Microsoft Corp is handing off some of its digital advertising business to AOL Inc and selling its street-image mapping operation to Uber Technologies Inc, as the giant software company tries to focus on activities more relevant to its core business.
AOL is adopting Microsoft’s Bing search engine, replacing Google as the default option for visitors who want to search the Internet on AOL Web sites. That means Microsoft will get a share of revenue from advertising that is tied directly to Internet searches performed on AOL.
However, Microsoft, which is based in Redmond, Washington, is to let AOL take over the selling of other types of advertising on Microsoft Web sites and apps, including MSN, Skype and Xbox.
An AOL spokeswoman said the New York-based online media company will extend job offers to all 1,200 people who worked in Microsoft’s advertising business.
Microsoft chief executive officer Satya Nadella has been saying he wants to focus more on the company’s core software business and related services, while warning employees of the need to “make some tough choices in areas where things are not working.”
Microsoft representatives indicated on Monday that both the AOL and Uber deals are an outgrowth of that strategy.
According to its agreement with AOL, Microsoft is unloading a business that has declined in importance over recent years. Microsoft has steadily increased its sale of advertising related to searches on Bing.
However, revenue from other kinds of advertising, known as “display ads,” fell to about US$250 million last quarter, or about 15 percent of all Microsoft ad revenue, according to figures compiled by industry analyst Jan Dawson of Jackdaw Research.
“Display advertising is a tough business for them. Search is more lucrative,” Dawson said.
Microsoft and AOL declined to reveal details of how they are to share revenue from the new pact. Both companies characterized the deal as a win-win, because Microsoft will gain more search advertising, while AOL — which has been beefing up its display business — is to add Microsoft’s Web sites to a host of other online properties on which AOL can place messages for advertising clients.
Uber has been investing in developing its own street-navigation technology. The San Francisco-based ride-hailing service is acquiring a small unit of Microsoft that collected visual images of streets and buildings for Microsoft’s Bing Maps service. Microsoft indicated it will rely on other companies to supply it with that data in the future.
“They’re becoming more and more focused on the things that are working well and jettisoning things that aren’t working well,” Dawson said.
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