Microsoft sheds part of digital ad business, mapping tool

SAN FRANCISCO — Microsoft is handing off some of its digital advertising business to AOL and selling its street-image mapping operation to Uber, as the giant software company tries to focus on activities more relevant to its core business.

AOL is adopting Microsoft’s Bing search engine, replacing Google as the default search option for visitors. That means Microsoft will get a share of revenue from advertising tied directly to Internet searches performed on AOL. But Microsoft will let AOL take over the selling of other types of advertising on Microsoft websites and apps, such as MSN, Skype and Xbox. An AOL spokeswoman said the online media company will extend job offers to all 1,200 people who worked in Microsoft’s advertising business.

Microsoft CEO Satya Nadella has been saying he wants to focus more on the company’s core software business and related services, while warning employees of the need to “make some tough choices in areas where things are not working”. Microsoft indicated on Monday that both the AOL and Uber deals are an outgrowth of that strategy.

Under its agreement with AOL, Microsoft is offloading a business that has declined in importance over recent years. Microsoft has increased its sale of advertising related to searches on Bing. But revenue from other kinds of advertising, known as display ads, had fallen to about US$250 million (S$337 million) in the last quarter, or about 15 per cent of all Microsoft ad revenue, based on figures by industry analyst Jan Dawson of Jackdaw Research. Mr Dawson said: “Display advertising is a tough business for them. Search is more lucrative.”

Uber has been developing its own street-navigation technology. The ride-hailing service is acquiring a small unit of Microsoft that collected visual images of streets and buildings for Microsoft’s Bing Maps service. Microsoft indicated it will rely on other companies for that data in the future. “They are becoming more and more focused on the things that are working well, and jettisoning things that aren’t working well,” Mr Dawson said. AP