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6/30/2015
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Microsoft Cuts Display Ad Business, Sells Bing Maps To Uber

Microsoft transfers its display ad business to AOL and sells Bing Maps tech to Uber as CEO Satya Nadella executes a new corporate mission.

Windows 10 vs. Mac OS X 10.11: OS Showdown
Windows 10 vs. Mac OS X 10.11: OS Showdown
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In an email sent last week to Microsoft employees, CEO Satya Nadella presented a new mission statement and explained the direction he would take the company in the months ahead.

Nadella's message acknowledged a need to "innovate in new areas, execute against our plans, make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value."

Now, it looks like Nadella is putting his words to action. Announcements from Redmond this week acknowledge two major deals intended to cut costs while giving Microsoft room to better focus on its core priorities of enabling more personal computing, reinventing business productivity, and building an intelligent cloud platform.

[Samsung makes nice with Microsoft. Read: Samsung To Issue Windows Update Patch]

Microsoft said on Monday it plans to transfer its display advertising business to AOL, Reuters reported. The two companies struck a 10-year deal under which AOL will sell display ads on Skype, Outlook.com, MSN, Xbox, and certain apps in foreign countries, in addition to AOL properties.

Starting in 2016, Bing will become the primary search engine on AOL. The partnership also broadens Microsoft's existing relationship with ad auction house AppNexus, which will serve as the platform through which ads are purchased.

About 1,200 Microsoft employees will be affected by the news, reported Bloomberg. Some will receive offers to join AOL. Others will have the option to transfer positions within Microsoft.

"Today's news is evidence of Microsoft's increased focus on our strengths: in this case, search and search advertising and building great content and consumer services," said Microsoft officials in a statement on the AOL deal.

A search deal between AOL and Microsoft could prove promising for the latter. In April, Microsoft announced the renewal of a similar partnership with Yahoo, originally struck in 2009 to improve the user search experience across platforms and create value for advertisers.

Bing hit 20% of desktop search share around the time the Microsoft/Yahoo deal was renewed, as indicated by ComScore data. With AOL as a new partner, Microsoft's search platform is poised to continue its growth.

We also learned about a deal between Microsoft and Uber, which will have control over the mapping technology and image collection once associated with Bing Maps. About 100 Microsoft staff members will receive offers to join Uber as part of the transaction.

It will be interesting to see how Uber evolves in the aftermath of its acquisition. It's safe to say the ride-sharing platform has some big plans ahead, given the number of employees and nature of the talent it's receiving from Microsoft.

None of the companies involved in the aforementioned transactions disclosed the financial terms of their deals.

Kelly Sheridan is Associate Editor at Dark Reading. She started her career in business tech journalism at Insurance & Technology and most recently reported for InformationWeek, where she covered Microsoft and business IT. Sheridan earned her BA at Villanova University. View Full Bio

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zerox203
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zerox203,
User Rank: Ninja
6/30/2015 | 10:23:01 PM
Re: Microsoft Cuts Display Ad Business, Sells Bing Maps To Uber
Like tzubair said, selling your ad business to AOL might seem a quite strange - but let's remember Verizon's acquisition of AOL earlier this year. In that deal, AOL's large market for video content delivery was cited as a major cornerstone (the numbers were pretty impressive but I, too, had no idea AOL had such a big video audience). One would think the deal with Microsoft has something to do with that, considering the Reuters article specifies the deal includes video ads. It looks to be a pretty broad deal, including Skype and Xbox, two major brands for Microsoft, but we still don't know all the details - how does this line up with Microsoft's mobile strategy? Mobile video was cited as a big goal for Verizon/AOL. Presumably they'll have control of  ads on Skype's mobile app, etc, but I notice no mention of how this will impact Windows 10 Mobile directly.

As for cutting your losses, I'd consider Bing Maps to Uber to be a good sell. It doesn't line up with Microsoft's enterprise productivity strategy, but it probably has enough users to make it worth maintaining. Though people like to make fun of Bing, 20% is really not bad when you consider how much of a juggernaut Google is. Compare to Windows phone's struggles in the mobile space (where Microsoft has around 2-3%, depending where you get your numbers, and Google has about 65% with Android), and one could actually see where Bing still fits into Microsoft's strategy for promoting growth in their mobile market. Expanding it through partnerships (the same way they're extending Office to other platforms) seems like a better recipe for success than brute forcing it.
shakeeb
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shakeeb,
User Rank: Ninja
6/30/2015 | 9:00:40 PM
Re: Mobile Devices
It is always better to look in to diversified business than focusing on one area. It will help in increasing revenue.
shakeeb
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shakeeb,
User Rank: Ninja
6/30/2015 | 8:57:17 PM
Re: What makes sense
That is true.  Focusing more on process improvement will lead towards cost savings and increasing productivity. I think this is a good approach.
Kelly22
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Kelly22,
User Rank: Strategist
6/30/2015 | 5:37:03 PM
Re: Mobile Devices
@tzubair I agree Microsoft is trying to boost its mobile division, but it's strugglng. The recent reorganization (when Nokia's Stephen Elop got cut) is another indicator that Microsoft is willing to make big moves for mobile success. It'll be interesting to see whether Windows 10 makes a big difference in Microsoft's mobile business. There's promise, but it'll be hard to attract people already loyal to iOS/Android.
tzubair
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tzubair,
User Rank: Ninja
6/30/2015 | 5:24:01 PM
Mobile Devices
Apart from giving up control on their existing businesses, Microsoft is investing a lot into their mobile devices business. Having purchased Nokia last year, Microsoft is really looking to make the business division grow so that more and more smart devices are equipped with Windows Mobile. After a firm presence in the smart phones market, Microsoft will have much more avenues to grow.
tzubair
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tzubair,
User Rank: Ninja
6/30/2015 | 5:18:09 PM
Re: What makes sense
"I do agree with Microsoft's approach... it simply makes sense.... if they want to focus on innovation and core priorities, they need to take away those things that either consume time or simply need a different approach."

@mejiac: I agree with Nadella's decisions, but I am not sure if the approach is right. I think it's a good idea to form partnerships and let the other party handle your product such as the case with Uber and Bing Maps, but I'm not sure if you'd like to sell your revenue-generating business such as the ad program to AOL. I think that's a rather risky move.
mejiac
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mejiac,
User Rank: Ninja
6/30/2015 | 2:29:48 PM
What makes sense
Great Article Kelly,

I do agree with Microsoft's approach... it simply makes sense.... if they want to focus on innovation and core priorities, they need to take away those things that either consume time or simply need a different approach.

I think Microsoft has done a great job with Bing, but having it handed over to someone else so that they can focus on other business priorities, I think it's a smart decision.

With Windows 10 coming out, and Windows Phone trying to make a name for itself, having both of these intertwined products have Microsoft entire focus is a recipy for success!
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