Satya Nadella Makes 'Tough Choice' To Attain 'Digital' Heights

by CXOtoday News Desk    Jul 02, 2015


Microsoft CEO Satya Nadella is known for taking big risks, changing his company’s image from a PC giant to a ‘mobile-cloud-first’ company to stay relevant in the digital era. To further attain his ‘digital’ dreams, the CEO has made some ‘tough choices’ which is likely to have long-term gains. Earlier in the week, Microsoft said it was handing over a portion of its display advertising business to AOL, including Xbox, Skype, and other products. 

Under the terms of the agreement, AOL would take over management and sales for the majority of the advertising on Microsoft’s gaming, mobile, and web products, in exchange, AOL would make Bing their search engine of choice instead of Google.

The good news is that as per the deal, Verizon-owned AOL will make Bing its default search engine in place of Google Inc for the next 10 years, starting from January 2016, which will boost Bing and make Google sort of a loser.

Now, the bad news. An email from Nadella last week hinted at the deal and employees layoffs. In the letter, Nadella noted: “We will need to innovate in new areas, execute against our plans, make some tough choices in areas where things are not working.” Laying off 1,000 employees could certainly be called a tough choice.

Microsoft’s Digital ad space was left utilized for many years. The recent deal suggests Microsoft is focusing more on the strategically important segment while is deliberately cutting resources from less important ones. 

While the partnership indicates that both Microsoft and AOL are reinventing themselves, with Microsoft smartly positioning its core properties like Windows, Azure, and Xbox, experts believe it is a second major loss for the internet firm this year.

Earlier this year, Google lost its partnership with Mozilla to Yahoo leading to a major fall in its search market share. Apple may also consider replacing Google with Bing or Yahoo for Safari, for which Google is currently the default search provider, said some sources. Yahoo is yet another big loser as the company was trying to pull off similar deals three year back but failed miserably. Marissa Mayer, Yahoo’s current CEO, publicly downplayed programmatic advertisingand AOL’s strategy at an event in May. Earlier this year, Yahoo shut down Right Media Exchange, an advertising exchange they spent $680 million on in 2007, says a Fast Company report.

Working together, Microsoft and AOL will “will create a powerhouse media offering with a remarkable set of differentiated assets,” Microsoft executive Frank Holland said in a blog post. The partnership introduces “one selling motion” across numerous AOL and Microsoft properties, which will leave both companies “uniquely positioned to deliver more scale of premium inventory and target audiences across display, video and mobile,” the companies said in a statement.

“This collaboration further validates our leadership position in digital advertising and the shift to automation, while also allowing Microsoft to focus on what they do best: industry leading services and search innovation,” said AOL President Bob Lord.

On a separate deal, a TechCrunch report noted, Microsoft will also sell some of its mapping-focused Bing assets - including around 100 engineers to the app-based transportation provider Uber. By doing so, Microsoft can focus more on core business strategies.

“In keeping with these efforts, we will no longer collect mapping imagery ourselves, and instead will continue to partner with premium content and imagery providers for underlying while concentrating our resources on the core user experience,” the spokesperson was quoted in The Verge. “With this decision, we will transfer many of our imagery acquisition operations to Uber.

While Nadella revealed the need to “make some tough choices in areas where things are not working,” analysts believe its a ‘temporary’ phase and the deal is not really about significant job cuts, but more so reflects Microsoft’s desire to concentrate on its core ambitions and partner with other companies in smarter ways.