In recent years, Microsoft has been looking to diversify and grow its ads business beyond its B2B roots with acquisitions like PromoteIQ and LinkedIn. During the company’s third-quarter earnings call earlier this week, Microsoft reported that LinkedIn had generated $3 billion in advertising revenue in the last business year; per the company, PromoteIQ’s platform has grown 300% year-over-year during the same period with companies like DICK’S Sporting Goods, The Home Depot and Kroger using the platform for digital marketing vendor programs.
Digiday caught up with Steve Sirich, general manager of the global advertising business at Microsoft to hear how the company is pitching advertisers today, how the work-from-home has impacted the company’s ad business and how the company is thinking about the ongoing privacy changes in the industry.
This conversation has been edited and condensed for clarity.
The privacy landscape is changing. Google has its own potential solution with its proposal FLoC. Microsoft recently announced its own with Parakeet. Can you tell us a bit about the thinking?
From an advertiser perspective, we know we’re at this inflection point and that we need to navigate through it and we’re thinking about what this might mean in a privacy-centric world. [We have a] proposal in front of the industry — the World Wide Web Consortium, the W3C — it’s called Parakeet and it’s an acronym for Private Anonymized Requests for Ads that Keep Efficacy and Enhanced Transparency. We believe [Parakeet] improves privacy and works with existing ad tech infrastructure than, for example, what is being pitched by Chrome’s privacy sandbox. The reason for that is that Chrome’s privacy sandbox has the auction happening in the browser, which brings some challenges because it breaks how the ecosystem works and how investments are made in the ad tech stack today.
How does Parakeet differ from FLoC?
We’re trying to drive a balanced solution that returns the action to the ecosystem as it is today. This is possible in our proposal because the browser anonymizes the PII or the personal identifiable information while still passing on the information. In our proposal, the consumers still have control over their data, too. It’s not like they don’t have control but the browser doesn’t function as the auction. The browser anonymizes the information and continues to pass it through the ecosystem as the ecosystem functions today. As I said, consumers have the ability to opt in and out of the cohorts of information based on their comfort level. We’re in the early days of these discussions, of course. I wouldn’t ground it to say this is exactly how Microsoft will function or the Microsoft Edge experience but we’re having discussions with Google, we’re having discussions with lots of publishers as well as advertisers around the efficacy of wanting to keep the ecosystem somewhat intact but wanting to respect the privacy, controls and transparency that we think need to be a part of that.
Ultimately, we’d love to see a solution as we think about the browser experience that’s consistent across the large browser ecosystems. That it’s not necessarily different in one experience as you transcend into another experience. We’ll see how we continue to sort through this in the next number of months and get there in what we expect to be a 2022 time horizon to operate and transition and see the industry through some change here.
In terms of the ad business, what is Microsoft’s point of differentiation and how are you pitching advertisers?
We believe, and we know from what advertisers, agencies, publishers and partners tell us, that we have a unique audience. We have an audience that’s rich and significant when you think about the number of devices that operate with Windows. You’re talking about over a billion people and devices that are experiencing Windows and operating in that ecosystem on a regular basis. Anchored in that, you have a large search network that enjoys over 600 million searches every month. You have a Microsoft Edge experience, LinkedIn experience, you have a number of strong consumer services that deliver a unique audience that we believe and we know from our data that it’s an unduplicated audience on some level to what’s being experienced on the Facebook ad network or what’s being experienced in the Google ad network. So if you want to continue to build out your brand strategy, connect with your buyers and consumers, it’s an audience that’s sizable enough and material enough that you don’t want to ignore it. We continue to see data that supports that the audience converts well.
Are you still looking to grow beyond a B2B focus? Are you pitching new kinds of advertisers that maybe you hadn’t been before?
We are. We continue to open up — both in the managed services and unmanaged services perspective — our advertiser experiences. We’ve seen growth in a number of categories. We’ve seen growth in the retail category; we’ve seen growth in the automotive category over this past year. We’ve seen growth in a number of core verticals suggesting, whether it’s new customers we’re acquiring that are small and medium-sized businesses or whether it’s large aspects of the enterprise business, we’re seeing a lot of growth in our advertiser base which suggests they’re finding the value in the audience, in the experience and that it’s converting well from an ROI perspective for them.
We see growth in our experiences, we see growth in our query-share and our volume with search, we’ve seen growth in terms of the volume of activity with Microsoft News. That’s because, in part, digital acceleration has fostered growth in a number of areas when you think about consumer services and the time people are spending with digital applications, especially over this last year as people are at home more and spending more time with their PC. They’re certainly spending more time on mobile. So we continue to see nice growth across our consumer services which can again continue to build and foster the audience story we have to offer [to advertisers].
Has the last year of work-from-home for many people helped grow your audience?
When you have people working from home, the enterprise experience, which we’ve always felt like we owned, all of a sudden was now in the home. When you bring the enterprise experience into the home all of a sudden what was a consumer home experience and an enterprise experience are beginning to blend. That gives us a continued point of leverage. What we’ve typically owned with the enterprise experience is in the home and offering a blended experience of work and life. We think that plays well for us as we think about the growth of our audience over the next number of years. … We are very committed to growing [the] consumer [side of our business]. We do believe commercial and consumer will continue to blend and we’ll continue to see more and more commitment on the consumer side in how we see our growth over the next couple of years.
Where do you see that growth going? Are there other potential acquisitions like those of the past i.e. PromoteIQ and LinkedIn that might be coming to continue that growth?
There’s nothing that I could comment on today. But I think our track record historically suggests — you look at the last three years of our partner and acquisition activity that would suggest you’ll probably see activity the next three years. Knowing that the consumer area is an area of focus for us, suffice to say that could be an area where you see some activity but there’s nothing I could comment on today.
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