How Will Microsoft's Management Shifts Impact Advertisers?

By The Myers Report Archives
Cover image for  article: How Will Microsoft's Management Shifts Impact Advertisers?

Schizophrenic perceptions among advertisers of Microsoft's value and sales organization.

With the departure of Microsoft CEO Steve Ballmer and the ascension of 22 year-company veteran Satya Nadella, advertisers and agencies can be hopeful that Microsoft will focus more on buildingSatya+Nadellaexpanded services and support for marketers. (Scroll down for details on current perceptions of Microsoft Advertising in the ad community.) Few in the ad community recall that before Nadella led the cloud and enterprise group (and prior to that the server, tools and online-services divisions), he was senior VP of the search, portal and advertising-platform group, VP of development for the business-solutions group, and general manager of consumer and commerce. He also worked for a short time at P&G in brand management and has an MBA from the University of Chicago. While he may be an engineer and tech geek, he's well-schooled in marketing and the value and importance of advertising. Although ad revenues represent only a fraction (reported to be less than 2%) of Microsoft revenues and Wall Street analysts cover the company from the tech rather than the advertising POV, Nadella will certainly focus more attention on the ad community than Ballmer ever did.

Microsoft has never had a stellar reputation among its advertising partners, but it has been at the forefront of the industry through its early acquisitions of Razorfish (which was later sold to Publicis). It had a short burst of positive energy during the nine-month tenure of Carolyn Everson, who departed to join Sheryl Sandberg at Facebook and has been a driving force behind the success and growing market cap of the world's largest social network. Since that time, Microsoft's presence in the ad community has stagnated, settling in under the day-to-day guidance of Keith Lorizio , who has also left the company.

Nadella has many priorities before he focuses on ad revenues. As reported in the Huffington Post, "Bing still has relatively little share in search. Windows Phone 8 is an also-ran, while Android keeps gaining share. Microsoft's email system, which is now called Outlook.com but previously was called Hotmail, has no chance of catching Gmail." However, Nadella is likely to assure that the company has strong and visible leadership in the ad community, develops a strategic plan for achieving that leadership, and commits the resources for competing on a more equal footing with Google, AOL, Yahoo, Amazon, Facebook and the many emerging companies in display, rich media, programmatic sales, branded content, mobile, search, video and social. I expect that within 24-months Microsoft will engage more actively in the M&A marketplace to build out its advertising business. Nadella's decision on who will ultimately lead the advertising revenue side of the business will be key to forecasting the company's strategic directions.

Currently heading the North American ad sales group on an interim basis is Barry Dougan, a 15-year Microsoft advertising sales veteran who since 2010 has been general manager, GM, US Specialists Sales. Issues facing Nadella, among many, are whether to bring in a well-known ad industry fixture and whether to integrate search, display, rich media, video, Xbox, programmatic, mobile, social and other ad-centric businesses under one or multiple P&L centers. Nadella may turn for strategic support to former CBS Studios chief Nancy Tellem, who is president of Microsoft Entertainment & Digital Media. The spotlight will be on her and her team as Xbox launches its first slate of original series in the next 60-90 days.

As a software company with a massive global customer base and multiple consumer touch points across the spectrum of digital technology, Microsoft has historically struggled to make advertising revenue a priority. Lorizio had little success in building a well-defined brand for Microsoft in the ad community and less success trying to navigate the company's tumultuous internal politics. However, he did establish a team of competent ad sales professionals who managed to meet revenue goals with little leadership or support. In the recent MyersBizNet Annual Survey of Advertising Executives on 42 Digital Native Media Companies, Microsoft ranked 20th overall in value to advertisers and sales organization performance (scroll down for details). The sales organization appears to have focused attention on large traditional media agencies, where they've maintained perceptions of value and innovation among long-term partners. A picture of a schizophrenic organization emerges, however, as perceptions of the sales team and management has declined among these traditional partners. Conversely, younger industry execs at both full service and digital agencies have more positive perceptions of the sales team but rate Microsoft less positively for value and innovation.

2013 MyersBizNet Survey of Advertising Executives on Digital Native Media Companies
(Methodology and details available to members at www.myersbiznet.com)
   
Microsoft Advertising's Rank Among 42 Digital Native Media Companies
   
Performance CategoryRank Among 42 Companies 
Quality Sales Team and Customer ServicesTotal Respondents19
 Digital Agencies14
 Full Service Media Agencies24
Value for the InvestmentTotal Respondents:20
 Digital Agencies23
 Full Service Media Agencies5
Innovation and Market LeadershipTotal Respondents21
 Digital Agencies24
 Full Service Media Agencies4
Premium Content & Audience QualityTotal Respondents14
 Digital Agencies8
 Full Service Media Agencies11
Effective PresentationsTotal Respondents28
 Digital Agencies16
 Full Service Media Agencies5
Average 5 Categories Overall PerformanceTotal Respondents20
 Digital Agencies17
 Full Service Media Agencies11
Source: MyersBizNet Annual Survey of Advertising Executives, September 2013 
   

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