Martin KihnAdExchanger Contributor
This text relies on interviews with individuals. It was impressed by Microsoft’s supposedly shocking 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. But it surely 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 Venture 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 high of key phrases for search. It was our differentiator – but it surely wasn’t sufficient.
Eric Picard (director, advert tech technique, Microsoft): Microsoft was centered on search, however Invoice Gates acknowledged it was greater – that advertisements could possibly 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 mainly invented RTB.
Brian Burdick (principal group program supervisor, adCenter): In 2005, a pair folks on my workforce and I wrote a proposal for an On-line Listings Trade. … 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 sooner or later that if the income per impression between the contextual and premium programs was materialized in actual time, any exterior third get together might additionally take part.
Nahum: The perception of Brian’s paper was mainly that what advert networks want is the Person ID – like a cookie, IP header information, and a URL that corresponds to the context and site of the advert. If we might move 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, a number of different groups needed to piggyback on the concept, and our ask was for a whole bunch of engineers. It didn’t get authorised.
Microsoft additionally took a take a look at Proper Media, a pioneering alternate that allowed advert networks to bid on each other’s stock. That assembly didn’t go so properly.
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 workforce, we had been f*ing terrified. We understood the worth of DoubleClick and what it will 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 scenario 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 received?”
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 alternate 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 shortly. It was at an Advert:Tech [event] … Eric Picard and Jed Nahum got here by our sales space and requested every kind of attention-grabbing questions.
Picard: We walked up and began chatting. We talked about what they’d constructed – it was attention-grabbing. Jed, [Microsoft GM] Joe Doran, Invoice, Jeff and I had a elaborate dinner and received alongside properly. We had been kindred spirits.
Jeff Inexperienced (COO, AdECN): Everybody needed to see Microsoft do properly. 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 realize, our advert server [Atlas] is healthier. Let’s mix it with Microsoft tech and construct the world’s largest 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 command of technique for Microsoft. … They ultimately got here round to the alternate mannequin, however not at first. There was resistance to the alternate, 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 finished it, Microsoft could be AdX.
Urschel: After the acquisition, on the Microsoft facet there have been some good individuals who noticed a imaginative and prescient of an even bigger alternate, however they had been primarily drowned out. The money on the time was flowing from the aQuantive enterprise, so I don’t suppose the alternate enterprise ever received a severe look and didn’t get the assets.
Burdick: I went right down to be CTO of AdECN. … We constructed the primary real-time bid alternate. However between the aQuantive folks and our VP, they’d not allow us to go exterior [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 grew to become an SSP and alternate.
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 alternate platform. However that will solely work when you put the entire heft of Microsoft behind it – all MSN stock – [and] make everybody purchase by us. I spent a number of time in Bellevue and received a thoughts meld [for] how we might 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 alternate.”
O’Kelley: We made a deal the place [Microsoft] gave us stock they usually received one-third of the corporate. … Unique stock from one of many high 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 finished, 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 making a living. My workforce launched 35 markets internationally. We bought 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 would like us to close MSN down, divest all of the non-search advert enterprise [and] the alternate and double down on paid search.” In the end, the workforce satisfied him MSN was too crucial – 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 supply instruments for Microsoft’s internet marketing 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 the whole lot. There was stress there. [AOL CEO] Tim Armstrong and I might 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 might we probably 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 remainder. The deal was good for everybody. We made Microsoft a whole bunch of thousands and thousands. 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 a number of transferring 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 a number of change administration taking place. It allowed Microsoft to not should help a show advert gross sales workforce.
O’Kelley: There have been so lots of these moments. That was fixed. Google was promoting towards us. AOL was promoting towards us. I used each little bit of leverage to maintain from shedding our largest consumer.
Jacobs: Whereas not core to the deal, we’d have favored 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 might have purchased a number of issues, they usually purchased Xandr. … I feel Xandr goes to be nice with Microsoft.
John Cosley (senior director, model advertising and marketing, Microsoft Promoting): We now have 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 answer, 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 blended 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 just a little bittersweet that they find yourself there now. I might have needed to work at Microsoft. … LinkedIn is a big asset. Activision is massive. Home windows is free now. There’s search, gaming – wonderful advert belongings. It doesn’t appear loopy that they could possibly be profitable within the advert tech enterprise.
To be continued …
