What's Microsoft's Ad Strategy?

By: Carla Rover  Published: September 8, 2011

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Microsoft is playing catch-up again. The company let Google grow into a behemoth under its nose while it ignored search. The same could be happening again with the emerging ad-tech infrastructure that enables programmatic buying.

This week, Microsoft trumpted the launch of a demand-side-platform channel via its Atlas Solutions unit. The plan is a bunch of technology partnerships with independent DSPs AppNexus, Turn and MediaMath. This tip-toe approach stands in stark contrast to the all-in effort spearheaded by rival Google, which scooped up DSP Invite Media early on, in June 2010, and shelled out $400 for supply-side platform Admeld exactly a year later. (The latter acquisition is still pending regulatory approval.)

There are growing grumbles in the industry that Microsoft, which has the resources to be a major counterweight to Google, isn't moving aggressively enough to do so. 

"While Google has put a thousand engineers on this and focused a huge part of their business on winning the display business, Microsoft has twiddled their thumbs in the space," said Zach Coelius, CEO of independent demand-side-platform (DSP) Triggit. "They've called their tiny investment in a few startups a strategy. They don't seem to understand that the RTB standard is setting the roadmap for the future of all digital advertising and that their refusal to engage with the space at scale is costing them big time." 
Part of the reason might be that Microsoft is feeling burned. It doesn't have a very good record with tech acquisitions in the area. It acquired ad exchange technology company adECN in July 2007, only to scrap it in favor of an AppNexus partnership this past May. More significantly, it reacted to Google's buy of DoubleClick by plunking down $6 billion for aQuantive, parent of Atlas, in May 2007. That deal was recently ranked as the fifth worst technology acquisition in history
With Yahoo is disarray, some in the industry wonder whether Microsoft is missing its chance to build out its ad tech infrastructure.
"We have continued to invest behind Atlas and behind Microsoft," said Curt Hecht, CEO of VivaKi Nerve Center in an interview with Bloomberg. Microsoft's display strategy is at a point where the company will have to prove to the world that display "is important to them,” said Hecht. He stated that Microsoft would have to show itself to be a partner as committed to the display space as VivaKi.
Some see Microsoft's move as the awakening of a sleeping giant, despite the company's use of partnerships to build its technology stack in display.
"Atlas clearly has room to improve in the area of partnerships, and it seems to be taking a big step in the right direction," according to Dan Beltramo CEO of Vizu, which has worked with the Atlas ad serving platform. “Microsoft has a tremendous asset in terms of capturing display advertising growth in Atlas if they manage it right and keep investing in it. I think Atlas would also be well served by beefing up their ability to enable brand lift measurement for their display advertisers in addition to the energy they are putting into audience targeting capabilities.”
Microsoft's partnerships with AppNexus, MediaMath and Turn will permit advertisers to buy ads targeted to a specific audiences according a range of variables such as location and the frequency and timing of ad exposure. 
According to Ryan Mackle, Microsoft's director of display platforms, the company is attempting to move forward at a deliberate pace to meet the demands of an RTB-driven marketplace. The recent changes are a small part of Microsoft's new push to "evolve Atlas into a multi-dimensional asset," said Mackle, who doesn't see Microsoft as behind the curve.
"Over the past two years we’ve developed a complete API Suite, produced Atlas+ Enterprise and released betas of our next-generation search and audience-messaging platforms," said Mackle "Atlas enables workflow and analytics integration with digital advertising specialty companies such as in the newly announced DSP channel, rich media vendors, search engine marketing firms, and others as part of the Atlas Technology Partner Alliance. We are offering more than just ad serving."
Perhaps so, but Microsoft is not earmarking the kind of resources that Google has. What's more, it's clearly not taking this as seriously as it is the development of Bing as a major search engine, according to Coelius. 
"They are so focused on search they have completely missed the RTB product cycle and now they have a ton of catching up to do as RTB has made their existing product stack painfully obsolete," he said. 
Mackie claims it isn't necessary for Microsoft to own every technology. Instead Microsoft wants to make display technologies work together smoothly, which is the objective of the partnership approach.
"An example is our relationship with AppNexus," said Mackle. "They are providing us and others with publisher controls and scaled RTB capability on top of which Microsoft can develop yield management capabilities and other value-added services."