According to a report carried by the Wall Street Journal on Tuesday, June 29th, Microsoft will be handing over its web advertising business to AOL for a period of ten years. As per the deal, AOL will sell display advertisement on Microsoft products and websites like Xbox, Skype, MSN, Outlook.com etc. in countries like the US, Canada, Japan, Brazil and a number of European countries including the UK. In return, Bing will replace Google as the search engine of choice on AOL.
The financial terms of the deal, including revenue sharing details however, have not been publicly disclosed. While advertisement constitutes a negligible part of Microsoft’s revenue, the division does employ as many as 1,200 people, who will now move over seamlessly to AOL according to the terms of the deal. Both companies have asserted that no jobs will be lost because of the agreement. Meanwhile, the Redmond, WA-based software giant has not just offloaded its web advertising business in the few markets mentioned above, but also in many other Eurozone markets like Austria, Belgium, Denmark and Portugal, where AppNexus will take over the web advert business from Microsoft.
In recent times, Microsoft has looked to consolidate its increasingly unwieldy businesses into its core areas of strength like personal computers, along with areas the new chief executive Mr. Satya Nadella has identified as possible areas of growth going forward, like the cloud and enterprise. As part of that stated philosophy of Mr. Nadella, Microsoft has also reportedly offloaded its mapping technology to transportation aggregator Uber, in a further attempt to cut down on the company’s unprofitable ventures. While Microsoft does not publicly disclose the exact revenue figures from its online ventures, the company is said to have lost as much as $10 billion over the past five years alone on these operations. As for speculations around the future of Bing, Mr. Nadella seems to believe that Microsoft’s search operations will turn profitable next year. In a statement released announcing the deals, Microsoft said, “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”.