Uncertainties remain but Microsoft’s Netflix pact is the clearest window to its designs on ad tech

By Ronan Shields

Netflix reported less-than-expected subscriber losses for the previous quarter earlier this week, still, it lost almost a million paying customers, a statistic that further concentrated minds on the pending launch of its ad-supported tier.

The emergence of Microsoft as Netflix’s exclusive partner in this endeavor defied earlier expectations and was seen as a game changer for the software giant whose reemergence in adland was made clear with its Xandr and Activision Blizzard announcements in recent months.

The exact nature of Microsoft and Netflix’s partnership remains ambiguous with Netflix COO Greg Peters noting that ads served on Netflix will be exclusively available through the Microsoft platform and lauding his partner’s “flexibility to innovate over time on both the technology and sales side.”

Sources told Digiday that they were, in part, surprised at Microsoft’s selection as Xandr, formerly known as AppNexus, doesn’t have as much traction among streaming and digital video advertisers.

Compared this to the vast experience of Comcast and Google, the two hotly-tipped contenders for the contract to operate Netflix’s advertising ad stack in the run-up to last week’s announcement.

It was the neutrality, stupid …

Some speculated the advertising tie-up may be a precursor to a lucrative cloud services contract that would involve Netflix migrating from Amazon Web Services to Microsoft’s Azure.

Although multiple sources, all of whom requested anonymity due to the sensitive nature of the discussions, told Digiday it was Microsoft’s lack of a competing streaming service (unlike Comcast’s Peacock or Google’s YouTube) that ultimately saw it emerge victorious during the request for proposal.

Earlier this year Microsoft Advertising chief Rob Wilk explained how CTV would play a key role in the company’s advertising ambitions and that offering cross-screen attribution capabilities would also play a key role in its go-to-market strategy.

Microsoft declined Digiday’s request for clarifications over what aspects of its platform will be made available to ad buyers at launch. Although since those inquiries, certain details have emerged with Insider reporting that revenue guarantees — these usually played a key role in winning RFPs during the early days of ad tech — from rival contenders were “underwhelming” (Google’s included), a sign that Netflix wants revenue, and fast.

Multiple Xandr sources contacted by Digiday claimed negotiations with Netflix were led by Microsoft’s team with few staffers there claiming knowledge of just what ad tech capabilities would look like at launch.

Open or closed?

One key question that many still ask is what the word “exclusively,” used by Microsoft in its announcement will mean in actuality — and whether it will primarily revolve around the Xandr ad server or the entirety of its stack, including its demand-side platform?

Popular opinion remains divided with some noting a fully exclusive, or “walled garden,” approach would represent a complete U-turn compared to the AppNexus messaging of a decade ago, while others claimed rival DSPs, such as The Trade Desk, still harbor ambitions of access to Netflix inventory.

One senior source at an agency holding …read more

Source:: Digiday