‘It’s a head scratcher’: The cases for and against Netflix picking Microsoft to power its advertising business

By Tim Peterson, Ronan Shields and Seb Joseph

Netflix caught the TV and streaming ad industry by surprise when the company announced on July 13 that it had picked Microsoft to be its global ad tech and sales partner to support its impending ad-supported tier.

“It’s a head scratcher,” said one agency executive.

Google and Comcast had reportedly been the frontrunners to win Netflix’s business given the respective maturity of their streaming ad tech stacks and the scale of their streaming ad sales. By contrast, Microsoft was once an ad tech behemoth that seemed to be exiting that business up until its acquisition of AT&T’s ad tech arm Xandr, which had failed to live up to its promise under the telecom company’s umbrella.

Despite the surprise, there are cases to be made to support why Netflix chose Microsoft — as well as cases for why to question Netflix’s choice. Here’s a sample based on conversations with industry executives following Netflix’s announcement.

For: A comprehensive offering, free from conflicts of interest

You don’t have to delve too deeply into the annals of digital media’s history books to find out how Xandr became the product of AT&T’s 2018 purchase of AppNexus, the poster child of independent ad tech.

At the core of its Xandr’s messaging was that it only offered ad tech, unlike the reputed tethering of Google’s owned and operated media to its ad stack. It’s likely that a reprise of this messaging helped Microsoft win out over the reported early frontrunners to Netflix’s foray into carrying ads — YouTube-owner Google and Peacock-owner Comcast. “The two big names that everybody was putting their money on had very big conflicted businesses in YouTube and all of the Comcast streaming platforms,” said Mark Giblin, CEO of LightBox.

The global scope of Microsoft’s business and operations could have also helped it edge out Google and Comcast, considering that 147 million of Netflix’s 222 million subscribers reside outside of the U.S. and Canada. “Microsoft gives Netflix a global partner that can both serve their tech and monetize in every market around the world, not just the top ones,” said Dave Morgan, CEO of TV ad targeting firm Simulmedia.

Obviously, Google could similarly support Netflix at a global scale, but there’s the competitive concern that likely would have canceled out that checkmark. And Comcast does operate internationally, for example with its Sky business, “but not as much as Microsoft,” said an agency executive.

Meanwhile, pure-play ad tech players Magnite (a historic supply-side platform that also operates the SpringServe ad server) and The Trade Desk (the largest demand-side platform in the market outside of Google’s DV360) had also been brought up as potential Netflix partners by some.

However, Microsoft’s more comprehensive offering — Xandr also has an ad exchange and ad server in addition to its DSP — would likely have proven an advantage over these potential suitors.

“Magnite would probably be disappointed because what Netflix needs is an ad server, a sales team plus some kind …read more

Source:: Digiday