Why Netflix Chose Microsoft In Its Bid To Enter Advertising

The speculation has been swirling for months that Netflix was receiving into the ad organization. We’ve prolonged viewed this as necessary for Netflix and have been very clear about the upside, so no big shock there.

What is notable is the news that Netflix chose Microsoft as its adtech associate. Why Microsoft?

Microsoft’s acquisition of Xandr, introduced in late 2021 and just concluded, makes this feasible. Xandr (née AppNexus) was an early, dominant participant in the programmatic exhibit advertisement house and, when obtained by AT&T again in 2018, commenced to dangle its hat on the Television set/movie advert possibility.

Netflix is likely to want enable building an ad featuring from scratch, and that’s not a tiny carry, but it’s not new for Xandr. Back in 2019, we gave Xandr combined testimonials for its converged Tv set system and capabilities, but its existing general public-experiencing story checks a lot of of the proper boxes: solutions for monetizing programmatic streaming stock and innovative Tv, holistic generate management, ad serving, supporting clients’ most popular market IDs — these are all requisites. Plus, Xandr’s legacy of sitting in between buyers and sellers, not like a lot more traditional demand from customers-facet platforms (purchase-side tech) or source-aspect platforms (provide-aspect tech), lends it a unique viewpoint on the demands of both equally.

However Microsoft and Netflix have not had a sturdy industrial marriage until now, the two businesses have ties. Brad Smith, Microsoft’s president and vice chair, sits on Netflix’s board, and Reed Hastings sat on Microsoft’s board from 2007 to 2012. In addition, Netflix’s very first edition of “Watch Instantly” used Microsoft’s Silverlight for streaming (alternatively of the far more commonly used Flash Player), and Xbox 360 was the first console to attribute an High definition Netflix streaming app.

Notably, other probable adtech partners these as FreeWheel or Google have passions aggressive to Netflix’s. They both sit inside of providers that have their very own material performs in streaming Tv. This probably knocked them out of the functioning.

A concern stays: Will this partnership actually force the envelope on innovating the advertisement encounter alone? For instance, in acquiring new formats or products in streaming Tv set? Microsoft does provide gaming to the table, where there’s possibility and innovation but nascency. If these new partners can translate this variety of up coming-gen thinking into the extra traditional streaming Tv set ad ecosystem — where by the advert working experience is, well, just simple terrible (far too several advert pods, much too several repeating ads) — that’s the place magic could materialize.

This post was written by VP, Principal Analyst Joanna O’Connell and it originally appeared in this article.