On Monday, Microsoft announced it was handing over a portion of its display advertising business to AOL. As per the deal, Verizon-owned AOL will make Bing its default search engine in place of Google for the next ten years, starting from January 2016.
Microsoft focusing on strategically important segment
In a blog post, Microsoft noted that for the next ten years, Bing will offer search advertising capabilities for AOL’s portfolio of websites (Engadget, Huffington Post, and TechCrunch). This service has been provided by Google. Moreover, under the deal, sales and trade marketing employees will now be managed by AOL. Furthermore, AOL will be responsible for the sales of the display, mobile and video ads on Microsoft’s websites in nine countries.
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Microsoft’s corporate vice president of advertiser and publisher solutions, Rik van der Kooi explained that following the deal with AOL, AppNexus will “become our exclusive programmatic technology and sales partner” in ten countries. And, in the coming months, business will move to AppNexus.
Previously, Bloomberg noted that around 1200 employee will be impacted by this partnership, but citing a source familiar with the matter, VentureBeat puts the number between 500 to 1000 employees.
The recent deal suggests Microsoft is focusing more on the strategically important segment while is deliberately cutting resources from less important ones. An email from Microsoft chief executive Satya Nadella last week hinted at the deal and employees layoffs. In the letter, Nadella noted: “We will need to innovate in new areas, execute against our plans, make some tough choices in areas where things are not working.” Laying off 1,000 employees could certainly be called a tough choice.
A big loss for Google
It is a second major loss for the internet firm this year. Earlier this year, Google lost its partnership with Mozilla to Yahoo, leading to a major fall in its search market share. More bad news may follow in from Apple’s Safari, for which Google is currently the default search provider. There are reports that Apple may replace it with Bing or Yahoo.
Why Google lost its AOL deal is unclear, but it’s possible that the company did not renew the agreement intentionally. Under the deal, Google had to pay a percentage of the revenue generated from AOL’s site, and analysts note this would have made Google less excited to renew the deal.