Why Netflix chose Microsoft to fuel its advertising ambitions

Shortly after revealing his intention to enter the advertising business in April, Netflix executives met with what appeared to be everyone in the space.

Roku, Comcast, Google, The Trade Desk… If there were a company with the infrastructure to sell and install video ad streaming technology, Netflix would love to hear from them (in recent weeks, executives at Google and Comcast have taken the impression of who are finalists). for bakery, and The Trade Desk signed a deal with Disney on July 12).

In the end, though, tech giant Microsoft, backed by its recently acquired Xandr video ad unit, emerged victorious.

While there were obvious conflicts that would make some potential partners an odd combination (Roku runs the Roku channel, Google owns YouTube, and Comcasts NBCUniversal owns Peacock, after all), there were a few things Netflix was looking for. It may have given Microsoft a head start in the conversation, according to someone familiar with the negotiations the streaming service has had in recent months: privacy and a desire for quick iterations.

Digital advertising is invasive, with many advertising giants like Google and Meta (formerly Facebook) using a deep river of consumer data to accurately deliver relevant ads to consumers. Many TV companies are also moving in this direction, promising precisely targeted digital video ads.

But that data hose comes at a cost, as US and EU regulators clamp down on data collection and sharing.

Indeed, during the same call where he revealed his advertising plans, Netflix CEO Reed Hastings said that Netflix wanted a different approach.

“The online advertising market has changed and now you don’t have to include information about people that you used to,” he said. “So we can be direct publishers and have other people do all the fancy ad matching and aggregate all the data about people.”

In fact, the Netflix deal “affirms Microsoft’s approach to privacy, which is based on protecting customer information,” Microsoft President of Web Experiences Mikhail Parakhin wrote in a July 13 blog post. . The association will have “strong privacy protections for our members”.

“It makes a lot of sense for Netflix to make a big deal out of this,” Kevin Krim, CEO of marketing data and analytics firm EDO, told The Gossipify. “When you have such a valuable subscriber base, you are incredibly protective of them.”

Ensuring privacy, along with the technology stack established through Xandr and a strong ability to iterate quickly, has helped Microsoft cross the finish line, said a person familiar with the thinking.

This flexibility will allow Netflix to quickly expand its advertising layer or change its strategy if necessary.

Meanwhile, the tech giant will be able to use the Netflix deal to fuel Xandr’s growth in a way that previous owner AT&T never could. And for marketers, a one-stop shop with existing connected TV business inventory across Netflix, the Xbox platform, and Xandr can be a very good proposition.

“It’s incredibly rare for a large-scale, global, high-quality video ad set to hit the market,” says Krim. “It’s something that happens once in a blue moon.”