Microsoft gets out of advertising, sells display ads division to AOL, AppNexus

Microsoft announced Monday that it would sell off its advertising division. In return, the company will have Bing search integrated into AOL sites. Is this part of the company's greater "strategic vision"?

Microsoft will be getting out of the ads business. The company will be giving AOL and AppNexus control of its display ads division, as part of chief executive officer Satya Nadella’s longtime plan to focus the company’s mission.

The partnership between Microsoft and the two ad services was announced Monday on the company’s official blog. “AOL will become our seller of all display formats, including mobile and video, for the Microsoft portfolio across nine markets,” the company writes. “[AppNexus] will become our exclusive programmatic technology and sales partner in 10 markets.”

Starting next year, AOL will manage and sell advertising for Microsoft products such as Xbox, Skype, and Outlook. In turn, Microsoft’s Bing service will power search and search advertising on AOL websites such as The Huffington Post and Engadget.

This takes the burden of advertising away from Microsoft, who has been slowly leaving the display ads industry over the past several years and focusing on Bing’s search ads capabilities.

Though Microsoft does not have a large stake in advertising, AOL does. By selling its ad services, both companies hope to gain something strategic: for AOL, it’s a market of younger users, and for Microsoft, it’s a new venue for Bing and another way to cut down divisions as part of the company’s plan to focus its products.

This is lucrative for AOL. “Think about me being able to sell the Huffington Post and Xbox together,” says AOL president Bob Lord. “That’s really compelling to advertisers.”

Mr. Nadella, who’s served as Microsoft’s CEO since 2014, has made a point to focus Microsoft’s strategy since taking the position. Recently, he outlined his vision for the company in an internal e-mail, with the company’s new mission statement: to “empower every person and every organization on the planet to achieve more.”

The advertising business is not in line with Nadella's strategic vision.

This should come as no surprise to those who have been following Microsoft’s changes over the last year. Selling off the ads division is only the latest in a series of cuts the company has made to focus on three sectors: personal computing, cloud platforms, and business productivity.

This is where Nadella thinks Microsoft differs from its competitors.

“Our identity really is about empowering others to build products. It’s not really about us and our products,” Nadella said last November.

In the path for Nadella's strategic vision, Microsoft has laid off 18,000 employees, cutting certain programs to focus on others. Amid this controversy, though, many have lauded Nadella’s leadership in the company’s focus on Microsoft’s Office 365, Outlook, and Azure Cloud Computing.

In this partnership with AOL, Microsoft will be significantly downsizing its advertising team. Bloomberg reports that 1,200 jobs will be impacted, but both Microsoft and AOL insist that there won’t be any layoffs. They say that these jobs will be moved to AOL or AppNexus, or within Microsoft.

Microsoft also announced Monday that it would be selling parts of its maps service to mobile ride service company Uber.