- Microsoft is trying to become the next big advertising company.
- The tech giant has lots of holes to fill in streaming TV, gaming, and business-to-business advertising.
- Insider identified five companies that Microsoft could buy to build its ad business.
In 2021, Microsoft stepped up its investment in its advertising business with the pending $1 billion acquisition of adtech platform Xandr. But the tech giant, which made $10 billion in ad revenue last year, has suggested that it’s not done shopping yet.
“There are scenarios where we can grow organically, and candidly, there are areas where we will have to grow inorganically,” Rob Wilk, corporate VP of Microsoft advertising, said at Luma’s Digital Media Summit in New York in May.
Wilk wants to get the ad industry to take notice of Microsoft’s entire ad offering, not just its core search business that it has run for years. Microsoft also sells e-commerce,
TV, gaming, and business-to-business ads.
Industry experts named five companies Microsoft could buy to supercharge its ad business.
Microsoft referred Insider to its statement about acquiring Xandr in December 2021. None of the companies named as potential acquisition targets were immediately available for comment.
Bolstering its streaming TV ad capabilities could be Microsoft’s top priority
Microsoft’s first priority could be streaming TV since it’s one of the fastest growing sectors in the industry. Xandr manages some streaming TV ad spend but trails competitors like The Trade Desk, said Jesse Redniss, a former WarnerMedia exec who used to work with the Xandr business when they were both owned by AT&T.
“I could see Microsoft wanting to bolster that capability first to position it as a market leader more,” he added.
Sources named two TV-focused firms that Microsoft could acquire: Innovid and Magnite.
Innovid helps marketers buy and measure streaming TV ads and it would let Microsoft serve ads in streaming TV, said a VC investor who invests in the space but doesn’t have a stake in Innovid.
This person said that Innovid has the added benefit of providing one of the industry’s best offerings in shoppable ads, a format that Innovid helped pioneer. He added that shoppable ads are a must-have capability for Microsoft because direct-to-consumer brands use this ad format to drive sales.
Magnite helps a wide group of publishers of differing sizes sell ads in streaming TV apps and made $143 million from streaming TV in 2021. Two adtech CEOs said that it could be a potential acquisition for Microsoft. Acquiring Magnite would increase the number of publishers that Xandr works with.
Microsoft will need a video game adtech company to monetize its huge gaming inventory
Microsoft also has a stake in video game advertising. It’s buying the game publisher Activision Blizzard, which sells ad space on its video games, and plans to build an in-game ad platform for XBox.
Buying a company like video game adtech startup Anzu would allow Microsoft to dynamically place ads inside games on digital objects like billboards, said Kevin Krim, CEO of streaming TV measurement platform EDO.
Microsoft could use this capability to monetize its massive library of games, which includes studios like Bethesda and Minecraft developer Mojang. It would get even more titles if the $68.7 billion Activision Blizzard acquisition goes through.
Microsoft needs B2B marketing tools to deepen its LinkedIn ad offering
LinkedIn is one of Microsoft’s biggest assets in B2B marketing, having recorded more than $1 billion in advertising revenue in 2021, up 97% year-over-year.
If Microsoft integrated Xandr with LinkedIn, it could acquire Demandbase or Bombora to find new ways of reaching and targeting audiences, two adtech CEOs said.
Krim said Demandbase would give LinkedIn the tools to launch off-network ads like email ads and provide another way for B2B marketers to reach potential clients and hires. And Bombora could help advertisers target LinkedIn ads more effectively, Krim added. Bombora sells data about the products and services that companies research for.
But not everyone thinks Microsoft needs more acquisitions to bolster its advertising division. Industry analyst Ana Milicevic noted Microsoft already has a leading positions in things like B2B marketing and gaming.
“Microsoft is and has always been an advertising powerhouse,” Milicevic said. “I’d say they can not only compete with Google and Amazon, they already are.”