Three years after it began considering the business, Microsoft finally announced the launch of its ad exchange.The catch: unlike Google, Microsoft didn’t build the exchange on its own technology, but instead on technology from startup AppNexus.
Ad exchanges let advertisers place real-time bids for display ads that appear on various sites — just as they have been able to do with search advertising since the early 2000s.
That’s good for advertisers, as it creates serious pricing competition, but could cut into publishers’ profits, which is why a lot of online companies have been slow to embrace the concept.
Microsoft actually bought an ad exchange company called AdECN around the same time, but the exchange never showed up.
Instead, Microsoft announced that it would use technology from AppNexus — which it invested in last fall — instead. AppNexus was started by Brian O’Kelley, who sold his first ad exchange, Right Media, to Yahoo for $850 million back in July 2007.
That’s the service that launched today. At launch, it only contains inventory from Microsoft’s Windows Live, with MSN coming soon. Eventually, third-party sites like Viacom will sell space through the exchange as well.
The whole deal is an outgrowth of Microsoft’s changing strategy in online advertising. Back in 2007, Microsoft wanted to be a major player in the online advertising business, and spent more than $6 billion acquiring aQuantive to help it get there.
Perhaps it was all a bluff to get Yahoo — which earned most of its money from display advertising — to the negotiating table for a search deal.
Whatever the reason, Microsoft now seems content to sell ads on its own network of sites, rather than making a big play to be the advertising technology that drives the Internet.
Correction: the original version of this story mischaracterized the role of AppNexus. It is a platform provider. Microsoft is running the exchange. Regrets for the error.