Why Netflix chose Microsoft to power its advertising ambitions
Roku, Comcast, Google, The Trade Desk… if there was a company with a streaming video ad tech stack and sales infrastructure, Netflix wanted to hear their pitch (in recent weeks, Google and Comcast execs had the felt like they were the finalists in the bake-off, while The Trade Desk signed a deal with Disney on July 12).
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In the end though, the tech giant Microsoft – backed by its recently acquired Xandr video advertising unit – emerged victorious.
While there were obvious conflicts that would have made some of the potential partners an awkward pairing (Roku operates the Roku Channel, Google owns YouTube, and Comcasts NBCUniversal owns Peacock, after all), there were a couple things that Netflix was looking for. may have given Microsoft an edge in the conversation, according to a person familiar with discussions the streaming service has had in recent months: Privacy and a willingness to iterate quickly.
Digital advertising is pervasive, with many advertising giants like Google and Meta (formerly Facebook) leveraging their deep river of consumer data to precisely target consumers with relevant ads. Many TV companies are also moving in this direction, promising precisely targeted digital video ads.
But this data firehose comes at a cost, with regulators in the US and EU cracking down on data collection and sharing.
In fact, on the same earnings call where he disclosed the ad plans, Netflix co-CEO Reed Hastings said Netflix wanted to take a different approach.
“The online advertising market has advanced, and now you don’t have to include all the people information you used to,” he said. “So we can just be a publisher and have other people do all the fancy ad matching and pull in all the people data.”
Indeed, the deal with Netflix “endorses Microsoft’s approach to privacy, which is built on protecting customer information,” Microsoft president of web experiences Mikhail Parakhin wrote in a blog post on Tuesday. July 13. the partnership would have “strong privacy protections for our members.”
“It just makes sense that Netflix would make this a big deal,” Kevin Krim, CEO of marketing data and analytics firm EDO, told The Hollywood Reporter. “If you have such a valuable subscriber base, you’re going to be incredibly protective of them.”
This ability to provide privacy, combined with a technology stack established through Xandr and a strong ability to iterate quickly, helped Microsoft cross the finish line, said the person familiar with the reflection.
This flexibility could allow Netflix to quickly scale its advertising level or pivot its strategy when needed.
The tech giant, meanwhile, will be able to leverage the Netflix deal to boost Xandr’s growth in a way that former owner AT&T never was able to. And for marketers, a one-stop-shop with inventory across Netflix, the Xbox platform, and Xandr’s existing connected TV business may be too good an offer to pass up.
“It’s incredibly rare for a set of large-scale, global, highly premium video ad inventory to hit the market,” says Krim. “It’s a once in the blue moon thing.”