Several years ago, I was dating someone who worked for AOL in the retention department. He was the guy who, very politely, made it basically impossible to cancel service by offering you free months. One day, AOL decided to outsource their retention program.
He found out about this when he walked into an office in chaos. No one was told until the day the office was shutting down, including the managers. Everyone was walked into a conference room and informed that they were getting two month’s severance and this was their last day of work. People who need rides home were offered cabs. AOL was done with them; they wanted them out.
I’m wondering if some of the Microsoft employees had a similar experience when it was announced that AOL will be taking over selling display ads for mobile and video as well as across the Microsoft portfolio. Microsoft made the announcement of the deal in a blog post, and an unidentified source told Bloomberg that some employees are being moved to new positions, but jobs are also being eliminated.
About 1,200 jobs at Microsoft will be impacted, with some positions to be moved to AOL and AppNexus, said the person, who asked not to be identified because the deal hasn’t yet been announced. Some people will be offered other positions at Microsoft, while other jobs will be cut, the person said.
One of the reasons that I suspect this was a surprise to many of the people whose jobs are being affected is due to the abruptness of the annoucement. I have a hard time believing that this was kept under wraps until the last second if employees were told in advance.
It is unclear if every individual being let go from Microsoft will be offered a position at AOL or if it will just be select individuals. Even if every person is offered a job, it may be a much lower paying one and could require relocation or a loss of benefits.
Is Microsoft Throwing In The Towel?
When you’re essentially outsourcing your ad sales to another company after historically struggling to keep up with your competition, it’s hard to not look like you’ve kinda given up. Not helping to mitigate this assessment is that TechCrunch is reporting that Uber bought a portion of Bing’s image mapping interests, and 100 employees are expected to move over to the transportation network.
Although Bing isn’t doing terribly as a search engine – Statista indicates it’s currently around 20% of the market – Microsoft as an ad seller is a very sad thing indeed. As you can see from this graph from eMarketer, Microsoft’s digital ad earnings started out small and dropped precipitously. The losses are expected to become less steep in the next few years, if only because it’s hard to have a huge drop in such a small number.
Microsoft has been edging away from its advertising business for a while, and outsourcing selling of its interests, even if only in piecemeal, seems like a clear sign that they’re trying to avoid the embarrassment of having a poorly performing ad sector without having he embarrassment of publicly giving up.
With Bing having lost $10 billion over the last five years and Satya Nadella only just now saying they expect it to finally make a profit next year, it’s no wonder that Microsoft is trying to wash its hands over the whole mess.
Microsoft is denying that they’re running screaming from the debacle that their online ad efforts have become, and MarketingLand was told by the vice president of Microsoft’s ad business Rik van der Kooi that Bing was able to pay for itself right now.
However, I’ve seen multiple reports that Bing has been a huge source of loss for Microsoft, and only now is Nadella hopeful that it will turn a profit. It’s been a few years since I took a math class, but last I checked, you have to have more than one theoretical year of profit for something to pay for itself. Furthermore, new and interesting ways of looking at math aside, Microsoft’s actions indicate that they’re ready to move on.