Who Are Those Guys, Anyway? -- Greg Nelson, Microsoft

There’s a classic scene in the 1969 movie, Butch Cassidy and the Sundance Kid. Butch and the Kid are being chased by a posse they just can’t seem to shake. Butch confidently asserts that the posse can’t track them over rocks, to which the Kid replies, “Tell them that.” Butch peers over a boulder to take a look for himself, and upon realizing the Kid is right, says, “Who arethose guys, anyway!?”

For anyone who’s ever seen this movie, it’s a pivotal point in the story; the moment when Butch and the Kid realize that maybe “those guys” weren’t who they thought they were. If you haven’t seen the movie, I encourage you break out your Surface tablet and watch it. Very entertaining.

Now, you may be asking why I am leading a blog with a snippet from a dated Western movie. The reason is simple: I think a lot of people outside of Microsoft have been rightly asking the same thing about our advertising business over the last few years.

“Who are those guys, anyway??”

Case in point. Not too long ago, I had the opportunity to meet with a number of reporters who cover the ad business to get their perspectives about the industry in general and Microsoft specifically. One of them, a highly respected veteran of the advertising media, told me he thought Microsoft was in the process of divesting or, to use his word, “outsourcing” the digital advertising business.

His comment took me by surprise, so I asked him how he came to this conclusion.

It turns out that he took a series of disconnected events like the sale of Razorfish to Publicis, the aQuantive write-down, and our sale of Atlas to Facebook, pieced them together, and surmised that they foreshadowed our eventual exit from the advertising business. And if this particular reporter felt this way, perhaps other logical-thinking people might also think the same thing.

This interaction crystallized for me the importance of setting the record straight and communicating how flawed that conclusion really is.

As someone who has worked at Microsoft for 15-plus years, I can say this with unflinching confidence: Our digital advertising business has never been more important to the company, more integral to our future, than it is today. Never.

Now, before you think that this sounds like the musings of a long-time Microsoft executive who likes the taste of his own Kool-Aid, I will also tell you that I believe there was a time in our not-too-distant past when advertising may not have been a very big priority for the company. When your roots are primarily as a packaged software business, it can sometimes be hard to get even internal stakeholders excited about new ad formats or a new technology platform for the delivery of digital ads.

What happened to elevate the importance of advertising at Microsoft? The most visible milestone I can point to is Steve Ballmer’s July 11, 2013 message to the company where he outlined a new vision for the business, one centered on Devices + Services. This vision has gotten a lot of play in the press over the last few months, and early returns, including our most recent earnings report would seem to indicate this Devices + Services strategy is doing pretty well out of the chute. After all, $7.46 billion in Devices and Consumer revenue could hardly be considered chump change.

But how does this impact the advertising business at Microsoft?

Consumers base their purchase decisions on the services, features and apps that come with a particular device. Very simply, the more high quality apps a device has, the greater is its consumer appeal. And there are only a couple of ways an app developer is going to make money: One way is through a paid subscription model and the other is through advertising.

Our job as the leaders of the advertising business at Microsoft is, therefore, to help drive consumer preference for the Windows ecosystem (including Windows 8.1, Windows Phone and Surface) as well as for Skype, Xbox, Office and our other devices and services, by creating an environment for app developers to build rich, engaging experiences that consumers will want. In this construct, “advertising” becomes much more than slapping an ad on a piece of digital real estate, it becomes the connective tissue that brings marketers, developers and consumers together.

This is not to say that our traditional flagship advertising properties will become less relevant over time. Far from it. For example, we believe advertisers and consumers alike will continue to magnetize to MSN for its rich content and engagement opportunities, things that will become even more appealing as we continue to weave the Bing platform into MSN’s content strategy and build and curate new user-centric experiences in the future.

What it does mean, however, is that as we build advertising experiences across our entire footprint of devices and services – which incidentally touches over a billion consumers every day – and stitch them together so that marketers can tell sequenced, multi-screen stories, our palette of offerings for advertisers will become that much richer and more compelling.

Microsoft’s transformation as a company dovetails nicely with how I see advertising evolving overall.

The advertising industry is constantly defining and re-defining how it engages consumers. This is a topic for another blog post, but suffice to say that I believe advertising is a means to an end -- and good marketers know this. In our new Devices + Services world at Microsoft, that “means” is incredibly important, if not vital. That’s because without advertising experiences that connect people to devices to apps and services that help them get things done our strategy doesn’t work. Hence the importance of advertising in the grand scheme of things.

Of course, there is still much room for improvement. Too many people still see advertising as a necessary evil that pays for the content they get for free today on the internet. This needs to change, and as consumers evolve their thinking, so too must the industry evolve its own. Ads that deliver value, move people closer to their end-goal, connect people to other people as well as to brands, and that are entertaining and engaging need to crush ads that are merely digital noise.

At Microsoft, we get all that, and while we may not be perfect and we may not have moved as fast as some people would have liked (including ourselves – our own harshest critics) we are more committed than ever to building this business for the long-haul.

So the next time you find yourself wondering “who are those guys anyway?” remember that your perception may be very different from reality.

Greg Nelson is General Manager, Display Advertising at Microsoft. He can be reached at gregnel@microsoft.com.

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