Big changes are coming to Microsoft: The company is exiting its display, mobile and video advertising business, and has struck a deal with AOL, which is going to take over the business in the U.S. and eight other key markets.
News of the deal was first reported by Bloomberg. It was later confirmed by AOL, with AOL president Bob Lord saying: “This collaboration further validates our leadership position in digital advertising and the shift to automation, while also allowing Microsoft to focus on what they do best: industry-leading services and search innovation.”
As part of the deal, AOL is set to take over display, video and mobile advertising on key Microsoft properties like MSN and Outlook.com as well as within apps like Skype and on Microsoft’s Xbox gaming platform. AOL will run ads on these properties in the U.S. as well as in the United Kingdom, Canada, Brazil, France, Germany, Italy, Spain, and Japan.
Financial details of the deal were not disclosed, but at least one detail became public: AOL will make job offers to 1,200 Microsoft employees who currently handle everything from sales to engineering for the company’s display ad unit, according to the Wall Street Journal.
The deal, which lasts for 10 years, isn’t just benefiting AOL and its growing display ad business. It also makes Microsoft’s Bing the default search engine across all of AOL’s online properties starting January 1 of next year. Previously, Google powered AOL’s Web search.
Microsoft will continue to run its Bing search advertising business, which has been a growing revenue driver for the company: In its fiscal 2014, Microsoft saw search advertising grow 39%, whereas its display advertising business shrunk 25%. Altogether, Microsoft’s advertising business grew by $497 million last year.
Microsoft will also unload its display advertising in 10 additional markets, including Belgium and Austria, to New York-based advertising specialist AppNexus.