create a pool of liquidity that rivaled Google. However aQuantive was saying, you already know, our advert server [Atlas] is best. Let’s mix it with Microsoft tech and construct the world’s greatest advert community.
Burdick: DrivePM was the interior advert community aQuantive ran for Microsoft, and it had greater than 40% margin. [They] put the pinnacle of technique of aQuantive in control of technique for Microsoft. … They ultimately got here round to the change mannequin, however not at first. There was resistance to the change, placing margins in danger.
Boris Mouzykantskii (founder, IPONWEB): I feel AdECN had an opportunity to check real-time bidding out there. It by no means occurred. It’s attainable, in the event that they’d carried out it, Microsoft could be AdX.
Urschel: After the acquisition, on the Microsoft aspect there have been some sensible individuals who noticed a imaginative and prescient of a much bigger change, however they had been primarily drowned out. The money on the time was flowing from the aQuantive enterprise, so I don’t assume the change enterprise ever acquired a severe look and didn’t get the sources.
Burdick: I went right down to be CTO of AdECN. … We constructed the primary real-time bid change. However between the aQuantive folks and our VP, they’d not allow us to go outdoors [Microsoft] for stock. The explanations are murky to me. They simply didn’t greenlight it.
In the meantime, Brian O’Kelley had began AppNexus, initially a cloud internet hosting platform that turned an SSP and change.
Brian O’Kelley (co-founder, AppNexus): My pitch to Microsoft was that they’ll’t struggle Google in search and show. Allow us to be the market maker, make us the dominant change platform. However that might solely work when you put the entire heft of Microsoft behind it – all MSN stock – [and] make everybody purchase by us. I spent quite a lot of time in Bellevue and acquired a thoughts meld [for] how we may beat Google. It was an extremely strategic dialog about the way forward for the web, not nearly product.
Picard: I launched Brian to [Microsoft Ads exec] Rik van der Kooi. I stated, “If we’re not going to be allowed to construct this internally, it’s not a foul factor to spend money on one other firm that’s a reputable competitor to Google’s advert change.”
O’Kelley: We made a deal the place [Microsoft] gave us stock they usually acquired one-third of the corporate. … Unique stock from one of many prime 5 publishers. Over time, we delivered. Some issues weren’t profitable, like a Home windows Telephone integration, however Microsoft was the primary totally programmatic main vendor.
Nahum: After the AppNexus deal was carried out, we branded our occasion of [as] MAX, [the Microsoft Advertising Exchange]. We couldn’t get the aQuantive guys to place stock in AdECN, however we had been in a position to put it into the waterfall after direct gross sales for AppNexus. Instantly it began earning profits. My staff launched 35 markets internationally. We offered to aggregators of demand, to DSPs, companies and buying and selling desks.
Picard: It was actually bittersweet. The day I made a decision to go away, I used to be in a gathering with Ballmer. He stated, “I need us to close MSN down, divest all of the non-search advert enterprise [and] the change and double down on paid search.” In the end, the staff satisfied him MSN was too essential – however the technique shifted from editorial to being a portal with content material from different publishers. It took about six years to totally divest the show enterprise, till 2015.
Microsoft Press Launch, July 2012: Whereas the aQuantive acquisition continues to offer instruments for Microsoft’s internet advertising efforts, the acquisition didn’t speed up development to the diploma anticipated, contributing to the write-down [of $6.2 billion].
AdExchanger, June 29, 2015: AOL to Take up Microsoft’s Show Advert Enterprise Together with 1,200 Workers, Bing to Energy all AOL Search
O’Kelley: AOL’s pitch to Microsoft was [to] allow us to rep every thing. There was pressure there. [AOL CEO] Tim Armstrong and I’d see one another on the road nook “growling.” Microsoft needed AOL to decide on Bing as its search engine. That was a $1 billion deal. We couldn’t beat that. How may we presumably win? We needed to massively overdeliver.
David Jacobs (SVP, gross sales & monetization partnerships, AOL): I’d give credit score to Tim Armstrong, who actually leaned in, and Bob Lord who pushed the deal by. It appeared like a superb factor. … It was nearly like a scale play. AOL and Huffington Publish had been related properties that had legs, however this created a chance to take model gross sales to a different stage. Header bidding was not mature but.
O’Kelley: I satisfied Microsoft to present AOL [some] main markets, together with Japan, the US and UK, and [to] give us the remaining. The deal was good for everybody. We made Microsoft a whole bunch of tens of millions. That was a $30 million income account for us. We ran with 17 [or] 18 “demand evangelists” offering a light-weight gross sales mannequin. My nightmare was AOL would drive us out of the deal.
Jacobs: It occurred at a time with quite a lot of shifting components. AOL acquired Millennial Media round then. I used to be in Dulles with some Microsoft folks when the deal was about to be signed – and that very same day the Verizon acquisition [of AOL] was introduced. … There was quite a lot of change administration occurring. It allowed Microsoft to not should help a show advert gross sales staff.
O’Kelley: There have been so a lot of these moments. That was fixed. Google was promoting in opposition to us. AOL was promoting in opposition to us. I used each little bit of leverage to maintain from shedding our greatest consumer.
Jacobs: Whereas not core to the deal, we’d have appreciated to get Microsoft stock into our SSP [from AppNexus]. Ultimately, we migrated the Microsoft show stock over to AOL’s advert server.
AppNexus was acquired by AT&T in 2018 and have become the muse for Xandr – which, in a twist of programmatic irony, was acquired by Microsoft this summer time.
Brian Lesser (CEO, Xandr): Clearly there was some worth there that we created, as a result of Microsoft may have purchased quite a lot of issues, they usually purchased Xandr. … I feel Xandr goes to be nice with Microsoft.
John Cosley (senior director, model advertising, Microsoft Promoting): We’ve got daring ambitions, together with the improvements we’ll drive with Xandr now that the deal closed – [also] continued momentum with our PromoteIQ providing, Microsoft Viewers Community resolution, our new measurement partnership with Roku – and ongoing improvements and market growth for our advertisers throughout our search and viewers community.
O’Kelley: I’ve combined emotions as a result of I needed Microsoft to be the customer the primary time round. It felt like the fitting dwelling for the corporate.
So, it’s somewhat bittersweet that they find yourself there now. I’d have needed to work at Microsoft. … LinkedIn is a big asset. Activision is large. Home windows is free now. There’s search, gaming – superb advert belongings. It doesn’t appear loopy that they might be profitable within the advert tech enterprise.
To be continued …
